THE COLLECTOR OF CENTRAL EXCISE, MADRAS vs. M/S M.M. RUBBER & CO

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9 PETITIONER: THE COLLECTOR OF CENTRAL EXCISE, MADRAS Vs. RESPONDENT: M/S. M.M. RUBBER & CO. TAMIL NADU. DATE OF JUDGMENT04/09/1991 BENCH: RAMASWAMI, V. (J) II BENCH: RAMASWAMI, V. (J) II RANGNATHAN, S. OJHA, N.D. (J) CITATION: 1991 AIR 2141 1991 SCR (3) 862 1992 SCC Supl. (1) 471 JT 1991 (3) 587 1991 SCALE (2)473

ACT: Central Excises & Salt Act, 1944--Section 35E--Legisla- tive intention, indicated--Power under Section 35E--Nature of--Authority authorised to exercise a power--Failure to exercise-Effect of. Central Excises & Salt Act, 1944 Section 35E(3)--Calcu- lation of the period of one year--Relevant date- "From the date of decision or order"--Construction. Central Excises & Salt Act, 1944 Section 35E--Collec- tor’s order dated 28. 11. 1984 Communicated on 21.2. 1984---Board’s direction to Collector to move Tribunal for correct determination--Whether the adjudicating authority aggrieved of own order--Legality of action after the period of limitation.

HEADNOTE: The appellant, an adjudicating authority held the demand from the respondent towards excise duty on biaxially orien- tal polypropylene films as set ant in the show cause notice dated 25.10.1983 as barred by limitation and dropped further proceedings. A copy of the order despatched on 21.12.1984 was received by the respondent on 21.12.1984. The Central Board of Excise and Customs after considera- tion of the order, on 11.12.198S directed the appellant to apply under Section 3SE(1) of the Central Excises & Salt Act, 1944, to the Customs, Excise & Gold (Control) Appellate Tribunal for correct determination of the points arising out of the order dated 21.12.1984 and the appellant filed the application under section 35E(4) of the Act. Before the Tribunal the respondent urged that the rele- vant date of the Collector’s (adjudicating authority’s) order for the purposes of Section 35E(3) should he taken as 28.11.1984 and not 21.12.1984 when it was received by the respondent and on that basis the order of the Board under Section 35E(1) of the Act should he held as beyond the period of one year from the date of the decision or order of the adjudicating authority and therefore the application before the Tribunal was incompetent. 863 The Tribunal dismissed the application holding that the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9 application was not maintainable. In this appeal tided under Section 35L of the Act, the appellant contended that mere writing an order in file kept in the office was no order in the eye of law in the sense of affecting the rights of the parties for whom the order was meant and that though the order of the adjudicat- ing authority was made on 28.11.1984 a copy of the same was sent to the respondent only on 21.12.1984 and received by him on the very day and that therefore the limitation would start only at the earliest from 21.12.1984; that enabling the giving of the direction under Section 35E(1) and the application under Section 35E(4) in pursuance of that direc- tion should he treated as if a right of appeal given to the department; that the departmental authorities and the pri- vate parties were to he treated equally as aggrieved persons for the purposes of calculating the time for making the direction under Section 35E(3) of the Act. On the question, what is the relevant date for the purpose of calculation of the period of one year provided under Section 35E(3) of the Central Excises & Salt Act, 1944, dismissing the appeal, this Court, HELD: 1. If an authority is authorised to exercise a power or do an act affecting the rights of parties, he shall exercise that power within the period or limitation pre- scribed therefore. The order or decision of such authority comes into force or becomes operative or becomes an effec- tive order or decision on and from the date when it is signed by him. The date of such order or decision is the date on which the order or decision was passed or made; that is to say when he ceases to have any authority to tear it off and draft a different order and when.he ceases to have any locuspaetentiae. Normally that happens when the order or decision is made public or notified in some form or when it can he said to have left his hand. The date of communication of the order to the party whose rights are affected is not the relevant date for purposes of determining whether the power has been exercised within the prescribed time. [869D- F] 2. If the intention or design of the statutory provi- sion was to protect the interest of the person adversely affected, by providing a remedy against the order or deri- sion any period of limitation prescribed with reference to invoking such remedy shall he read as commencing from the date of communication of the order. But if it is a limita- tion for a competent authority to make an order the date of exer- 864 cise of that power and in the case of exercise, of suo moto power over the subordinate authorities’ orders, the date on which such power was exercised by making an order are the relevant date for determining the limitation. [871H-872B] 3. Section 35E comes under the latter category of an authority exercising its own powers under the Act. It is not correct to equate the Board to one of the two parties to a quasi-judicial proceeding before the Collector and the Board’s right under Section 35E to the exercise of the right of appeal by an aggrieved assessee from an order passed to its prejudice. [872B-C] 4. The power under Section 35E is a power of superin- tendence conferred on a superior authority to ensure that the subordinate officers exercise their powers under the Act correctly and properly. Where a time is limited for the purposes by the statute, such power should he exercised within the specified period from the date of the order sought to he reconsidered. To hold to the contrary would he

