Premium Members

Advanced Search
Disclaimer Mobile View

Search

Cites 26 docs - [View All]

The Salt Cess Act, 1953
Section 35B in the Central Excise Act, 1944
the Central Excise Act, 1944
Section 128 in the Customs Act, 1962
the Customs Act, 1962
Citedby 4 docs
Rochees Watches Ltd. vs Commissioner Of Customs on 3 December, 2002
J.K. Synthetics Limited vs Collector Of Central Excise on 3 June, 1996
Lallubhai Amichand Ltd. vs Commissioner Of Cen. Excise on 1 May, 2003
Larsen And Toubro Ltd. vs Cce on 2 April, 1996

Get this document in PDF

Print it on a file/printer

User Queries
Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free reliance industries ltd.

experience. Free for one month and pay only if you like it. reliance industries
nariman
Customs, Excise and Gold Tribunal - Mumbai personal hearing
Reliance Industries Limited vs Collector Of Central Excise on 5 December, 1986 salt
appeal does not lie
Equivalent citations: 1987 (11) ECR 287 Tri Mumbai, 1988 (34) ELT 126 Tri Mumbai
central excise act
ORDER
K.S. Dilipsinhji, Member (T) preliminary issue
interlocutory order
1. M/s. Reliance Industries Ltd. have filed this appeal against the Order F.No. V-Adj(18)15-86/B-III,
central excise and salt act
dated 3-3-1986 of the Collector of Central Excise, Bombay-Ill, holding that the normal quantum of
central excise rules
production need not be determined Under Rule 173E of the Central Excise Rules 1944, before framing preliminary objection
charges (i) and (ii) in the show cause notice No. V(18)15-54/85/6773, dated 28-10-1985. Charge (i) in section 11a
the show cause notice is that M/s. Reliance Industries Ltd. have not accounted for the production of can central excise duty
Polyester Filament Yarn weighing 1302.3 Metric Tonnes during the period October 1980 to 7th May, cross objection
1985 in the Central Excise record and it has been further alleged that the aforesaid quantity has been central excises and salt act 1944
removed in contravention of the Central Excise Rules and by evading duty amounting to Rs. preliminary issue to be raised
10,90,67,625.00. Charge (ii) in the show cause notice relates to the allegation that M/s. Reliance central excise act, 1944
Industries Ltd. have manipulated the account of Polyester waste during the period October 1982 to adjudicator's decision
December 1983 to the tune of 1630 Metric Tonnes instead of showing Polyester Yarn of the same sec 35a
weight and it has been alleged that the aforesaid quantity of yarn has been removed without payment of
duty amounting to Rs. 13,65,12,500.00 in contravention of the Central Excise Rules. M/s. Reliance
Industries Ltd. in the letter dated 11-2-1986 addressed to the Collector contended that these two
charges could not be framed without invoking Rule 173E and determining the normal production of
their factory. In this letter they further submitted that the quantum of duty demanded was enormously
large and since the basis of the charge was not maintainable under the Act or the Rules, paragraphs 1
and 2 the show cause notice be first determined on the basis of preliminary submission raised by them.
The Collector held a personal hearing on 11-2-1986 with reference to the request of M/s. Reliance
Industries Ltd. and issued the order dated 3-3-1986, against which the appeal has been filed.

2. When the appeal was called out for hearing, Shri Senthivel on behalf of the Respondent Collector
raised a preliminary object regarding its maintainability. Shri Senthivel contended that the appeal of
M/s. Reliance Industries Ltd. and the cross-objection dated 19-4-1986 of the Collector of Central
Excise, Bombay-II, were not valid. He urged that under the Central Excises and Salt Act, 1944 a
specific provision had been provided Under Section 35B of the Central Excises and Salt Act, 1944 for
filing an appeal to the Appellate Tribunal. Therefore, the appeals under the Central Excise Act were
not to be confused with appeals under the common law. The so called order of the Collector dated 3-3-
1986 was a record of a personal hearing in the course of the adjudication proceedings and this had been
communicated to M/s. Reliance Industries Ltd. under the letter F.No. V-Adj(18)15-86/B-III, dated 4-3-
1986 signed by the Superintendent of Central Excise. There was no preamble to the Collector's order as
in normal cases of adjudication orders advising the party concerned of the appellate remedy available
to him. Besides the Collector's order dated 3-3-1986 had dealt with only two of the allegations
contained in the show cause notice out of six and even in respect of these two allegations, the order
was not final. The order further indicated that the Collector had fixed hearing on 20-3-1986 at 2 p.m. to
consider the explanation of M/s. Reliance Industries Ltd. with reference to the show cause notice dated
28-10-1985. This would indicate that the Collector's order dated 3-3-1986 was in the nature of an
interlocutory or an interim order. Hence M/s. Reliance Industries Ltd. could not come in appeal to the
Tribunal against such an order. The Collector had not passed the adjudication order with reference to
the show cause notice enlisting these charges. Though in the concluding portion of the Collector's
order, he had observed that in case M/s. Reliance Industries Ltd. desire to appeal against his interim
order, they were free to ask for an adjournment. Therefore the question for consideration before the
Tribunal was whether the Central Excises and Salt Act provided for an appeal against an order which
was of interim character. Shri Senthivel contended that under the aforesaid show cause notice demands
for payment of Central Excise duty had been raised and penal action against M/s. Reliance Industries
Ltd. had been proposed. The Collector had not adjudged any of these demands or the penal action in
his aforesaid order dated 3-3-1986 and therefore there could not be any appeal against that order. The
contention of M/s. Reliance Industries Ltd. appear to be that without invoking Rule 173E of the
Central Excise Rules, 1944, the Collector could not invoke the penal provisions of Rule 173Q. This
aspect of the matter had not been decided by the Collector as an adjudicating authority and hence there
could not be an appeal to the Tribunal against such an order of the Collector. The powers of the
Collector as an adjudicating authority were different from his powers as administrative authority. Even
in respect of Collector's powers as an adjudicating authority there were two views. One was that the
Collector's decisions as an adjudicating authority were with reference to Section 33 of the Act and the
other view was that it could cover other decisions also in the nature of adjudication orders. Shri
Senthivel submitted that he would prefer the second view as such a decision was required to be made
in the capacity as a quasi-judicial authority. This would necessarily have a reference to the show cause
notice. This Bench in the order No. 305/85/WRB, in the Appeal No. ED(BOM)A/209/1984 of M/s.
Motilal & Co. [1984 (15) ELT 157 (Tribunal)], had held that no appeal would lie to the Tribunal
against the order of the Collector (Appeals) passed in terms of Section 35F rejecting the request for
depositing duty or penalty before hearing the appeal on merits. The present appeal was analogous to
that case and hence the same decision should be taken in the present case. In reply to a question from
the Bench, Shri Senthivel clarified that the present decision of the Collector could not be treated as a
part adjudication of the case against M/s. Reliance Industries Ltd. on the basis of the show cause notice
issued to them as part decisions normally made in the Department related to adjudications regarding
levy of duty and confiscation of goods while postponing the decision on the question of leviability of
penalties. Such part decisions were taken with a view to give early decision in respect of goods under
detention. But there were no such compulsion in the present incident and therefore there was no need
for a part decision in the present case. Shri Senthivel further relied on the decision of the Tribunal in
the case of Bhushan Industrial Co. Pvt. Ltd. [1984 (18) ELT 538]. In particular he read out para 8, of
the Tribunal's order. Shri Senthivel further argued that the issues framed against M/s. Reliance
Industries Ltd. in the show cause notice were yet to be adjudged and the Collector had not done so in
the order. Shri Senthivel further contrasted the wordings of Section 35 and Section 35B of the Act and
argued that whereas under the former section, an aggrieved party could file an appeal to the Collector
(Appeals) against any decision or order passed under the Act, Under Section 35B the aggrieved person
could appeal to the Tribunal only against the orders specified thereunder. Under Sub-section (l)(a) an
appeal to the Tribunal would lie against a decision or order passed by the Collector of Central Excise
as an adjudicating authority. Hence the scope of Section 35B was restrictive compared to Section 35.
Shri Senthivel pointed out that the same view had been taken by the Tribunal in the appeal of M/s.
Natver Textile Processors Pvt. Ltd. vide Order No. 583/86/WRB, dated 15-5-1986. In the case of M/s.
Natver Textile Processors Pvt. Ltd., the Gujarat High Court refused to interfere in the proceedings as
the Collector had not passed a final order and M/s. Natver Textile Processors Pvt. Ltd. had rushed to
the High Court before the Collector could pass an order. Similarly, in the present case, the Collector in
his order dated 3-3-1986, decided to proceed further with the hearing of the case with reference to the
show cause notice and it was open to M/s. Reliance Industries Ltd. to urge whatever arguments they
wanted to advance before the Collector passed the adjudication order. In the case of M/s. Natver
Textile Processors Pvt. Ltd., Shri Senthivel added that the decision of the Gujarat High Court was
further upheld by the Supreme Court. Shri Senthivel therefore urged that the present appeal was not
maintainable and that it should be dismissed.

