# SUDHAKAR VITHAL KUMBHARE v. STATE OF MAHARASHTRA AND ORS

- **Citation:** [2003] Supp. 5 S.C.R. 746
- **Court:** Supreme Court of India
- **Decided:** 2003-11-18
- **Case number:** Civil Appeal No. 5186 of2001
- **Bench:** V.N. Khare, S.B. Sinha, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sudhakar-vithal-kumbhare-v-state-of-maharashtra-and-ors-19615
- **Pages:** 38

## Headnote

Constitution of India, 1950:
Article 342-Status of Scheduled Tribe on bifUrcation of State-Part of
C area inhabited by 'Halba' Tribe in State of Madhya Pradesh merged in State
of Maharashtra-'Halba' Tribe recognized by both the States as Scheduled
Tribe-Junior Engineer, being resident of Madhya Pradesh and belonging to
'Halba' tribe of the region which was bifUrcated, employed in Maharashtra
Electricity Board and promoted as Assistant Engineer against reserved postD Later on, reverted on the ground that he was not entitled to reservation
benefit in State of Maharashtra-Held, the Maharashtra State Electricity
Board acting upon the direction of the State Government has reverted the
appellant without referring the matter to the Scrutiny Committee which was
not the correct way to deal with the appellant's case-In such a situation
the employer was required to refer the question before the Scrutiny
E Committee-In view of the fact that the appellant's case was not referred to
the appropriate Committee, the judgment and order under challenge is set
aside-It will be open to Maharashtra State Electricity Board to refer the
matter to Scrutiny Committee for verifying eligibility of the emp/oyeeEmployee shall be reinstated forthwith as Assistant Engineer and shall continue
p to hold the said post till the matter is decided by the Committee-Constitution
(Scheduled Tribes) Order, 1950-States Reorganisation Act, 1956.
G
Kumari Madhuri Patil and Anr. v. Additional Commissioner, Tribal
Development and Ors., [1994[ 6 SCC 241 and Punit Raiv. Dinesh Chaudhary,
JT [2003) Supp. 1 SC 557, relied on.
Action Committee on Issues of Caste Certificate to Scheduled Castes
and Scheduled Tribes in the State of Maharashtra and Anr. v. Union of India
and Anr., JT (1994) 4 SC 423; UP. Public Service Commission, Allahabadv.
Sanjay Kumar Singh JT (2003) 8 SC 79; Director of Tribal Welfare v. Laveti
Giri, [1995[ 4 SCC 32 and Kumari Madhuri Patil and Anr. v. Additional
H
746
SUDHAKAR VITHAL KUMBHARE v. STA TE
747
Commissioner, Tribal Development, Thane and Ors., (Second), (1997) 5 SCC A
437, referred to.

## Text

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A
SUDHAKAR VITHAL KUMBHARE
v.
STATE OF MAHARASHTRA AND ORS.
NOVEMBER 18, 2003
B
[V.N. KHARE, CJ., S.B. SINHA AND DR. AR. LAKSHMANAN, JJ.]
Constitution of India, 1950:
Article 342-Status of Scheduled Tribe on bifUrcation of State-Part of
C area inhabited by 'Halba' Tribe in State of Madhya Pradesh merged in State
of Maharashtra-'Halba' Tribe recognized by both the States as Scheduled
Tribe-Junior Engineer, being resident of Madhya Pradesh and belonging to
'Halba' tribe of the region which was bifUrcated, employed in Maharashtra
Electricity Board and promoted as Assistant Engineer against reserved postD Later on, reverted on the ground that he was not entitled to reservation
benefit in State of Maharashtra-Held, the Maharashtra State Electricity
Board acting upon the direction of the State Government has reverted the
appellant without referring the matter to the Scrutiny Committee which was
not the correct way to deal with the appellant's case-In such a situation
the employer was required to refer the question before the Scrutiny
E Committee-In view of the fact that the appellant's case was not referred to
the appropriate Committee, the judgment and order under challenge is set
aside-It will be open to Maharashtra State Electricity Board to refer the
matter to Scrutiny Committee for verifying eligibility of the emp/oyeeEmployee shall be reinstated forthwith as Assistant Engineer and shall continue
p to hold the said post till the matter is decided by the Committee-Constitution
(Scheduled Tribes) Order, 1950-States Reorganisation Act, 1956.
G
Kumari Madhuri Patil and Anr. v. Additional Commissioner, Tribal
Development and Ors., [1994[ 6 SCC 241 and Punit Raiv. Dinesh Chaudhary,
JT [2003) Supp. 1 SC 557, relied on.
Action Committee on Issues of Caste Certificate to Scheduled Castes
and Scheduled Tribes in the State of Maharashtra and Anr. v. Union of India
and Anr., JT (1994) 4 SC 423; UP. Public Service Commission, Allahabadv.