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9 inequitable and will also introduce uncertainties into the administration of the Act. [872C-E] 5. The direction to file an appeal under Sections 35E(1)(2) of the Act by the Board and the Collector, as the case may he, is to the very adjudicating authority who would otherwise he bound by his own order and not expected to he aggrieved by the same. When an appeal is filed on such direction, the appellant will be the adjudicating authority himself and not the authority who gave the direction. [867D-E] 6. The period of one year fixed under sub-section (3) of Section 35E of the Act should he given its literal meaning and so construed the impugned direction of the Board was beyond the period of limitation prescribed therein and therefore invalid and ineffective. [872G] Annamalai Chetti v. Col. J.G. Cloete, [1883] ILR 6 Mad. 189, Seshamma v. Sankara, [1889] ILR 12 Mad. 1; The Secre- tary of State for India in Council v. Gopisetti Narayanaswa- mi Naidu Guru, ILR 34 Madras 151; Raja Harish Chandra Raj Singh v. The Deputy Land Acquisition Officer & Anr., [1962] 1 SCR 676; Asstt. Transport Commissioner (Administration) U.P. & Ors. v. Sri Nand Singh, [1981] 1 SCR 131; Muthia Chettiar v. CIT, ILR 1951 Mad. 815 and Viswanathan Chettiar v. Commissioner of Income Tax, Madras, 25 ITR 79, referred to. 865

JUDGMENT: CIVIL APPELLATE JURISDICTION: CiVil Appeal No. 6071 (NM) of 1990. From the Order dated 31.5.90 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. E/2586/86-C with E/Cross/478/86-C. (Order No. 541/90-C). M. Gauri Shankarmurthy, K. Swamy and P. Parmeshwaran for the Appellant. Santosh Hegde and K.R. Nambiar for the Respondent. The Judgment of the Court was delivered by V. RAMASWAMI, J. The short question of law that arises for consideration in this appeal is as to what is the rele- vant date for the purpose of calculation of the period of one year provided under section 35E(3) of The Central Ex- cises & Salt Act, 1944 (hereinafter called the Act). Briefly stated the question arises in the following circumstances. By order in Original No. 34 of 1984 dated 28.11.1984, the Collector of Central Excise, Madras as an adjudicating authority within the meaning of the Act, held as barred by limitation the demand from the respondent towards excise duty on biaxially oriental polypropylene films as set out in the show cause notice dated 25.10.1983 and dropped further proceedings against the respondent. A copy of this order was attested by the Superintendent of the office on 21.12.1984 and despatched to the respondent. It was received by the respondent on 21.12.1984. The Central Board of Excise and Customs (hereinafter called the. Board), after consideration of the order, on 11.12.1985 directed the Collector of Cen- tral Excise, Madras under the provisions of Section 35E(1) to apply to the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi, for correct determination of the points arising out of the aforesaid order and accordingly the Collector filed the application before the Tribunal ’as provided under Section 35E(4) of the Act. Before the Tribunal the respondent urged that the rele- vant date of the Collector’s (adjudicating authority) order

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9 for the purposes of Section 35E(3) should be taken as 28.11.1984 and not 21.12.1984 when it was received by the respondent and on that basis the order of the Board under Section 35E(1) of the Act should be held as beyond the 866 period of one year from the date of the decision or order of the adjudicating authority and therefore the application before the Tribunal was incompetent. The Tribunal accepted this contention and held that the application was not main- tainable. In this appeal filed under Section 35L of the Act the learned counsel for the appellant contended that mere writ- ing an order in file kept in the office is no order in the eye of law in the sense of affecting the rights of the parties for whom the order is meant and that though the order of the adjudicating authority was made on 28.11.1984 a copy of the same was sent to the respondent only on 21.12.1984 and received by him on the very day and that therefore the limitation would start only at the earliest from 21.12.1984. He stated that the order was received by the Board also only subsequent to 21.12.1984. His further submission was that enabling the giving of the direction under Section 35E(1) and the application under Section 35E(4) in pursuance of that direction shall be treated as if a right of appeal given to the department. On this basis his argument was that the departmental authorities and the private parties are to be treated equally as aggrieved persons for the purposes of