3. In reply to the preliminary objection of Shri Senthivel, Shri Nariman contended that the SDR was a
representative of the Collector. The Collector himself had informed M/s. Reliance Industries Ltd. that
they could file an appeal against his order if they so desire. It was therefore, not possible for Shri
Senthivel to urge that the present appeal was not maintainable. Shri Nariman however conceded that
this was a question which could be considered and decided by the Tribunal. He further argued that the
Collector had passed the aforesaid order on the basis of the letter dated 11-2-1986 of M/s. Reliance
Industries Ltd. Under Rule 173E the Proper Officer of Central Excise could make a best judgment of
assessment of duty on the production of a manufacturer if it was felt that there was shortfall in the
production which was not accounted to the satisfaction of the officer. But in such circumstances the
norm of production considered normal had to be fixed first. In the present circumstances no such action
had been taken and Rule 173E had not been invoked. Through allegations (i) and (ii) in the show cause
notice an attempt was made to recover duty on goods which had not been produced by the
manufacturers. The allegations in the show cause notice revealed that the alleged production of yarn
was fixed on the basis of standards in the text books and in show cause notice allegations had been
made that M/s. Reliance Industries Ltd. had removed the yarn without payment of duty. The charges (i)
and (ii) alongwith the other charges were framed in the show cause notice and it was open to the
Collector to decline to adjudicate the case piecemeal against M/s. Reliance Industries Ltd. if he so
chose. But the Collector had heard the case of M/s. Reliance Industries Ltd. against the two charges in
the show cause notice and passed the aforesaid order. If he had proceeded to adjudicate the case, M/s.
Reliance Industries Ltd. could have approached the High Court as it would have amounted to denial of
natural justice. In his ruling at page 8 of his order the Collector had held that determination of normal
production was not mandatory before the allegations in the show cause notice could be adjudicated
upon. This ruling showed that it was a decision of the Collector as an adjudicating authority and not
merely a recorded note of hearing as contended by the learned SDR. This was also a final order of the
Collector regarding the maintainability of the charges (i) and (ii) in the show cause notice and therefore
it was not an order of an interlocutory nature. The Collector himself permitted that an appeal could be
filed against his decision. Therefore, the SDR could not now argue that no appeal would lie. Shri
Nariman therefore requested that the SDR should not be permitted to raise the preliminary objection.

4. Shri Nariman observed that the impugned order of the Collector was dated 3-3-1986. In the
concluding portion he had fixed the further hearing on 20-3-1986 at 2 p.m. However, he had reserved
the right to M/s. Reliance Industries Ltd. to appeal against his order dated 3-3-1986 and to ask for an
adjournment. Accordingly in their letter dated 14-3-1986 addressed to the Collector the solicitors of the
Company requested him to postpone further hearing of the proceedings arising out of the show cause
notice dated 28-10-1985. Accordingly no action was taken by the Collector for proceeding with the
hearing. The Collector had himself held that Paras (i) and (ii) of the show cause notice were
maintainable and accordingly he had fixed the personal hearing in the matter. As regards the learned
SDR's objection that the appeal was not maintainable, Shri Nariman contended that all matters
pertaining to adjudication were within the competence of the Tribunal and hence any person aggrieved
by such a decision could appeal to the Tribunal. The decision of the Collector materially affected M/s.
Reliance Industries Ltd. and hence they had approached the Tribunal in terms of Section 35B as this
was a decision or order of the Collector. Shri Nariman referred to the definition of "Adjudicating
authority" as per Section 2(a) of the Act. He contended that in case the Collector had accepted the
objections of M/s. Reliance Industries Ltd. that charges (i) and (ii) in the show cause notice could not
be pressed without invoking Rule 173E, the Collector could not proceed further with the aforesaid
charges, and these allegations would have gone out of the purview of the show cause notice. Therefore,
the Collector's decision related to his own jurisdiction and the Tribunal had been set up to correct such
decisions. Shri Nariman referred to the Annexures A and 1 to the show cause notice. He added that it
was not understood how the quantities of yarn were worked out as per these annexures. No authority
has been cited in support of the calculation mentioned in these annexures. On the other hand, the
production register showing the actual production of the yarn by M/s. Reliance Industries Ltd. had
been regularly signed by the Central Excise officers and they had also done the stock-taking.
Therefore, the Collector's order was a final decision and this could be appealed before the Tribunal. In
this behalf Shri Nariman cited Supreme Court's decision in the case of Shah Babulal Khirnji reported
in AIR 1981 SC 1786, regarding the different types of judgments, namely, final, preliminary and
intermediate. Shri Nariman submitted that this would be a useful guide to the Tribunal in determining
as to whether the Collector's order was final or otherwise against which an appeal to the Tribunal
would lie Under Section 35B. Shri Nariman also cited the Supreme Court's decision reported in AIR
1962 SC 161. In this judgment the Supreme Court had considered as to whether an order of assessment
was open to a writ petition. Coming back to the facts of the case Shri Nariman argued that Under
Section 35B an appeal could be filed to the Tribunal against any decision or order. The present decision
of the Collector was made in the course of the adjudication proceedings. It was a finding on a question
which had finally determined the maintainability of the allegations in the show cause notice. The
appellants had approached the Tribunal against this decision. Therefore, the appeal was fully
maintainable. Shri Nariman added that it was not necessary for the Collector to decide the issue raised
by M/s. Reliance Industries Ltd. in their letter dated 11-2-1986 addressed to the Collector and that he
could have decided the same issues later at the time of deciding the entire liability of the appellants. As
regards the SDR's reliance on the Tribunal's decision in the case of M/s. Motilal & Co., Shri Nariman
argued that this Tribunal's decision was that no appeal could lie to the Tribunal against the order of the
Collector (Appeals) in terms of Section 35F rejecting the request of the appellants before him.
Similarly, the Tribunal's decision in Natver Textiles and Coats (India) cases were also on different
grounds and these would not help the SDR in urging the preliminiary contention that the present appeal
cannot subsist and was not maintainable.