Sanjay Kumar Singh JT (2003) 8 SC 79; Director of Tribal Welfare v. Laveti
Giri, [1995[ 4 SCC 32 and Kumari Madhuri Patil and Anr. v. Additional
H
746
SUDHAKAR VITHAL KUMBHARE v. STA TE
747
Commissioner, Tribal Development, Thane and Ors., (Second), (1997) 5 SCC A
437, referred to.
CIVIL APPELLATE JURISDICTION :Civil Appeal No. 5186 of2001.
From the Judgment and Order dated 23.3.2001 of the Bombay High
Court in W.P.No. 2368of1989.
B
V.A. Mohta and D.M. Nargolkar for the Appellant.
S. V. Deshpande, S.S. Shinde, Mukesh K. Giri and A.S. Bhasme for the
Respondents.
The following Order of the Court was delivered :
The appellant is originally a resident of village Sawargaon, post
Pandhuma, District Chhindwara in State of Madhya Pradesh. It is not disputed
c
that as a result of State reorganization, a part of the said district being
Chandrapur, which was originally in the State of Madhya Pradesh, had gone D
into the State of Maharashtra. Earlier in the Presidential Scheduled Tribes
Order issued in the year 1950 the tribe 'Halba' was recognized as Scheduled
Tribe in the District of Chhindwara in the State of Madhya Pradesh. After
reorganization, when Chandrapur was included within the territory of State of
Maharashtra, the caste 'Halba' was recognized as Scheduled Trible also in the E
State of Maharashtra. It is also not disputed that the appellant herein was
brought up and educated in District of Chhindwara. Subsequently, he applied
in response to an advertisement for selection and appointment in the
Maharashtra State Electricity Board for the post of Junior Engineer [Civil]. It
is not disputed that he was selected and appointed against the non-reserved
vacancy on the basis of merit in the said post. In the year 1987, the appellant F
was promoted to officiate as Assistant Engineer (Civil) against a reserved
vacancy on the basis of a certificate of being belonging to Halba tribe issued
by the competent authorities of the State of Madhya Pradesh. On 22nd
August, 1988, respondent no. 2 herein issued him show cause notice as to
why he should not be reverted from the post of Assistants Engineer as he
was not entitled to the benefit of reservation for Scheduled Tribe in the State G
of Maharashtra. The appellant submitted an explanation to the said show
cause notice justifying his promotion against the reserved post. Despite that
explanation, the appellant was reverted from the post the of Assistant Engineer
to the post of Junior Engineer.
H
748
SUPREME COURT REPOkTS (2003] SUPP. 5 S.C.R.
A
Aggrieved, the appellant filed a petition under Article 226 of the
Constitution Challenging the order of reversion. The High Court by its judgment
and order dated 23rd March, 200 I dismissed the petition on the ground that
the petitioner who comes from the State of Madhya Pradesh though belonged
to Scheduled tribe 'Halba' which is recognized as such in the State of
B Maharashtra is not entitled to benefit of reservation. It is against the said
judgment of the High Court, the appellant is in appeal before us.
Mr. V.A. Mohta, learned senior counsel appearing for the appellant,
urged that the question as to whether the appellant was entitled to the benefit
of reservation in the State of Maharashtra ought to have been referred to the
C Statutory Committee constituted on the basis of directions issued by this
court in Kumari Madhuri Patil and Anr. v. Addi. Commissioner, Tribal
Development and Ors., [1994] 6 SCC 241, where it was directed that in course
of employment if any dispute arises as regard to the benefit of reservation
the matter is required to be referred to a Scrutiny Committee.
D
It is no doubt true that a Scheduled Tribe notified in one State may not
be given the benefits therefor in another State having regard to the plain
expression 'in relation to that State' in Article 342 of the Constitution. {See
Action Committee on issue of Caste Certificate to Scheduled Castes and
Scheduled Tribes in the State of Maharashtra and Anr. v. Union of India and
E Anr., JT (1994) 4 SC 423 and U.P. Public Service Commission, Allahabadv.
Sanjay Kumar Singh, JT (2003) 8, SC page 79.