calculating the time for making the direction under Section 35E(3) of the Act. Before we discuss the arguments of the learned counsel, it is necessary to set out some relevant provisions in the Act. Section 35 of the Act, provides for an appeal to a person aggrieved by any decision or order passed under the Act by a Central Excise Officer lower than a Collector of Central Excise’ and that such an appeal will have to be filed "within three months from the date of the communica- tion to him of such decision or order". Clause 5 of Section 35A requires that on the disposal of the appeal, the Collec- tor (Appeals) shall communicate the order passed by him to the Appellant, the adjudicating authority and the Collector of Central Excise- Section 35B provides for a right of appeal to any person aggrieved by, among other orders, (1) an order passed by the Collector (Appeals) under Section 35A and (2) a decision or order passed by the Collector of Central Excise as an adjudicating authoritY. Such an appeal will have to be filed "within three months from the date on which the order sought to be appealed against is communicat- ed to the Collector of Central Excise or as the case may be the other party preferring the appeal." The Appellate Tribu- nal also is required to send a copy of the order passed in the appeal to the Collector of Central Excise and the other party to the appeal. Section 35E(1) authorises the Board "of its own motion, call for and examine the record of any proceeding in which a Collector of Central Excise as 867 an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Collector to apply to the Appel- late Tribunal. or as the case may be the Customs and Excise Revenues Appellate Tribunal established under Section 3 of the Customs and Excise Revenues Appellate Tribunal Act, 1986 for the determination of such points arising out of the decision or order as may be specified by the Board in its order." As sub-section (2) is also relevant for considera-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9 tion that may also be set here and that reads: "2. The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudi- cating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legal- ity or propriety of any such decision or order and may, by order, direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be spcified by the Collector or Central Excise in his order. It may be seen that the direction to file an appeal under these two sub-sections by the Board and the Collector, as the case may be, is to the very adjudicating authority who would otherwise be bound by his own order and not ex- pected to be aggrieved by the same. When an appeal is filed on such direction, the appellant will be the adjudicating authority himself and not the authority who gave the direc- tion. Sub-Section (3) of Section 35E of the Act which deals with the limitation for exercise of the powers under sub- sections (1) and (2) of the Act and which is the relevant provision for consideration in this appeal reads as follows: "No order shall be made under sub-section (1) or subsection (2) after the expiry of one year from the date of the decision or order of the adjudicating authority." At this stage itself we may state that sub-section (4) of the Act provides that the adjudicating authority shall file the application before the Tribunal in pursuance of the order made under sub-section (1) or sub-section (2)"within a period of. three months from the date of communication of the order under sub-section (1) or sub-section (2) to the adjudicating authority." 868 The words "from the date of decision or order" used with reference to the limitation for filing an appeal or revision under certain statutory provisions had come up for consider- ation in a number of cases. We may state that the ratio of the decisions uniformly is that in the case of a person aggrieved filing the appeal or revision, it shall mean the date of communication of the decision or order appealed against. However, we may note a few leading cases on this aspect. Under section 25 of the Madras Boundary Act, 1860 the starting point of limitation for appeal byway of suit al- lowed by that section was the passing of the Survey Offi- cer’s decision and in two of the earliest cases, namely, Annamalai Chetti v. Col. J.G. Cloete, [1883] ILR 6 Mad. 189 and Sesharnrna v. Sankara, [1889] ILR 12 Mad. 1, it was held that the decision was passed when it was communicated to the parties. In The Secretary of State for India in Council v. Gopisetti Narayanaswami Naidu Guru, ILR 34 Madras 151, construing a similar provision in the Survey and Boundary Act, 1897 the same High Court held that a decision cannot properly be said to be passed until it is in some way pro- nounced or published under such circumstances the parties affected by it have a reasonable opporunity of knowing what it contains. "Till then though it may be written out, signed and dated, it is nothing but a decision which the officer intends to pass. It is not passed so long it is open to him to tear off what he has written and write something else." In Raja Harish Chandra Raj Singh v. The Deputy Land Acquisi-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9 tion Officer & Anr., [1962] 1 SCR 676 construing the proviso to Section 18 of the Land Acquisition Act which prescribed for applications seeking