5. We reserved our order on the preliminary objection raised by Shri Senthivel and advised Shri
Nariman to proceed with the arguments on merits of the appeal. Shri Nariman referred to the show
cause notice and to allegations (i) and (ii) in the show cause notice. He stated that the allegations in
paras (i) and (ii) of the show cause notice had been elaborated in the Annexures A and I to the show
cause notice. On this basis a conclusion was sought to be drawn that M/s. Reliance Industries Ltd. had
produced certain quantities of yarn and removed them without payment of duty. The annexures to the
show cause notice compared the production of the Company in 1982 and in 1983 and 1984. Shri
Nariman urged that this comparison was totally wrong. The Company had started production towards
the later part of 1982 and at that time the Company was using DMT as raw material. It switched over
to using TPA as raw material in 1983 and 1984. Hence the comparisons were not correct. Similarly the
percentage of waste generated in 1984 was sought to be applied to the production in 1982 and 1983.
Thus the first charge covers the period 1982 to 85 while the second charge related to only 1982 and
1983. Shri Nariman then referred to Rules 173D and E and read out the same. He argued that as per
Rule 173D the assessee would be required to furnish the information regarding the principal raw
material. The Central Excise Department did not issue any notification requiring the manufacturer of
man made yarn to furnish information regarding the principal raw material like DMT or TPA. In this
behalf he referred to the notification reproduced at page 582 of Central Excise Act and Rules, 3rd
Edition by R.B. Sethi and stated that against Serial No. 40 of the table annexed to this notification the
manufacturer of Terene Filament Yarn was required to give information regarding Polymer chips only
as principal raw material. Shri Nariman stated that this was confired in the finding of the Collector in
his order under appeal. This was also the point accepted in the Collector's cross-objection dated 19-4-
1986. As regards the requirements of Rule 173E, the Collector had held that it was not mandatory to
fix the norm Under Rule 173E before proceeding with the allegations in the show cause notice. Shri
Nariman aruged that the Collector was competent Under Rule 173B to decide the norm, but this had to
be with reference to the factory and by a duly empowered officer. In the present show cause notice, no
such authority had been revealed that the Collector had empowered any officer to fix the norm. So far
as the annexure 1 to the show cause notice is concerned, it was unsigned and it did not also explain as
to who determined the norms mentioned therein. The Company started production of yarn in October,
1982 and this had been shown in para 4 of annexure I to the show cause notice. Therefore, earlier to
this date no norm could be fixed Under Rule 173E. However, this was necessary for preferring charge
(i) in the show cause notice. As regards charge (ii) regarding the wastage in 1982 and 1983 the show
cause notice alleged that the Company manufactured and removed the yarn during the period October
1982 to December 1983 on the basis of wastage accruing in 1984. In 1982 the Company was using
DMT as raw material while in 1984 it was using TPA. Referring to Section 3 of Central Excises and
Salt Act, 1944 Shri Narirnan argued that Under Section 3 a duty of excise was leviable on goods which
are manufactured by an assessee. In case these have escaped assessment through suppression of
production, the proper officer of Central Excise could make a best judgment assessment Under Rule
173E. In the present case no evidence had been adduced in the show cause notice that M/s. Reliance
Industries Ltd. produced the goods and removed them without payment of duty. This was therefore,
nor a case of alleged clandestine removal of goods produced without accounting in the excise records.
It was a case of assumed production with regard to certain norms. This could be assessed to duty only
in terms of Section. 3 read with Rule 173E. But Rule 173E was not invoked. In case of clandestine
removal, the allegations should have been made for levying duty Under Rule 9(2). This was not done
in the present case and hence without recourse to Rule 173E, duty could not be demanded from M/s.
Reliance Industries Ltd. The Collector had accepted that Rules 173D and 173E were not invoked in the
show cause notice and no other provisions of law were attracted which would justify demand of duty.
This was therefore a question regarding the jurisdiction for demanding duty and the Collector decided
it against M/s. Reliance Industries Ltd. However, in the show cause notice the norms of production
were not disclosed. Shri Nariman relied on Supreme Court's decision in Ramachandra Keshav Adke
case reported in AIR 1975 SC 915 to urge that a power given to an officer to take certain action in a
particular way had to be so used that action was done only in that way. Shri Nariman implied that the
Collector's decision was not in accordance with this judgment of the Supreme Court, He, therefore,
requested that the Collector's order dated 3-3-1986 be set aside.

6. In reply Shri Senthivel first dealt with the contention of Shri Nariman against his preliminiary
objection to the maintainability of the appeal. Shri Senthivel submitted that Under Section 35B only in
four categories of the cases mentioned therein the Tribunal could decide the appeals before it. In that
case the Tribunal has to pass an order in terms of Section 35C. In the present case the Collector's order
dated 3-3-1986 was a limited one. The appellants in the present case had not come to the Tribunal for
maintainability of the Collector's order, but actually for the maintainability of the show cause notice
issued to them, which was quite a different case. The Collector had not given any decision on the
question of levy of duty or penalty as alleged in the show cause notice. Shri Senthivel relied on the
decision of the Calcutta High Court in the case of Shiv Bhagwan Goenka v. the Collector of Customs,
Calcutta, AIR 1971 Cal. 112 in which the High Court had laid down that sustainability of the show
cause notice was quite different from jurisdiction. He, therefore, reiterated his argument that the
present appeal of M/s. Reliance Industries Ltd. was not competent as the Collector had not given any
decision with reference to the show cause notice.

7. With regard to the merits of the appellant's contention Shri Senthivel argued that it was for the
Collector to decide whether he should invoke Rule 173E or not. Possibly the Collector did not feel the
need for invoking this rule and he had not done so. So far as the allegations were concerned, the
grounds had been fully disclosed in the show cause notice. Charge (i) to the show cause notice related
to production of Polyester Filament Yarn which could be produced on the formula for such production
out of the quantities of raw materials used. Charge (ii) to the show cause notice related to the reported
production of abnormal quantity of waste as recorded in the RG1 account of the appellants. Both these
allegations had been made along with others in the show cause notice and M/s. Reliance Industries Ltd.
had answered the charges in the show cause to the Collector, but the Collector had yet to decide on
these allegations after taking into account the explanation of M/s. Reliance Industries Ltd. Shri
Senthivel contended that Rule 173E was for a different purpose. The charges in the show cause notice
included the demand from the initial setting up and production of the factory. Perhaps for this reason
Rule 173E was not invoked. However, the evidence for both the charges had been furnished in the
enclosures to the show cause notice. In reply to the show cause notice, M/s Reliance Industries Ltd.
had inter alia raised a point of law and the Collector's order dated 3-3-1986 gives an answer to this
point. Rule 173Q had been invoked in the show cause notice and this was for the entire show cause
notice. Shri Senthivel therefore urged that there was no merit in the contention of the appeal of M/s
Reliance Industries Ltd, and that the same should be dismissed.

8. In reply, Advocate Shri Nariman stated that the basic question in the appeal was regarding the
determination of the Collector's jurisdiction in respect of the two charges in the show cause notice.
Since the Collector decided this aspect in favour of the department, it required interference by the
Tribunal to set aside his order which was not correct or legal As regards the learned SDR's reliance on
the Calcutta 'High Court's decision in the case of Shiv Bhagwan Goenka AIR 1971 Cal 112, Shri
Nariman brought out the correct ratio of this judgment. He repeated his contention that Rule 173Q
contained penal provisions for not accounting for the production of the yearn in the statutory records of
the appellants. Hence the question in the show cause notice was one of deemed production for which
recourse to Rule 173E was inevitable. Shri Nariman therefore reiterated his request for allowing the
appeal.

9. Shri Senthivel sought permission to rely on one more decision of the Bench in the case of M/s
Hindustan Aeronautics Ltd. Bangalore reported in 1983 ELT 2012 in support of his contention
regarding maintainability of the appeal. Permission was granted by the Bench and accordingly Shri
Senthivel cited this judgment to urge his contention that the appeal was not maintainable.

10. With the permission of the Bench, Shri Nariman referred to the appellant's letter dated 31-12-1985
addressed to the Collector of Central Excise, Bombay III in answer to the show cause notice and
pointed out the preliminary submissions taken up by the appellants at pages 2 to 5, of the Company's
letter. Shri Nariman concluded that the Collector's decision was with reference to these points and
hence the appeal was maintainable.