But the question which arises for consideration herein appears to have
not been raised in any other case. It is not in . dispute that the Scheduled
Castes and Scheduled Tribes have suffered disadvantages and denied facilities
F for development and growth in several States. They are required protective
preferences, facilities and benefits inter a/ia in the form of reservation, so as
to enable them to compete on equal terms with the more advantageous and
developed sections of the Community. The question is as to whether the
appellant being a Scheduled Tribe Known as Halba/Halbi which stands
recognized both in the State of Madhya Pradesh as well as in. the State of
G Maharashtra having their origin in the Chhindwara region, a part of which,
on States' reorganization, has come to State of Maharashtra, was entitled to
the benefit ofreservation? It is one thing to say that the expression 'in relation
to that State' occurring in Article 342 of the Constitution of India should be
given an effective or proper meaning so as to exclude the possibility that a
H tribe which has been included as a Scheduled Tribe in one State after
SUDHAKAR VITHAL KUMBHARE v. ST A TE
749
consultation with the Governor for the purpose of the Constitution may not A
get the same benefit in other State whose Governor has not been consulted;
but it is another thing to say that when an area dominated by members of
the same tribe belonging to the same region which has been bifurcated, the
members would not continue to get the same benefit when the said tribe is
recognized in both the States. In other words, the question that is required B
to be posed and answered would be as to whether the members of the
Scheduled Tribe belonging to one region would continue to get the same
benefits despite bifurcation thereof in terms of States' Reorganization Act.
With a view to find out as to whether any particular area of the country was
required to be given protection is a matter which requires detailed investigation
having regard to the fact that both Pandhurna in the District of Chhindwara C
and the part of area of Chandrapur at one point of time belonged to the same
region and under the Constitutional Scheduled Tribes Order 1950 as it originally
stood the Trible Halba/Halbi of that region may be given the same protection.
In a case of this nature the degree of disadvantages of various elements
which constitute the input for specification may not be totally different and
the State of Maharashtra even after reorganization might have agreed for D
inclusion of the said Trible Halba/Halbi as a Scheduled Tribe in the State of
Maharashtra having regard to the said fact in mind.
Here we find that the Maharashtra State Electricity Board acting upon
the direction of the State Government has reverted the appellant without E
referring the matter to the Scurtiny Committee which was not the correct way
to deal with the appellant's case. In fact, in such a situation the employer was
required to refer the question before the·Scrutiny Committee which admittedly
had been constituted and established for coming to the matter. We may notice
that in Kumari Madhuri Patil's case [supra] this Court observed:-
"The admission wrongly gained or appointment wrongly obtained
on the basis of false social status certificate necessarily has the effect
F
of depriving the genuine Scheduled Castes or Scheduled tribes or
OBC candidates as enjoined in the Constitution of the benefits
conferred on them by the Constitution. The genuine Candidates are
also denied admission to educational institutions or appointment to G
office or posts under a State for want of social status certificate. The
ineligible or spurious persons who falsely gained entry resort to
dilatory tactics and create hurdles in completion of the inquiries by
the scrutin'y committee. It is true that the applications for admission
to educational institutions are generally made by a parent, since on H
750
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
that date many a time the student may be a minor. It is the parent or
the guardian who may play fraud claiming false status certificate"
Similar observation have been made in Director of Tribal Welfare v. Laveti
Giri, (1995] 4 SCC 32. This aspect of the matter has been noticed following
the observation of this Court in Kumari Madhuri Patil and Anr. v. Addi.
B Commissioner Tribal Development, Thane and Ors., (second) (1997] 5 SCC
437] in Punit Rai v. Dinesh Chaudhary, JT (2003) {Suppl. I} SC 557 at 574]:-
c
D
E
F
3. "As regards prayer (b) read with direction no. (iv) of the order
of this Court, we too appreciate the inconvenience caused due to vast
area of the State. Therefore, instead of one committee of three officers,
there will be three Scheduled tribe/Caste Scrutiny Committees
comprising of five member with quorum of three members, as suggested
in para 4 of the direction, to take a decision. At Pune, Nasik and
Nagpur, six caste scrutiny committees for SCs, Denotified Tribes,
Nomadic Tribes, other Backward Classes and the Special Backward
category in existence at Mumbai, Pune, Nasik, Aurangabad, Amravati
and Nagpur would continue to scrutinise the certificate issued by the
respective officers and take a decision in that behalf. In this regard,
it is also suggested by Shri Dholakia, learned senior council for the
applicant, that in case any certificate has been wronglfully refused by
the certificate issuing authority, the aforestated committees also would
go into the question and decide in that behalf, whether refusal was
wrongful and in case it finds that the refusal was wrongful, they are
at liberty to direct the authority to grant the certificate.
5. With regard to prayer (d), along with the vigilance cell, one
research officer/tribal development or social welfare officer would be
associated in finding the social status of eligibility of the officers."
In view of fact that the appellant's case was not referred to the appropriate
Committee, the judgment and order under challenge deserves to be set aside.
It will be open to the Maharashtra State Electricity Board to refer the matter
G to the Scrutiny Committee for verifying the eligibility of the appellant. We
direct that the appellant shall be reinstated forthwith as Assistant Engineer
and shall continue to hold the said post till the matter is decided by the
Committee. The appeal is allowed on the aforementioned terms. There shall
be no order as to cost.
H RP.
Appeal allowed.
A
ITW SIGNODE INDIA LTD.
v.