reference to the Court, a time limit of six weeks of the receipt the notice from the Col- lector under Section 12(2) or within six months from the date of the Collector’s award whichever first expires, this Court held that the six months period will have to be calcu- lated from the date of communication of the award. In Asstt. Transport Commissioner (Administration) U.P. & Ors. v. Sri Nand Singh, [1981] 1 SCR 131 construing the provision of Section 15 of the U.P. Motor Vehicle Taxation Act, it was held that for an aggrieved party the limitation will run from the date when the order was communicated to him. The ratio of these judgments were applied in interpret- ing section 33A(2) of the Indian Income Tax Act, 1922 in Muthia Chettiar v. CIT, ILR 1951 Mad. 815 with reference to a right of revision provided to an aggrieved assessee., Section 33A(1) of the Act on the other hand authorised the Commissioner to suo moto call for the records of any pro- ceedings under the Act in which an order has been passed by any 869 authority subordinate to him and pass such order thereon as he thinks fit. The proviso, however, stated that the Commis- sioner shall not revise any order under that sub-section" if the order (sought to be revised) has been made more than one year previously". Construing this provision the High Court in Muthia Chettiar’s case held that the power to call for the records and pass the order will cease with the lapse of one year from the date of the order by the subordinate authority and the ratio of date of the knowledge of the order applicable to an aggrieved party is not applicable for the purpose of exercising suo moto power. Similarly in another decision reported in Viswanathan Chettiar v. Commis- sioner of Income Tax, Madras, 25 ITR 79 construing the time limit for completion of an assessment under section 34(2) of the Income Tax Act, 1922, which provided that it shall be made "within four years from the end of the year in which the income, profit and gains were first assessable," it was held that the time limit of four years for exercise of the power should be calculated with reference to the date on which the assessment or reassessment was made and not the date on which such assessment or reassessment order made under Section 34(2) was served on the assessee. It may be seen therefore, that, if an authority is authorised to exercise a power or do an act affecting the rights of parties, he shall exercise that power within the period of limitation prescribed there for. The order or decision of such authority comes into force or becomes operative or becomes an effective order or decision on and from the date when it is signed by him. The date of such order or decision is the date on which the order or decision was passed or made: that is to say when he ceases to have any authority to tear it off and draft a different order and when he ceases to have any locuspaetentiae. Normally that happens when the order or decision is made public or notified in some form or when it can be said to have left his hand. The date of communication of the order to the party whose rights are affected is not the relevant date for purposes of determining whether the power has been exercised within the prescribed time. So far as the party who is affected by the order or decision for seeking his remedies against the same, he should be made aware of passing of such order. Therefore Courts have uniformly laid down as a rule of law that for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9 seeking the remedy the limitation starts from the date on which the order was communicated to him on the date on which it was pronounced or published under such circumstances that the parties affected by it have a reasonable opportunity of knowing of passing of the order and what it contains, The knowledge of the party 870 affected by Such a decision, either actual or constructive is thus an essential element which must be satisfied before the decision can be said to have been concluded and binding on him. Otherwise the party affected by it will have no means of obeying the order or acting in conformity with it or of appealing against it or otherwise having it set. This is based upon, as observed by Rajamanner, CJ in Muthia Chettiar v. CIT, supra "a salutary and just principle". The application’ of this rule so far as the aggrieved party is concerned is not dependant on the provisions of the particu- lar statute, but it is so under the general law. In Muthia Chettiar’s case (supra) both these aspects came up for consideration. The relevant provisions consid- ered therein were Section 33A(1) and (2) of the’ Indian Income Tax Act, 1922, which read as follows: "33A. (1) The Commissioner may of his own motion call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him and may make such inquiry or cause such. inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee as he thinks it: Provided that the Commissioner shall not revise any order under this sub-section if- (a) x x x (b) x x X x (c) the order has been made more than one year previously." "(2) The Commissioner may, on application by an assessee for revision of an order under this Act, passed by any authority subordinate to the Commissioner, made within one year from the date of the order,.... call for the record of the proceeding in which such order