11. We have examined the submissions made on both the sides. A preliminary contention has been
raised by the learned SDR to the effect that the appeal of M/s Reliance Industries Ltd. is not
maintainable. This has been opposed by the learned advocate of the appellants on the ground that the
SDR is the representative of the Collector and when the Collector in his own order granted the right of
appeal to M/s. Reliance Industries Ltd., it would not lie in the mouth of the SDR now to say that the
appeal is not maintainable. However, Shri Nariman conceded that this is an aspect which lies within
the jurisdiction and discretion of the Tribunal and the Tribunal can decide this aspect on its own. We
find that there is a lot of weight in the contention of Shri Nariman. When the Collector on his own has
allowed the appellants to file an appeal to the Tribunal, the Collector's representative cannot say that
the appeal is not maintainable and that it should be dismissed in limine. All the same, the
maintainability of the appeal is an important aspect which calles for consideration first by the Tribunal.
Under Section 35B(l)(a) of the Central Excises and Salt Act, 1944 an appeal to the Tribunal lies against
a decision or an order passed by the Collector of Central Excise as an Adjudicating authority.
Therefore, the crux of the present appeal is to decide whether the purported order of the Collector
dated 3-3-1986 against which the present appeal is filed is an order of the Collecor passed in the
capacity as an Adjudicating authority. The learned advocate of the appellants has drawn our attention
to the definition of "Adjudicating authority" in Section 2(a) of the Act. Inter alia, the definition of
adjudicating authority is that it is an authority competent to pass any order or decision under this Act.
The question therefore arises as to whether the order of the Collector dated 3-3-1986 has been passed
under the Act. It has been vehemently urged by advocate Shri Nariman that it is so and in this behalf he
has argued that the decision was given after the issue of a show cause notice. The show cause notice is
issued demanding duty and for confiscation and levy of penalty. We observe that the show cause notice
is required to be issued Under Section 124 of the Customs Act as made applicable to Central Excise
duties by Notification No. 68/63, dated 4-5-1963 issued in terms of Section 12 of the Central Excises
and Salt Act, 1944. Besides Rule 223A also requires such a notice to be issued before confiscation of
any property or imposition of any penalty. Therefore, the show cause notice issued to M/s Reliance
Industries Ltd. is in terms of the aforesaid provisions of law. They have been asked to show cause to
the Collector who has to decide the allegations raised in the show cause notice and this decision has to
be taken in terms of Rule 9(2) read with Section 11A as alleged in the show cause notice so far as the
demand of duty is concerned, and Under Section 33 so far as the proposed action for confiscation and
levy of penalty is concerned. Therefore, the salient point which calls for determination is whether the
Collector has done so in his order dated 3-3-1986. The obvious answer to this question is in the
negative. Therefore, in the circumstances of the case, the Collector's order dated 3-3-1986 is not the
one passed by him as an adjudicating authority.
12. During the course of the hearing of the appeal, the learned advocate of the appellants accepted the
fact that the Collector had not passed any order of confirming the demand of duty or ordering fine or
penalty. But he contended that this was a final order of the Collector which was appealable to the
Tribunal Under Section 35B. This aspect of the argument has been very seriously opposed by the
learned Senior Departmental Representative. He has contended that there is a great deal of difference
between an appeal to the Tribunal under the Central Excises and Salt Act, and one under the common
law. In the case of the former, the appeal is restricted to the four categories of cases under the
provisions of Section 35B of the Central Excises and Salt Act, 1944. The learned SDR has therefore
contrasted the appeals under the Central Excises and Salt Act, with those under the common law. He
has argued that the so-call order of the Collector is merely a record of the personal hearing granted to
M/s Reliance Industries Ltd. presuant to the show cause notice issued to them and that too only on a
limited aspect. The Collector had yet to pass an order as enjoined Under Section 33 of the Act. The
learned SDR therefore, categorised the present order dated 3-3-1986 of the Collector as an intermediate
or interlocutory order and urged that there cannot be any appeal to the Tribunal against such a decision
as the Collector had yet to decide finally the allegations adduced in the show cause notice. In support
of his contention, the SDR has relied on different orders of the Tribunal in the cases of M/s. Motilal &
Co. [1984 (15) ELT 157 (Tri.)], M/s Natver Textiles and M/s Bhushan Industrial Co. Pvt. Ltd. The
decision of the Tribunal in the case of Motilal & Co. was with reference to the order of the Collector
(Appeals) in terms of Section 35F. Similarly the decision of the Tribunal in the case of Bhushan
Industrial Co. Pvt. Ltd. was also to the same effect, However, in deciding this matter against the
appellants, the Tribunal observed that the legislative intent was clear to exclude entertaining appeals by
the Tribunal against interim or interlocutory orders. It is on this observation of the Tribunal that the
SDR relies to oppose the present appeal. The Tribunal's decision in the case of M/s Natver Textiles is
really not on all fours with the present case and hence it is not necessary to deal with this in detail. On
the other hand the contention of the learned advocate of the appellants is that the Collector's decision is
final. In support of his contention, he has cited several decisions. However, an important decision on
which he has relied is the case of Shah Bahulal Khimji AIR 1981 SC 1986. In this case the Supreme
Court was dealing with the provisions of the Civil Procedure Code and the scope of letters patent
appeal to the High Courts. In para 113 of this judgment, the Supreme Court set out three categories of
judgments, namely final, preliminary and intermediary or interlocutory. In this judgment, the Supreme
Court held that those orders would be treated as final judgments which affected vital and valuable
rights of the parties. But in this judgment also the Supreme Court observed that unnecessary
multiplication of appeals should be avoided. Scrutinising the contention of the learned advocate in the
light of the aforesaid judgment of the Supreme Court it is seen that the Collector's order dated 3-3-1986
does not decide the issue which would finally affect the vital and valuable rights of M/s Reliance
Industries Ltd. The show cause notice had been issued and the merits of the explanation offered by M/s
Reliance Industries Ltd. were yet to be decided by the Collector. Therefore, the Collector's order dated
3-3-1986 does not affect the vital right of M/s Reliance Industries Ltd. except to the extent of showing
that the allegations (i) and (ii) in the show cause notice are maintainable. M/s Reliance Industries Ltd.
have been left free to dispute these allegations and the dispute is yet to be decided by the Collector.
Therefore, it cannot be said that the Collector's order dated 3-3-1986 is final in the sense that it fastens
any liability regarding payment of duty or fine or penalty on the appellants. Even otherwise, the
concept, of common law appeals cannot be imported into the Central Excises and Salt Act, 1944. As
observed by the Tribunal in the case of M/s Bhushan Industrial Co. Pvt. Ltd., the right of appeal under
the Central Excises and Salt Act, 1944 is very much limited. Therefore, there cannot be any appeal to
the Tribunal apart from the provisions contained in Section 35B. The purported appeal of M/s Reliance
Industries Ltd. cannot therefore be termed as the one envisaged by Section 35B(l)(a).

13. It is further seen that Under Section 35B(a) the scope of appeal is restricted as compared to Section
35 which prescribes filing of appeals to Collector (Appeals). Under Section 35, a person aggrieved by
any decision or order passed under the Central Excises and Salt Act, can appeal to the Collector. This
Section is wider in scope than Section 35B. The Collector's order dated 3-3-1986 is not in terms of any
of the provisions of the Act. It can therefore be termed much less as a decision or order passed by the
Collector as an adjudicating authority justifying appeal Under Section 35B(l)(a) to the Tribunal. The
learned advocate of M/s Reliance Industries Ltd. conceded during the course of the argument that the
Collector had yet to decide on the questions of levy of duty, ordering confiscation and penalty.
Therefore, the present order dated 3-3-1986 cannot be treated as a f'inal order. The appellants are
merely afraid that in case the Collector were to confirm the demand of duty and order fines and
penalties, the liability of the Company would be so high that the Company would be effectively denied
the appellate remedy of approaching the Tribunal as it may not be possible for the Company to pay
such a huge amount of duties besides fines and penalties. This point of concern appears to be at the
bottom of the Company's present appeal to the Tribunal. However, this is a separate matter and it
cannot give a right of appeal to the Company where none exists. It may further be observed that such a
tear is totally unfounded. If M/s Reliance Industries Ltd. are therefore convinced of their case that
without recourse to Rule 173E, the demand cannot be sustained, they would have nothing to fear so far
as the Collector's decision is concerned. In case his decision is still against them, Section 35F would
none the less provide rescue to the appellants in seeking the appellate remedy against the Collector's
order.