COLLECTOR OF CENTRAL EXCISE
NOVEMBER 19,2003
B
[V.N. KHARE, CJ., S.B. SINHA AND DR. AR. LAKSHMANAN, JJ.]
Central Excises and Salt Act, 1944; S.JJ-A and amendments made
thereunder/Central Excise Tari.ff Act, 1985; Tari.ff Items 26AA(iiij, 68, 72II.31, C
7308.90/Central Excise Rules, 1944; Rules 9(2) and Amendments made
thereunder and 1738:
Manufacture of box strappings from duty paid cold rolled steel strips
as input-Resultant product-Classification of-Assistant Collector held that
since resultant product is being manufactured by doing painting/waxing on D
input material, description of final product does not change-No further duty
liability arises-Amendment in Section I IA of the Act-Affirmed by the
Appellate Authority-Reversed by the Tribunal-On appeal, Held: Amended
provisions of Law facilitate Revenue authorities to determine correctness of
classification of the product by re-opening of approved classification list- E
A legal fiction created for recovery of short levy/non-levy-Hence, amended
provision of Law, a valid piece of legislation.
Extended period of /imitation for short levy-Invoking of-Held, It
could be invoked only on discovery of positive acts of fraud on the part of
assessee-Limitation involves question of jurisdiction-To be determined F
having regard to both facts and law-In absence of any act of fraud, extended
period of limitation could not have been invoked-Even if short levy, assessee
could adjust the same from MODVATcredit on duty paid on input materialMatter remitted to Tribunal for consideration afresh in accordance with
law-Limitation Act, 1963-/nterpretation of Statutes.
Curative and Validating Statutes-Operation of-Held: Retrospect:ve
effect could be given-However, scope of validating Act varies from case to
case.
Words and Phrases:
751
G
H
752
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
'Such '-Meaning of in the context of Section I IA of the Central Excise
Act.
Appellant-Assessee, a manufacturer, deals in manufacturing of box
strappings from duty paid cold rolled steel strips as input raw material.
Assessee informed the Revenue authorities concerned that the product falls
B under tariff item No.26AA(iii) of the Central Excise Tariff Act and no excise
duty was Ieviable. The authority·responded that the product would be
classifiable under Tariff Item No.68 and not under Tariff Item No.26AA (iii)
of the Act. However, Assistant Collector held that the assessee had discharged
its duty/liability by paying duty for cold rolled steel strips, the input material
C under Tariff Item No. 26AA (iii) and since the resultant product continues to
be same, no further duty liability arose thereon.
In the meanwhile, assessee had filed a classification list disclosing
processes used in the manufacture of the product. The list was approved by
the concerned authority. But the Revenue issued a show cause notice to the
D assessee for levy and recovery of differential amount of duty on the product
as the product fall under Tariff Item No.68 of the Act. In appeal, the Collector
and the Appellate Authority affirmed the order of Assistant Collector. In
appeal, Tribunal reversed the order. Hence the present appeal.
On the issue of 'short levy of excise duty', Constitution Bench of
E Supreme Court in the matter of Collector of Central Excise, Baroda v.
Cotspun Ltd., (1999) 7 SCC 633 overruled its earlier decision in Ballarpur
Industries Ltd. v. A.C. ofC.C.E., (1995] Supp. 3 SCC 429 upholding the law
laid down by the Court in Rainbow Industries (P) Ltd v. CCE, Vadodra, (1994)
6 SCC 563 as correct law. Parliament accordingly made certain amendment
F under Section llA of the Central Excise Act, 1944 and the same was given
retrospective effect. Assessee, in the present case, challenged the said
amendment and the question was considered by this Court in Easland
Combines, Coimbtore v. CCE, Coimbatore, (2003) 3 SCC 410. The Court
upheld the amendment.
G
When the present matter was placed before the Division Bench, the
Bench did not agree with the view taken by the Court in 'Easland Combines'
case and directed to refer the matter to a Bench of 3 Judges. Hence the matter
came before the present Bench.
It was contended for the appellant-assessee that the basis of the decision
H in Cotspun case was not taken away by introducing amendment in Section 11
ITW SIGNODE INDIA LTD. v. C.C.E.
753
A of the Act; that levy of excise duty on the basis of an approved list would not A
be construed as short levy, thus, differential duty could not be recovered and
Section 11-A, would have no application; that the process undertaken on cold
rolled strips to get the final product, do not amount to 'manufacture' of the
final product, since the product would not attain a new and distinct character;
that box strappings, the final product, could appropriately be classified under
the heading 7211.31 as cold rolling strips only and not under heading No. B
7308.90; that extended period of limitation as prescribed under Section 1 lA
of the Act would have no application since there was no short levy occasioned
on account offraud/collusion/wilful suppression of facts with an intent to evade
duty; and that in case the final product is held to be dutiable, the assessee
should have been allowed to avail MODV AT credit on duty paid on input C
material
On behalf of the respondent, it was submitted that the basis of judgment
of the Supreme Court in Cotspun case had been removed by making necessary
amendment in Section llA of the Central Excise Act; that as per amended
provisions of the Act, even the correctness of approved classification list could D
be challenged/questioned; and that since several processes had been
undertaken on input steel strips to get the final product, the same amounts to
manufacture.
