19th Sept., 2001.
Government of India
Ministry of Finance
( Department of Revenue )
Subject:- Retrospective validation of action taken under Section 11A of Central Excise Act, 1944, under Finance Act, 2000.
Attention is invited to the provisions contained in Sections 97 and 110 of the Finance Act, 2000.
2. Queries have been raised from field formations about the exact scope and amplitude of these changes. The matter has been examined in consultation with Additional Solicitor General. A copy of the opinion of ASG dt.20.4.2001 is enclosed. The Board has accepted the opinion given by the Learned Additional Solicitor General. You are requested to take follow up action in accordance with the advice of the ASG.
3. This may be brought to the notice of field formations.
4. Receipt of this Circular may please be acknowledged.
5. Hindi version will follow.
Office of Shri Kirit N. Raval
Additional Solicitor General
|1.||My opinion is sought on the question of the scope and amplitude of the retrospective amendment to Section 11A of the Central Excise Act, specifically enacted to protect the Revenue’s interest after the judgment of the Hon’ble Supreme Court in the case of Collector of Central Excise Vs. M/s.Cotspun Ltd., 1999 (113) ELT 353 (SC). My attention is drawn to the fact that by virtue of Section 110 of the Finance Act, 2000, any action taken under Section 11A of the Central Excise Act, demanding duty on account of non-payment, short-payment, non-levy, short-levy etc. within a period of six months or five years, as the case may be, from the relevant date as defined in clause (ii) of sub-section (3) of said section, shall be deemed to be and to always have been for all purposes validly and effectively issued or served under that section, notwithstanding any approval, expense or assessment relating to the rate of duties on or value of the excisable goods by any Central Excise Officer under any other provision of the Central Excise Act or the Rules made thereunder. Sub-section (2) of the said Section also provides that any action taken anything done under section11A at any time during the said period shall be deemed to be and to have always been, for all purposes, as validly and effectively taken or done as if sub-section (1) had been in force in all material times, notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority.|
|2.||Thus, it can be seen from section 110 of the Finance Act, 2000 that the section seeks to grant legitimacy to all the actions taken for the recovery of the duty from the period 17.11.1980 and that any action initiated in respect of any case after such date shall be deemed to have been validly taken and any judgment, decree or order of any court, tribunal or other authority shall not be an impediment to such an action.|
|3.||In this background, my opinion is sought on the following queries:-|
|(1)||Whether it is correct to hold that the amendments would only cover demands for a period of six months prior to issue of SCN?|
|(2)||Whether demands for the extended period, where such demands were held as time barred on the ground that there was approved classification list/price list, etc. would be covered by the amendments?|
|(3)||Whether these provisions would apply to proceedings that have attained finality and where appeal periods have expired?|
|(4)||Could recoveries be made in such cases, and what would be the period upto which such proceedings could be reopened and recoveries made?|
|(5)||What would be the time limit, if any, for initiating proceedings under the amended provisions?|
|(6)||What is the kind of notice/order that should be issued for recoveries of dues in respect of proceedings which have attained finality?|
|(7)||How should the department proceed in respect of matters which are pending in appeal in Tribunal and Courts?|
|4.||My answer to the Queries is as under.|
In the “Negative” – in view of the fact that the word “one year” has been substituted by the word “six months” by section 97-B of the Finance Act. Further, the amendment has been stated to be effective from 17th November, 1980.
In the “Affirmative” – such demands which were earlier held to be time barred because of the approval of the classification list would also be covered by the amendment as the amendment has been made retrospective w.e.f. 17th November, 1980. The factum of approval after the date will not come in the way of recovering the amounts which would be covered by such an amendment.
Under Section 110 of the Finance Act, any notice issued after the 17th of November, 1980 will be protected by the validating Act. The necessity for the amendment arose to over-come the judgment of the Hon’ble Supreme Court in the Cotspun Ltd. Case. Further, the power to amend the law retrospectively has been recognised judicially in a number of pronouncements (for example, Prithvi Cotton Mills Ltd. vs. Broach, (1969) 2SCC 284). The said judgment, in para 4, clearly provides “If the legislature has the power over the subject matter and competence to make a valid law, it can at any time, make such a valid law and make it retrospectively so as to bind even past transactions.” Therefore, where notices have already been issued, the judgments rendered in the context of the earlier provision would cease to be of relevance. In fact, in the case of Cotspun itself, where the judgment of the Supreme Court was rendered, in view of the validating provisions, recovery could be made notwithstanding the Cotspun judgment. Under these circumstances, if the SCNs have been issued then even in respect of past proceedings where even judgments have been rendered, it will be open to the Department to make recoveries.
Recoveries can be made in such cases for the period subsequent to 17th November, 1980 when the retrospective operation of the amended provision has come into play. However, this is subject to the SCNs having been issued in time. It is also worth noting that if SCNs have not been issued so far, now it will not be open to issue SCNs for the past period unless it is within the period of limitation as prescribed under the amended provisions.
The time limit for initiating proceedings under the amended provisions would be one year for issuance of fresh notices. However, as far as recoveries pursuant to notices already issued or subject matter of pending proceedings are concerned, the same are covered by answer to the previous queries.
In respect of matters which have received finality, the demand notices should be issued referring to the amendment carried out and pointing out that in view of the amended provision, it is necessary for the assessee to make the payment, as demanded. Reliance should be placed on the amendments for the purpose of making recoveries.
As far as the pending matters are concerned, the Department should file an affidavit indicating the amendment having been carried out and the request that the controversy be decided in the context of the amended provisions.
I have nothing further to add.
Additional Solicitor General