14. A further fact which needs observation is that the Order dated 3-3-1986 is not a part adjudication
order. In case of part adjudication, some decision is taken with regard to the show cause notice which
may involve demand of duty, confiscation of property and levy of fine or penalty. Though these facts
are alleged in the show cause notice no such decision has been reached in the Collector's order dated 3-
3-1986. Therefore, this order cannot be called a part adjudication order. Were it so, there would have
been no doubt that such a decision would have been appealable to the Tribunal Under Section 35B. We
note that the learned advocate of the appellants and the SDR conceded that there was no compulsion on
the part of the Collector to pass the order dated 3-3-1986. We fail to notice any provisions of the
Central Excises and Salt Act, and the Central i Excise Rules, 1944 which would justify such an order
of the Collector. By informing M/s Reliance Industries Ltd. that they could file an appeal to the
Tribunal, the Collector cannot give a right of appeal to M/s Reliance Industries Ltd. where none exists
under the law. To apply the Supreme Court's observations in the case of Shah Babulal Khimji, such
decisions will flood the Appellate Tribunal with appeals against all kinds of orders passed by the
Collector and the Tribunal would not be able to carry out its functions properly and effectively. The
questions of controversy have not been decided by the Collector and there was no reason for him to
pass such an order.

15. After the hearing of the appeal was over, the advocate, of the appellants brought to our notice the
decision of the North Regional Bench, New Delhi in the case of Premier Packaging Pvt. Ltd. reported
in 1986 (26) ELT 333 (Tribunal) and requested that we should follow this decision while disposing of
appeal of M/s Reliance Industries Ltd. We have considered the request of the appellants. We find that
this appeal to the North Regional Bench in the case of Premier Packaging Pvt. Ltd. was against the
decision of Collector of Central Excise (Appeals) which had in turn affirmed the order of the Assistant
Collector for the demand duty with reference to the show cause notice issued to M/s Premier
Packaging Pvt. Ltd. Therefore the appeal of M/s Premier Packaging Pvt. Ltd. to the North Regional
Bench of the Tribunal was filed and entertained in terms of Section 35B(l)(b) and was disposed of in
terms of Section 35C. On the other hand the present appeal of M/s Reliance Industries Ltd. purports to
be the one filed Under Section 35B(l)(a). As set out in paragraph 12 above, the present purported
appeal cannot be deemed to be the one competent Under Section 35B(l)(a). In fact, as further observed
by us in para 14 of our order there are no provisions of law which could justify the Collector's order,
dated 3-3-1986. Therefore, there cannot be any appeal to the Tribunal against such an order. In this
behalf we have also relied on the Supreme Court's decision in the case of Shah Bahulal Khimji.
Therefore, the present case is distinguishable from the appeal of M/s Premier Packaging Pvt. Ltd. and
therefore the request of the advocate is not tenable.

16. In view of the foregoing facts we find that the so-called appeal of M/s .Reliance Industries Ltd. is
not maintainable. Pot this reason, it is not necessary for us to go into the other arguments on merits of
the appeal advanced by both the sides. That still leaves the decision in respect of the so-called cross-
objection of the Collector. Though the learned advocate of the appellants referred to the Collector's
cross-objection in the course of the arguments before us, the so-called cross-objection is not one as
correctly envisaged Under Section 35B(4). It has therefore not been registered as a cross-objection by
the registry. However, since a mention was made of this "cross-objection" by the learned advocate of
M/s Reliance Industries Ltd. it is necessary to dispose of that matter and the "cross-objection" is
directed to be closed. In this view, we find that the appeal of M/s Reliance Industries Ltd. is
incompetent, and we reject the same.

17. [Contra per : K. Gopal Hegde, Member (J)]. - I have carefully gone through the order proposed by
brother, Shri Dilipsinhji, dated 19-11-1986. With great respect I am unable to agree with his conclusion
that the appeal is not maintainable.

18. The question of maintainability was raised by Shri Senthivel, Senior Departmental Representative
at the time of hearing of the stay petition ESP(BOM)332/86, filed by M/s Reliance Industries Ltd. The
following observations were made by us in the order on the stay petition :

"We have examined the submissions made on both the sides. While urging or opposing the request
both the sides have touched on the maintainability of the appeal. It is not possible for us to deal with
this aspect at the present stage as an expression of any view one way or the other is liable to cause
prejudice to the parties. We, therefore, scrupulously refrain from dealing with the arguments about the
maintainability of the appeal. Suffice it to say that the Collector thought that the aspect of jurisdiction
raised by M/s Reliance Industries Ltd. before him was important enough calling upon him to pass the
final order and he has accordingly, done so. As advised by him M/s Reliance Industries Ltd. have filed
this appeal. The order of the Collector is dated 3-3-1986 and thereafter no steps were taken by the
Collector to proceed further with the hearing. The matter assumed the urgency when he issued the
notice dated 6-8-1986 to M/s Reliance Industries Ltd. informing them that he was proceeding further
with the hearing and fixing the hearing on 22-8-1986. Hence, this present application for stay. During
the arguments on both the sides, while hearing the stay application, both the sides expressed their
willingness for an early hearing of the appeal of M/s Reliance Industries Ltd. Considering this fact and
also the fact that the disposal of stay application virtually disposes of the appeal of M/s Reliance
Industries Ltd. which has not been heard on merits and also the fact that no action had been taken by
the Collector to proceed with the hearing since 3-3-1986, we are of the opinion that the interest of
justice requires a stay of further proceedings pending with reference to the show cause notice No.
F.No. V(18)15-54/85/6773, dated 28-10-1985 and accordingly, we stay the same direct that the appeal
No. ED(BOM)84/86, be listed for hearing before this bench on 6-10-1986."

19. During the hearing of the appeal Shri Senthivel raised the question of maintainability of the appeal
Alter hearing both the sides on the question of maintainability, without reserving our order on that
question, we directed the parties to address arguments on merits also. Accordingly, arguments were
addressed on merits. The hearing of the appeal was, however, advanced to 1-10-1986.

20. Since there has been a faithful recording of the various contentions urged by the parties in the order
of brother Shri Dilipsinhji, 1 do not propose to set out them again.

21. Having regard to the rival contentions, the first question that arises for consideration is whether the
appeal filed by M/s Reliance Industries Ltd. against the order of the Collector dated 3-3-1986 is not
maintainable. Shri Senthivel's contentions regarding the maintainability of the appeal has several
dimensions. Firstly, he contended that the order dated 3-3-1986 which is the subject-matter of the
appeal, was a record of a personal hearing and it is not an order in an adjudication as it is ordinarily
understood. Secondly, that the Collector's order dated 3-3-1986 dealt with only two out of six
allegations contained in the show cause notice and the Collector's order was also not final even with
regard to those two allegations. Thirdly, since the Collector had posted the case to a further date with
regard to the allegations contained in the show cause notice, the order dated 3-3-1986 is an
interlocutory or an interim order against which no appeal lies. Fourthly, that the order dated 3-3-1986
was not passed by the Collector as an adjudicating authority, no appeal lies to the Tribunal Under
Section 35B of the Central Excises and Salt Act, 1944 (for short 'the Act').