Partly allowing the appeal, the Court
E
HELD: I.I. Section llA of the Central Excise Act deals with a case when
inter a/ia excise duty has been levied or has been short-levied or short-paid.
The word "such" occurring after the words "whether or not" refers to nonlevy, non-payment, short-levy or short-payment or erroneous refund. It is,
therefore, not correct to say that the word "such" indicates only such short- F
levy which has been held to be non-existent in Cotspun case having regard to
Rule 1738 of the Central Excise Rules, 1944 . Such short-levy or non-levy
may be on the basis of any approval, acceptance or assessment relating to the
rate of duty on or valuation of excisable goods; that any approval made in terms
of Rule 10 of the Act, in the event, any mistake therein if detected, would also
come within the purview of the expression "such short-levy or short-payment". G
(779-1)..E-F)
Collector of Central Excise, Baroda v. Cotspun Ltd., 11999) 7 SCC 633,
referred to.
l.2. It is a well-settled principle of law that in case of a conflict between H
754
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A a substantive Act and delegated legislation, the former shall prevail inasmuch
as delegated legislation must be read in the context of the primary/legislative
Act and not the vice-versa. [779-CI
1.3. The procedure laid down under Rule 1738 of the Rules has
specifically been included in the Act. Furthermore, by reason of the amended
B Act a provision has been made for reopening the approved classification lists.
It is a procedural provision in terms whereof statutory authorities are required
to determine as to whether the earlier classification was correctly done or
not. The authority upon giving an opportunity of hearing the parties, may come
to the conclusion that decision on the approval granted need not be reopened
C and even if the same is reopened, the reasons therefor have to be stated.
(779-H; 780-A-B)
1.4. Parliament, by making an amendment, had merely provided that an
approval on the basis of a classification list inter alia in case of a short-levy
can be recovered if a finding is arrived at that the goods had undergone a
D short-levy. For the said purpose, clause 110 of the Finance Act, validating
actions taken under Section llA can be taken into consideration whereby
and whereunder a legal fiction is created. Cotspun case was decided when the
matters relating to classification, approval thereof as also short-levy or upon
detection of a mistake were governed by the Central Excise Rules. Rule 10
E and Rule 173 8 of the Rules were to be read in conjunction with each other
and the Constitution Bench in the said matter merely followed the principle
of interpretation of statute. A different situation has arisen now having regard
to the fact that not only the substantive provision dealing with the consequence
of non-levy, non-payment or short levy or short-payment or erroneous refund
but also has laid down the procedure therefor. [780-8-C; F)
F
Collector of Central Excise, Baroda v. Cotspun Ltd, [1999) 7 SCC 633,
followed.
Bhavnagar -University v. Palitana Sugar Mill Pvt. Ltd. and Ors., (2003)
2 SCC 111; State of Karnataka v. Vishwabharathi House Building Coop.
G Society and Ors., (2003) 2 SCC 412; High Court of Judicature for Rajasthan
v. P.P. Singh and Anr., (2003) 4 SCC 239 and Dipak Chandra Ruhidas v.
Chandan Kumar Sarkar, (2003) 7 SCC 66, relied on.
1.5. A statute, it is trite, must be read as a whole. A statutory Act may
be enacted prospectively or retrospectively. A retrospective effect indisputably
H can be given in case of curative and validating statute. In fact curative statutes
ITW SIGNODE INDIA LTD. v. C.C.E. [S.B. SINHA, J.]
755
by their very nature are intended to operate upon and affect past transaction A
having regard to the fact that they operate on conditions already existing.
However, the scope of the validating Act may vary from case to case. Hence,
Section I IA of the Act as amended is a valid piece of legislation.
[780-G-H; 781-A)
2.1. This Court in the peculiar facts and circumstances of the present B
case need not go into the question as to whether the processes undertaken by
the assessee would amount to manufacture or whether the classification of
goods under sub-heading 7308.90 is correct, since the question as regards
limitation and availability of MODY AT had not been considered. The question
of limitation involves a question of jurisdiction. The findings of fact on the C
question of jurisdiction would be a jurisdictional fact. Such a jurisdictional
question is to be determined having regard to both fact and law involved therein.
The Tribunal committed a manifest error in not determining the said question,
particularly, when in the absence ofany finding offact that such short-levy of
excise duty related to any positive act on the part of the appellant by way of
fraud, collusion, wilful mis-statement or suppression of facts, the extended D
period of limitation could not have been invoked and in that view of the matter
no show cause notice in terms of Rule I 0 of the Rules could have been issued.