was passed, and..... may pass such order thereon...... as he thinks fit: Interpreting these provision the Court observed: "In a case falling under sub-section (1) the Commissioner acts of his own motion. There is no question of the 871 aggrieved party invoking his jurisdiction, there can therefore be no occasion to apply the rule enunciated in Secretary of State for India in Council v. Gopisetti Narayanaswami Naidu, [1910] ILR 34 Mad, 15 1. It may be said that the Commissioner’s power to call for the record ceases with the lapes of one year from the date of the order by the subordinate authority. But in a case failing under sub section (2) the party aggrieved has got to take the step of applying for revision and he is allowed one year from the date of the order. The provision is, therefore, certainly in the nature of a time-limit for the applica-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9 tion for revision." The decision in Viswanathan Chettiar’s case (supra) related to the reassessment power under Section 34(2) of the Income Tax Act, 1922 which read as follows: "No order of assessment under Section 23 or of assessment or reassesment under sub-section (1) of this section shall be made after the expiry, in any case to which clause (c) of sub-section (1) of section 28 applies, of eight years and in any other case, of four years from the end of the year in which the income, profits or gains were first assessa- ble." After referring to some of the provisions in the Act and some of the earlier decisions and in particular Muthia Chettiar’s case (supra) the learned judges observed: "As we have already pointed out, the time limit of four years for which sub-section (2) of Section 34 provided was the period within which the Income-tax Officer had to complete one stage of the proceedings, that is, the assessment of the income and determination of the tax payable, and that stage could be completed by the Income- tax Officer himself, even if the terms of the order of assessment were not communi- cated within that period of four years to the assessee. The rights of the assessee aggrieved by such an order of assessment have been specifically provided for by other sections of the Act." Thus if the intention or design of the statutory provision was to protect the interest of the person adverse- ly affected, by providing a remedy against the order or decision any period of limitation prescribed with reference to invoking such remedy shall be read as com- 872 mencing from the date of communication of the order. But if it is a limitation for a competent authority to make an order the date of exercise of that power and in the case of exercise of suo moto power over the subordinate authorities’ orders, the date on which such power was exercised by making an order are the relevant dates for determining the limitation. The ratio of this distinction may also be found- ed on the principle that the Government is bound by the proceedings of its officers but persons affected are not concluded by the decision. Section 35E comes under the latter category of an au- thority exercising its own powers under the Act. It is not correct to equate the Board, as contended by Sri Gaurishan- kar Murthy, to one of the two parties to a quasi-judicial proceeding before the Collector and the Board’s right under Section 35E to the exercise of the right of appeal by an aggrieved assessee from an order passed to its prejudice. The power under Section 35E is a power of superintendence conferred on a superior authority to ensure that the subor- dinate officers exercise their powers under the Act correct- ly and properly. Where a time is limited for the purposes by the statute, such power, as under Section 33A(2) of the Indian Income-tax Act, 1922 referred to in Muthia Chettiar (supra), should be exercised within the specified period from the date of the order sought to be reconsidered. To hold to the contrary would be inequitable and will also introduce uncertainties into the administration of the Act for the following reason. There appears to be no provision

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9 in the Act requiring the endorsement, by a Collector, of all orders passed by him to the Board. If there is such a prac- tice in fact or requirement in law, the period of one year from the date of the order is more than adequate to ensure action in appropriate cases particularly in comparison with the much shorter period an assessee has within which to exercise his right of appeal. If, on the other hand, there is no such requirement or practice and the period within which the Board can interfere is left to depend on the off- chance of the Board coming to know of the existence of a particular order at some point of time, however, distant, only administrative chaos can result. We are, therefore, of the opinion that the period of one year fixed under sub- section (3) of Section 35E of the Act should be given its literal meaning and so construed the impugned direction of the Board was beyond the period of limitation prescribed therein and therefore invalid and ineffective. For the foregoing. reasons we are of the view that the Tribunal was right in holding that the application before them was out of time. This appeal is accordingly dismissed. There will be no order as to costs. V.P.R. Appeal dis- missed. 873