22. Shri Nariman appearing for the appellants on the other hand, also urged several arguments as to the
maintainability of the appeal. He firstly contended that the impugned order dated 3-3-1986 was passed
by the Collector during the course of the adjudication. Secondly, the absence of the preamable does not
alter the character or nature of order passed by the Collector. Thirdly, order passed by the Collector is
not an interlocutory or an interim order, but is a final order which finally determined the jurisdiction of
the Collector to enquire into the charges (i) and (ii) in the show cause notice. Fourthly, the Collector
who passed the order understood the order to be an appealable order and he had postponed the hearing
to enable M/s Reliance Industries Ltd. to prefer an appeal against his order if they so chose. Fifthly,
when the Collector himself had reserved a right to M/s Reliance Industries Ltd. to prefer an appeal
against his order, it is not open to the Departmental Representative who represent the Collector to
contend that no appeal lies against the order of the Collector. Sixthly, the Collector came to pass the
impugned order dated 3-3-1986 because of the request made by the Reliance by their letter dated 11th
February, 1986 which raised a question as to the Collector's jurisdiction to enquire into the allegations
(i) and (ii) in the show cause notice. Finally, the order of the Collector is a decision and it was passed
after affording a personal hearing and therefore, an appeal lies to the Tribunal against that decision as
provided in Section 35B of the Act.

23. In order to appreciate the rival contentions, it is necessary to refer to certain facts and
circumstances under which the Collector came to pass the impugned order. In the show cause notice
issued to the appellants, among other things, it was alleged that, -

"(i) they have not accounted the production of polyester filament yarn (POY) of a quantity of 1302.3
MTs during the period October 1982 to 7th May 1985 in the prescribed Central Excise R.G. 1 register
as required Under Rule 173G(4) read with Rules 53 and 226 ibid as detailed in para 1 of Annexure 'A'
and removed the said POY without determining the Central Excise duty leviable thereon, without
payment of Central Excise duty as required Under Rules 173F and 173G(1) read with Rule 9(1) ibid
resulting is short payment of Central Excise duty to the tune of Rs. 10,90,67,625,00;

(ii) they have manipulated the account of polyester waste in the R.G. 1 register during the period
October 1982 to December 1983 to the tune of 1630 MTs which should have been accounted as POY
as explained in para 2 of Annexure 'A' and thereby not accounted the equivalent quantity of POY as
required Under Rule 173G(4) read with Rules 53 and 226, removed the said unaccounted Polyester
yarn without determining the duty leviable and without payment of duty as required Under Rules 173F
and 173G(1) read with Rule 9(1) resulting in short payment of duty to the tune of Rs.
13,65,12,500.00."

The rest of the show cause notice is not relevant for our purpose. M/s Reliance Industries Ltd. sent a
reply dated 31st December, 1985. Inter alia they contended -

"PRELIMINARY SUBMISSIONS :

(1) It is submitted that the very basis of the main charges in the show cause notice, particularly Items
(i) and (ii) therein, proceed on the assumption that there are norms of production for the unit and that
these norms of production have been breached and there has been a shortfall in respect thereof. In the
first place this is totally untenable infact and in law. Rule 173E has been on the statute book for a
number of years." (This rule has been extracted, but omitted by me).

"The norms of production have never been prescribed and at no time has any officer or official of the
Excise Department even purporting to act Under Rule 173E has ever purported to fix the "normal
quantum of production". In the absence of any fixation of the normal quantum of production, there is
no warrant for the issuance of the show cause notice, especially pertaining to Items (i) and (ii). Rule
173E is the only statutory provision permitting assessment of duty on goods which ought to have been
manufactured and which have not in fact been manufactured. To call upon the owner of a factory
licensed under the Act to pay Excise duty on goods which should have been manufactured and were
not manufactured on the basis of quantities less than the so called norms of production being observed
is totally ultra vires the provisions of the Rule -and the Act. Excise duty is chargeable only on goods
which are actually and factually produced and manufactured (save and except in the cases provided for
in Rule 173E assuming that the said rule is valid. There can be no show cause notice under any alleged
head of "suppression of production" as contrasted from any conscious diversion of goods produced, the
latter is not the charge made."
In the reply, Rule 9 had been extracted and thereafter it was stated, -

"Rule 9(2) makes it clear that except for the cases mentioned in Explanation (ii) thereof the duty can
only be demanded on excisable goods actually and factually manufactured. Rule 9(1) whose
contravention is provided for in Rule 9(2) also makes it clear that duty is payable on goods actually
and factually manufactured and not on goods which in the opinion of the Excise Officer ought to have
been manufactured. The provisions of Section 173Q (consequences and penalty) also makes it amply
clear that the object and intenment of the Act and the rule is to ensure that goods actually and factually
produced and manufactured are not removed and have to be accounted for goods not actually and
factually produced are not within the contemplation of the rule save and except in the limited
circumstances mentioned in Rule 173E, the only rule providing for the best judgment of assessment."

"(11) It is submitted that the show cause notice is clearly barred Under Section 11A and there is no
ground whatever for invoking the proviso in the facts and circumstances of the case. The entire show
cause notice is erroneously issued and ought to be withdrawn."

The rest of the reply to the show cause notice is not relevant for our purpose.

24. On 11-2-1986 M/s Reliance Industries Ltd. addressed a letter to the Collector, wherein among other
things, it was stated, -

"Since the quantum of duty demanded is enormously large and since the basis of the charge is not at all
maintainable under the Act and the Rules, it is submitted that paragraphs 1 and 2 of the show cause
notice be first determined on the basis of the preliminary submissions raised by us in our reply dated
31st December, 1985.

It is submitted that a great part of the hearing depending on the factual data etc. would be obviated
since the factual assumptions and data will have to be established by the Department by evidence.

It is submitted that the submissions made in the pages 2 to 4 of the reply dated 31st December, 1985
being in the nature of jurisdictional points, it is not only in the interest of justice but also of
convenience that these questions should be first determined."

"Affidavit of Shri Samir Chakravarty and Mr. v. Ananthakrishnan, both affirmed on the 10th day of
February, 1986, are annexed to this Application."

25. Subsequent to this letter, on the same day, the Collector seems to have given a personal hearing to
M/s Reliance Industries Ltd. and they were represented among others by Shri F.S. Nariman, Senior
Advocate-Thereafter on 3-3-1986, the learned Collector passed the impugned order. In this impugned
order, the learned Collector had referred to the submissions made during the personal hearing. In his
order the learned Collector had also referred to various submissions by Shri F.S. Nariman. It appears,
Shri Nariman, among other things, had contended that the basis of the first two charges of the show
cause notice proceeded on the assumption that the norms of production for M/s Reliance Industries
Ltd. has been established Under Rule 173E of the Central Excises Rules, 1944 and also that these
norms had been breached. But then the determination of norms of production had not been made
earlier by any officer at any time. Therefore, the allegations contained in the first two paragraph of the
show cause notice are ultra vires of Rule 173E and therefore do not survive. In support of his
submission Shri Nariman had relied on the affidavits filed by Shri V. Ananthakrishnan, General
Manager (Process) of M/s Reliance Industries Ltd. and also by Shri S Chakravarty, Works Manager of
M/s Reliance Industries Ltd. From the order of the Collector, it is further seen that Shri Nariman had
also contended that no factory can work on a theory and the charge of suppression was made on a
presumption and therefore, it was not valid. It appears, after referring to the language of Annexure 'I' to
the show cause notice, Shri Nariman appeared to have commented on the words such as "for
convenience of calculation", "can be worked out" and "could be worked out" show that the allegations
were on an unsound basis. The order of the learned Collector also discloses that during the personal
hearing Shri Nariman had reiterated that the level of charges such as contained in paragraphs (i) and
(ii) of the show cause notice was ultra vires of the provisions of Section 173 of the Central Excises
Rules and such allegations can be made only after the proper officer determines the normal quantum of
production in the case of a factory and not before. It was further stated in the order that the learned
Advocate sought a ruling of the Collector on question of jurisdiction on the preliminary points so as to
obviate the greater part of hearing depending upon the factual data.