Even if the short-levy, if any, is to be recovered, the appellant was entitled to
raise a question that he was entitled to adjust the duty upon taking MODVAT
credit of the duty paid on cold rolled steel strips. These aspects of the matter E
are required to be gone into by the Tribunal. Hence, the impugned judgment
cannot be sustained and is set aside and the matter is remitted to the Tribunal
for consideration thereof afresh in accordance with law. ·
(781-B-C; 782-G-H; 783-A-B-C)
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7868of1995.
From the Judgment and Order dated 6.4.95 of the Central Excise Customs
and Gold Control Appellate Tribunal, New Delhi in F.0.No.E/180 of 1995-BI.
V. Lakshmikumaran, Alok Yadav and V. Balachandran for the Appellant.
Dhruv Mehta, Ms.Vibha Dutta Makhija and B.K. Prasad for the
F
Respondent.
G
The Judgment of the Court was delivered by
S.8. SINHA, J. The primal question involved in this appeal which arises
out a judgment and order of the Customs, Excise & Gold (Control) Appellate
Tribunal dated 6.4.1995 revolves round the effect of a validating statute.
H
756
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A BACKGROUNDFACTS:
The appellant manufactures and deals in box strappings. For the said
purpose they receive duty paid cold rolled steel strips. Several processes are
undertaken for manufacturing the end product.
B
The appellant allegedly infonned the Superintendent of Central Excise
about the processes undertaken by them contending that the resultant product
falls under Tariff Item No. 26AA(iii) and no further excise duty is leviable
thereupon. The Assistant Collector by a letter dated 25.6.1983 stated that the
box strappings made out of the duty paid cold rolled steel strips would be
C classifiable under Tariff Item 68 and not under Tariff Item 26AA(iii). The
appellant protested thereagainst by a letter dated 2. 7 .1983 inter alia contending
that having regard to the ISi specifications and certain judicia! pronouncements,
Tariff Item 68 would not be applicable. The Assistant Collector by an order
dated 11. 7.1983 held:
D
"Considering all aspects, the cold rolled strips known as box strappings
continue to be cold rolled strips under Tariff item 26AA (iii). The
painting and waxing on the product does not change the classification
of the product.
As the raw material, cold rolled strips has discharged its duty
E
liability under T.I. 26AA(iii) and the resultant product continues to be
cold rolled strips under T.I. 26AA (iii), no further duty liability arises."
The said order is said to have become final. Thereafter on or about
4.2. 1986 a classification list was filed by the appellant effective from 1.3.1986
stating that box strappings are made by cutting duty paid steel strips under
F the column "particulars of other goods produced or manufactured and intended
to be removed by the assessee". Reference in this behalf was also made to
the order of the Assistant Collector dated 11.7.1983. The said classification
list filed by the appellant was approved by the Assistant Collector. However,
by a notice dated 8.4.1987, the Collector, Central Excise called upon the
Appellant herein to explain as to why processes undertaken by them would
G not amount to manufacture with immediate effect and why an amount of Rs.
H
I, 13,82,247 should not be levied on the basis that the goods should be
classified under chapter sub-heading 7308.90 of the Central Excise Tariff Act,
1985 upon invoking Rule 9(2) of the Central Excise Rules, 1944 read with the
provisions of Section 11 A of the Central Excise Rules.
ITW SIGNODE INDIA LTD. v. C.C.E. [S.B. SINHA, J.]
757
The appellants contend that the issue as regard classification was A
raised with the Department even in 1983, whereupon the Assistant Collector
vide his letter dated 11. 7 .83 held that the process carried out by the appellants
does not amount to manufacture since the product continues to be a strip and
accordingly there was no change in the classification, i.e., it will fall under
Tariff Item 26AA(iii). This order has not been challenged by the department B
and thus it has become final and conclusive. Thereafter, all along the appellants
have filed classification lists right from 1986 claiming the classification as
strips under Tariff Item 26AA under the old Tariff according to the order
passed by the Assistant Collector. All the classification lists described the
process manufacture adopted by the appellants. This was finally approved
by the department without any modification in favour of the appellants. This C
classification continued even for the period effective from March 1987. Thus,
no demand could have been raised against the appellant under Section 11 A
for the past period since there was no short levy and in any event no
suppression can be attributed to the appellants.
A reply to the show cause was flied by the appellant highlighting the D
processes undertaken. The Collector by his order dated 24.9.1987 held that
the processes undertaken by the appellant do not amount to manufacture and
as such their product is classifiable under Chapter 72 only.
An appeal
thereagainst was filed by the respondents before the Appellate Tribunal.
The matter was heard by three members of the Tribunal who constituted E
the Bench. Three separate orders in the matter were passed on 6.4.1995. The
Member (Judicial) in his order proposed to remit the matter to the Collector
for a de nova consideration on the merit; whereas the Vice-President and the
Member (Technical) decided the merit of the matter against the appellant. The
majority of the Appellant Tribunal classified the box strappings in running p
length and in coil under heading 73.08 as articles of iron or steel. However,
none of the members took into consideration the question as to whether the
demand made by revenue was barred by limitation. Aggrieved thereby and
dissatisfied therewith the appellant is in appeal before us.
REFERENCE TO CONSTITUTION BENCH AS REGARD SHORT-LEVY:
G
Having regard to the conflict of decision in Ballarpur Industries ltd.
V. Asstt. Collector of Customs & Central Excise, [I 995] Supp. 3 sec 429 and
Rainbow Industries (P) ltd. v. Collector o/Central Excise, Vadodara, [I994]
6 SCC 563 the question was referred to a Constitution Bench. This Court in
H
758
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A Collector of Central Excise, Baroda v. Cotspun Ltd., [1999] 7 SCC 633
(wherein one of us V.N. Khare, CJ! was a member) overruled the decision of
this Court in Ballarpur Industries (supra) and held that the Rainbow Industries
(supra) has correctly laid down the law.
B
AMENDMENT IN SEC. I IA:
The Parliament thereafter amended Section 11 A of the Central Excise
Act, 1944 by Act No. 10 of2000 which was published in the Gazette oflndia
on 12.5 .2000 and the same was given a retrospective effect and retroactive
operation from 27.12.1985.
C REFERENCE TO THIS BENCH REGARDING VALIDATING ACT:
The appellants herein thereafter questioned the vires of the said
provision.
It is also not in dispute that the said question came up for
consideration before a two-Judge Bench of this Court in Easland Combines,
D Coimbatore v. Collector of Central Excise, Coimbatore, [2003] 3 SCC 410
wherein the validity of the Amendment was upheld.
E
F
G
H
However, when this matter was placed before another Division Bench
it referred the matter to a three-Judge Bench by an order dated 20th February,
2003 opining:
"Earlier this appeal was adjourned awaiting the judgment of this Court
in C.A. No. 2693 of2000, Easland Combines v. Collector of Central
Excise, Coimbatore, (2003) 152 E.L.T. 39 (S.C.). When this appeal is
taken up for hearing today, Mr. Bajpai, the learned Counsel appearing
for the Revenue, invited our attention to the judgment in Easland
Combines (supra) and submitted that the point involved in this appeal
is covered by the said judgment.
In Collector of Central Excise, Baroda v. Cotspun Ltd., [1999] 7 SCC
633], a Constitution Bench of this Court laid down as follows :
"14. The levy ,of excise duty on the basis of an approved
classification list is the correct levy, at least until such time as to
the correctness of the approval is questioned by the issuance to
the assessee of a show cause notice. It is only when the
correctness of the approval is challenged that an approved
classification list ceased to be such.
ITW SIGNODE INDIA LTD. v. C.C.E. [S.B. SINHA, J.]
7 59
15. The levy of excise duty on the basis of an approved A
classification list is not a short levy. Differential duty cannot be
recovered on the ground that it is a short levy. Rule I 0 has then
no application."
The Parliament has amended Section I IA of the Central Excise Act,
1944 by Finance Act, 2000 (10 of2000) with effect from November 17, B
1980 with a view to change the basis of the judgment in the aforementioned case. The question whether the amendment has changed
the basis of the judgment in Cotspun 's case (supra), is the question
that arises in this case. The same question came up for consideration
of this Court in Eas/and Combines (supra). A bench of two learned C
Judges took the view that the amendment which conferred power to
correct the errors or mistakes in approval, acceptance or assessment
relating to the rate of duty on or valuation of excisable goods cannot
be said to be unreasonable. It was further held that with retrospective
effect, the legislature has empowered the Central Excise Officer to set
at naught the erroneous approval of classification list or acceptance D
of price list or assessment order, and, on that premise, it was laid
down,
"Hence, it is held that in view of the amendment of Section
11A(l), the decision rendered by this Court in Cotspun's case
(supra) would not be a good law. Show cause notice for correcting E
errors or mistakes in approval, acceptance or assessment relating
to the rate of duty on or valuation of excisable goods under the
provisions of the Act or the Rules made thereunder could be
issued within the prescribed period."
Having gone through the judgment carefully and given our anxious F
consideration to the said judgment in Easland Combines (supra), we
are unable to agree with the view taken by the bench of two learned
Judges in regard to either the import of the amendment or the effect
thereof and, in our view, the amendment does not alter the basis of
the judgment in Cotspun 's case (supra).
We, therefore, consider it appropriate to refer the appeal to a bench
of three learned Judges.