26 Thereafter the learned Collector after referring to the various contentions raised by Shri Nariman
proceeded to record his findings. The Collector had begun his findings by observing "in the
preliminary submissions and the application the claim has been made that unless in the case of a
factory the normal quantum of production has been determined Under Rule 173E of the Central Excise
Rules, 1944, an allegation cannot be levelled that in the given period of manufacturing activity of a
particular unit, any production when studied in consonance with the amount of raw materials etc. fell
short of the optimum production". Thereafter the Collector referred to Rule 173E and observed "now
coming to the language of Rule 173E it is clear that the determination of normal production envisaged
thereunder is not a mandatory provisions as far as the department is concerned. This rule follows Rule
173D under which it is incumbent upon an assessee to furnish information regarding the principle raw
material and the ratio of such raw material to the finished products, when so asked for by the
Department. Rule 173E does not have such a provision. It bestows upon the concerned officer the
unilateral discretion to fix a normal quantum of production without holding a dialogue with the
assessee. If the assessee is required to furnish such information Under Rule 173D then that would form
the basis of such determination Under Rule 173E This Collectorate has not issued any instruction
Under Rule 173D The raw materials consumed by M/s Reliance in the production of POY are not
therefore required to be declared. Therefore, the officers who conducted the studies in the factory of
M/s Reliance as regards determination of normal production were entirely within their right to do so
unilaterally...." Thereafter the Collector gives his ruling "viewed in this light I do not agree to the claim
of Shri Nariman that determination of normal production under the said rule is mandatory before any
allegations such as raised in the present case are made."

27. From the above narration it is seen that in the reply to the show cause notice and in their letter
dated 11-2-1986 as well as during the personal hearing on 11-2-1986, M/s Reliance Industries Ltd.
required the Collector to record a finding as to the ultra vires nature of the allegations (i) and (ii)
contained in the show cause notice and further required the Collector to give a ruling regarding the
preliminary points they had raised. The Collector had proceeded to consider the preliminary points and
he considered them as jurisdictional points and thereafter gave his ruling. The ruling given was that
determination of norms of production Under Rule 173 is not mandatory before any allegations such as
raised in the show cause notice are made.

28. It is necessary to consider whether the order passed by the Collector is an interim order or an
interlocutory order of an interim nature or an interlocutory order which finally determined the
preliminary issue raised by M/s Reliance Industries Ltd. as to the maintainability of the charges (i) and
(ii) in the show cause notice. There is a judgment of the Supreme Court in which the above questions
are answered. In the case of Shah Babulal Khimji v. Jayaben D. Kania and Anr., AIR 1981 Supreme
Court 1786, their Lordships of the Supreme Court were considering as to the scope of the expression
'judgment' appearing in Clause 15 of the Letters Patent. After reviewing the various decisions, His
Lordship Mr. Justice Fazal Ali for himself and on behalf of His Lordship Mr. Justice A. Varadarajan
observed that a judgment can be of three kinds :

"(1) A final judgment - A judgment which decides all the questions or issues in controversy so far as
the trial Judge is concerned and leaves, nothing else to be decided."

"(2) A preliminary judgment - This kind of a judgment may take two forms - (a) where the trial Judge
by an order dismisses the suit without going into the merits of the suit but only on a preliminary
objection raised by the defendant or the party opposing on the ground that the suit is not maintainable.
(b) Another shape which a preliminary judgment may take is that where the trial Judge passes an order
after hearing the preliminary objections raised by the defendant relating to maintainability of the suit
e.g. bar of jurisdiction, resjudicata, a manifest defect in the suit, absence of notice Under Section 80
and the like, and these objections are decided by the trial Judge against the defendant, the suit is not
terminated but continues and has to be tried on merits but the order of the trial Judge rejecting the
objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid,
is entitled to get the suit dismissed on preliminary grounds. Thus, such an order even though it keeps
the suit alive, undoubtedly decides an important aspect of the trial which affects a vital right of the
defendant and must, therefore, be construed to be a judgment so as to be appealable to a larger Bench."

"(3) Intermediary or interlocutory judgment - Most of the interlocutory orders which contain the
quality of finality are clearly specified in Clauses (a) to (w) of Order 43, Rule 1 and have already been
held by us to be judgments within the meaning of the Letters Patent and, therefore, appealable. There
may also be interlocutory orders which are not covered by Order 43, Rule 1 but which also possess the
characteristics and trappings of finality in that, the orders may adversely affect a valuable right of the
party or decide an important aspect of the trial in an ancillary proceeding. Before such an order can be
a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect
or remote."

29. Thereafter, His Lordship, gave illustrations of interlocutory orders which cannot be regarded as a
judgment. His Lordship also gave illustrations of interlocutory orders which may be treated as
judgments, As many as 15 orders were listed by His Lordship and one of the illustrations given reads
"an order deciding a preliminary objection to the maintainability of the suit on the ground of limitation,
absence of notice Under Section 80, bar against competency of the suit against the defendant even
though the suit is kept alive".

30. The order passed by the Collector comes under the category of a preliminary judgment falling
under the category (b) of the Supreme Court case Before the Collector, M/s Reliance Industries Ltd.
had raised a preliminary objection relating to the maintainability of the two charges in the show cause
notice. They had contended that without determining the norms of production as provided Under Rule
173E, the charges (i) and (ii) in the show cause notice will not be maintainable. They have urged that
the said charges are totally ultra vires of the provisions of the Act and the Rules. They urged before the
Collector that if the preliminary issue raised by them is decided, it would obviate the necessity of
adducing mass of evidence to substantiate those charges. They had also contended that the preliminary
objection raised by them are in the nature of jurisdictional points. The Collector had conceded their
request. He gave a personal hearing. He heard the arguments and then gave his ruling. The ruling given
was that the determination of norms of production Under Rule 173E is not mandatory before any
charges such as raised in the show cause notice are made. The ruling of the Collector finally
determines the preliminary issue as to the maintainability of the charges (i) and (ii) in the show cause
notice. The decision of the Collector had adversely affected a valuable right of M/s Reliance Industries
Ltd. If the preliminary issue raised by M/s Reliance Industries Ltd. were to be upheld, M/s Reliance
Industries Ltd. would not be required to pay the Central Excise duty of over Rs. 25 crores, which
according to the Department were short payment of duty. Even if the order of the Collector is
characterised as interlocutory, but that interlocutory order has finally determined the issue regarding
the jurisdiction or maintainability of the charges. I, therefore, hold that the Collector's order is a
preliminary judgment passed after hearing the preliminary objection raised by M/s Reliance Industries
Ltd. relating to the maintainability of the charges (i) and (ii) in the show cause notice. As a matter of
fact, brother Dilipsinhji who passed the stay order with whom I concurred had observed in the order
"suffice to say that the Collector thought that the aspect of jurisdiction raised by M/s Reliance
Industries Ltd. before him was important enough calling upon him to pass the final order and he has
accordingly, done so".

31. The next question that arises for consideration is whether an appeal lies against the impugned order
to the Tribunal. Shri Senthivel appearing for the Collector had contended that the impugned order is
not an order. It is a record of a personal hearing held on 11-2-1986. This contention of Shri Senthivel is
misreading of the impugned order. Probably, he was misled by the endorsement on the top of the order.
The endorsement reads "record of a personal hearing held on 11-2-1986 in the matter of show cause
notice No. V(18)15-54/85/6773, dated 28-10-1985". The rest of the order has nothing to do with the
above endorsement. The impugned order itself was passed on 3-3-1986 and not on 11-2-1986. In the
impugned order the Collector had referred to the personal hearing as well as the persons who were
present at the personal hearing and the submissions made by Shri Nariman during the personal hearing.
The Collector has divided his order into three parts. The first part consists of the submissions made by
Shri Nariman at the time of personal hearing on 11-2-1986. The second part is his findings and the
third and the last part is his ruling. I, therefore, reject Shri Senthivel's contention that the impugned
order is not an order but only a record of the personal hearing held on 11th February, 1986.