The Registry is directed to obtain the orders of Hon'ble the Chief
Justice for listing the case before a bench of three learned Judges."
G
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SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
That is how the matter is before us.
SUBMISSIONS:
Mr. V. Lakshmikumaran, the learned counsel appearing on behalf of the
appellant would submit that by reason of the amendment made in Section I IA
B of the Act, the basis of the decision in Cotspun (supra) had not been taken
away.
The learned counsel would urge that in Cotspun (supra) it has
categorically been held that Rule 10 which was in pari materia with Section
11 A of the Act as unamended did not deal with classification lists or related
to the reopening of the draft classification lists which having been exclusively
C provided for Rule 173 B, by amending Section 11 A the basis of the said
judgment cannot said to have been removed.
The learned counsel would argue that in Cotspun (supra) it has not
only been held that Sub-Rule (5) of Rule 1738 deals with classification lists
but therein the question as regard different stages for correct levy had been
D laid down.
E
Mr. Lakshmikumaran would contend that levy of excise duty on the
basis of an approved classification list would not be a short levy and as such
differential duty could not be recovered on the said premise and in that view
of the matter Section 11 A of the Act will have no application.
Submission of the learned counsel is that Section 11 A of the Act as
amended only provides that even if the short levy is based on the approved
classification list, show cause notice can be issued, but the same cannot be
said to be sufficient to get over the basis of the judgment/Constitution Bench
in Cotspun (supra). Once it is held in Cotspun (supra), Mr. Lakshmikumaran
F would argue, that the levy based on the approved classification list is not
short levy, the entry point in Section 11 A must be held to have been closed.
According to the learned counsel, by reason of the amendment as also the
retrospective effect given thereto the short levy having been redefined for the
purpose of Section I IA contrary to what had been held in Cotspun (supra),
G it must be held that even now there is no short levy of duty.
H
The learned counsel further submitted that the Tribunal misdirected
itself in holding that the processes undertaken by the appellants on the duty
paid cold rolled steel strappings amounts to manufacture in terms of Section
2(t) of the Central Excise Act, 1944.
ITW SIGNODE INDIA LTD. v. C.C.E. [S.B. SINHA, J.]
761
According to the learned counsel, having regard to the processes A
undergone the resultant product would not attain any new and distinct
character so as to warrant fresh levy of duty.
In other words, Mr.
Lakshmikumaran would contend, that the characteristics of cold rolled strip
which is the starting material are retained in the box strappings. Relying on
the decision of Gujarat Steel Tubes ltd v. State of Kera/a, ( 1989) 42 EL T 513 B
it was urged that galvanization of pipes undertaken for the purpose of making
them weather proof would not bring into existence a new commodity and even
by a circular dated 9.2.1994 the Board of Excise and Customs has clarified that
the process of galvanization does not amount to manufacture.
As regard question of classification , the learned counsel would submit C
that box strappings is classifiable under 7211.31 as strip only and not under
7308.90. Heading 7308, it was contended, covers other articles of iron or steel
and in that view of the matter, the box strappings can be called as article of
steel. Even after the processes undertaken for the end product, the box
strappings remain as strips. It was argued that in any event having regard
to the fact that heading 7308 covers other articles of iron and steel covering D
articles of steel in individual pieces like bottom steel, nails, rivets, ranges etc,
it cannot be equated with the product in question, i.e., box strappings which
are in running length in coil form and not individual pieces. In any view of
the matter, box strappings being covered as cold rolled strips i.e. IS: 58721973, the same is not classifiable under 7308.90.
E
The learned counsel would contend that in the instant case, the proviso
appended to Section I IA of the Act is not attracted inasmuch as the extended
time period specified thereunder would have application only when the short
levy is occasioned on account of fraud, collusion, willful mis-statement or
suppression of facts with an intent to evade payment of duty. In that view p
of the matter the period of limitation for issuing a show cause notice would
be six months and not five years. In support of the aforementioned contention,
reliance has been placed on Padmini Products Ltd v. CCE, (1989)43 ELT 195,
P&B Pharmaceuticals ltd. v. CCE, (2003) 153 ELT 14 and Pushpam
Pharmaceuticals ltd v. CCE, (1995) 78 ELT 401.
In this connection, the learned counsel has drawn our attention to the
fact that the issue of classification had been raised by the appellant since
1983 and the same had been approved and even received the seal of approval
by the Collector.
G
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SUPREME COURT RE ORTS (2003) SUPP. 5 S.C.R.
A
The learned counsel would lastly C'· mtend that even if the product in
question is held to be dutiable the appeliant should be allowed to take the
Modvat credit of the duty paid on the cold rolled steel strips.
Mr. Dhruv Mehta, learned counsel appearing on behalf of the
respondent, on the other hand, would submit that by reason of amendment
B carried out in Section I I A of the Central Excise Act by Act No.