32. The next contention taken by Shri Senthivel was that in the case of an appealable order, the order
contains a preamble and the order has no preamble. This contention also has no force- The presence or
absence of a preamble does not determine the nature of character of the order. Even if an order has a
preamble and if the order does not involve any decision affecting the right or the liability, the cannot be
considered as an order in the eye of law. Therefore, the absence or presence of a preamble is not at all
relevant for consideration of the question as to whether an appeal lies against the order.

33. The third contention of Shri Senthivel was that the show cause notice contained six charges and the
Collector's order was restricted to two out of six charges and even with regard to those charges, the
Collector had not recorded any findings on merits. This contention amounts to begging the question. If
the Collector had recorded his findings on merits, then this argument is not at all available to Shri
Senthivel. It is not disputed that the Collector has the power and jurisdiction to make a part
adjudication. If for reasons the Collector had decided on merits only two out of the six charges, it
cannot be contended that that order of the Collector is not an appealable order. Question is whether the
impugned order which did not finally determine the merits of the charges is not an appealable order.
The request of M/s Reliance Industries Ltd. was to consider the question of maintainability of the two
charges and there had been no request to consider the merits of those charges. Therefore, the argument
that the order was not final because the merit of the charges have not been decided, in my view, is not a
sound one. I have, in detail, discussed as to the nature and character of the order. I have already
recorded a finding that the impugned order finally determined the preliminary issue raised by M/s
Reliance Industries Ltd. as to the maintainability of the first two charges in the show cause notice. The
fourth contention of Shri Senthivel that since the Collector had posted the case to a further date with
regard to the allegations contained in the show cause notice the impugned order dated 3-3-1986 is an
interlocutory or an interim order against which no appeal lies. This aspect of the contention had been
already dealt with by me and in view of my finding I reject Shri Senthivel's contention that the
impugned order is an interlocutory in the sense that there has been no final determination of the right
or the liability of M/s Reliance Industries Ltd. The fifth and the last contention of Shri Senthivel was
that the impugned order dated 3-3-1986 was not passed by the Collector as an adjudicating authority
and therefore, no appeal lies to the Tribunal under the Act. This argument of Shri Senthivel found
favour with brother Dilipsinhji. In para 11 of his order brother Dilipsinhji observed "Under Section
35B(l)(a) of the Central Excises and Salt Act, 1944 an appeal to the Tribunal lies against a decision or
an order passed by the Collector of Central Excise as an Adjudicating Authority. Therefore, the crux of
the present appeal is to decide whether the purported order of the Collector dated 3-3-1986 against
which the present appeal is filed is an order of the Collector passed in the capacity as an Adjudicating
authority. The learned advocate of the appellants has drawn our attention to the definition of
"Adjudicating authority" in Section 2(a) of the Act. Inter alia, the definition of adjudicating authority is
that it is an authority competent to pass any order or decision under this Act. The question therefore
arises as to whether the order of the Collector dated 3-3-1986 has been passed under the Act. It has
been vehemently urged by advocate Shri Narirnan that it is so and in this behalf he has argued that the
decision was given after the issue of a show cause notice. The show cause notice is issued demanding
duty and for confiscation and levy of penalty. We observe that the show cause notice is required to be
issued Under Section 124 of the Customs Act as made applicable to Central Excise duties by
Notification No. 68/63, dated 4-5-1963 issued in terms of Section 12 of the Central Excises and Salt
Act, 1944. Besides Rule 233A also requires such a notice to be issued before confiscation of any
property or imposition of any penalty. Therefore, the show cause notice issued to M/s Reliance
Industries Ltd. is in terms of the aforesaid provisions of law. They have been asked to show cause to
the Collector who has to decide the allegations raised in the show cause notice and this decision has to
be taken in terms of Rule 9(2) read with Section 11A as alleged in the show cause notice so far as the
demand of duty is concerned, and Under Section 33 so far as the proposed action for confiscation and
levy of penalty is concerned. Therefore, the salient point which calls for determination is whether the
Collector has done so in his order dated 3-3-1986 The obvious answer to this question is in the
negative. Therefore, in the circumstances of the case, the Collector's order dated 3-3-1986 is not the
one passed by him as an adjudicating authority". In para 13 of his order brother Dilipsinhji has
observed "it is further seen that Under Section 35B(a) the scope of appeal is restricted as compared to
Section 35 which prescribed filing of appeals to Collector (Appeals). Under Section 35, a person
aggrieved by any decision or order passed under the Central Excises and Salt Act can appeal to the
Collector. This section is wider in scope than Section 35B. The Collector's order dated 3-3-1986 is not
in terms of any of the provisions of the Act It can therefore be termed much less as a decision or order
passed by the Collector as an adjudicating authority justifying appeal Under Section 35B(l)(a) to the
Tribunal".

34. If I understood brother Dilipsinhji's order correctly, it means that the impugned order was not an
order passed under the Act and that it was not an order passed by the Collector as an adjudicating
authority. The reasons assigned by brother Dilipsinhji for his above conclusions are that under the Act
the Collector has to decide the allegations raised n the show cause notice and that decision has to be
taken in terms of Sections 11A and 33 With great respect, I am unable to subscribe to the view of my
brother Dilipsinhji that the impugned order is not an order under the Act or that only those orders
which fall Under Section 33 or 11A alone should be considered as an order passed by the Collector as
an adjudicating authority However, I would like to make it clear that Shri Senthivel did not contend
that the adjudication orders are only those which are passed Under Section 33 of the Act.

35. Let me now proceed to consider whether the scope and ambit of Section 35B are differen
from the scope and ambit of Section 35 and if so, to what extent. I have hereinbelo
extracted the provisions of Section 35 as well as Section 35B insofar as they are relevan
in juxtaposition

Section 35 Section 35B

Any person aggrieved by Any person aggrieved by any of the

any decision or order passed following orders may appeal to the

under this Act by a Central Appellate Tribunal against such

Excise Officer lower in rank order --

than a Collector of Central

Excise may appeal to the (a) a decision or order passed by the

Collector of Central Excise Collector of Central Excise as an
(Appeals) [hereinafter in this adjudicating authority;

Chapter referred to as the

Collector (Appeals)] within 3 (b) an order passed by the Collector

months from the date of (Appeals) Under Section 35A;

communication to him of such

decision or order. (c) an order passed by the Central

Board of Excise and Customs constituted

under the Central Boards of

Revenue Act, 1963 (54 of 1963),

(hereinafter in this Chapter referred ,

to as the Board) or the Appellate

Collector of Central Excise under
Section 35, as it stood immediately

before the appointed day;

(d) an order passed by the Board

or the Collector of Central Excise,

either before or after the appointed

day, Under Section 35A, as it stood

immediately before that day

36. It may be stated here that the appeal provisions in the Central Excises Act, Customs Act and Gold
(Control) Act are identically worded. The corresponding sections of the Customs Act are Sections 128
and 129A Under the Gold (Control) Act, they are Sections 80 and 81. In the Gold (Control) Act, the
words "the Administrator" appears in Clauses (c) and (d) of Section 81, whereas in Section 35B of the
Central Excises Act and 129A of the Customs Act in Clauses (c) and (d) the words the Central Board
of Excise and Customs appear. Otherwise, there is no other change in the provisions of the three Acts.
Excepting the above said sections, there are no other sections in all the three Acts providing for appeal.

37. Under all the three Acts appeals to the Collector (Appeals) is only from one source, namely, against
the orders passed by an officer lower in rank than a Collector of Central Excise or of Customs, whereas
appeals to the Appellate Tribunal are from four sources. Under all the Acts any person aggrieved by
any decision or order passed by the Collector as an adjudicating authority may file an appeal to the
Appellate Tribunal against such decision or order. Similarly, in all the three Acts, any person aggrieved
by any decision or order of an officer lower in rank than 'a Collector may file an appeal to the Collector
(Appeals) The distinction sought to be made out by Shri Senthivel and accepted by brother Dilipsinhji,
in my opinion, is a distinction without difference It may be pointed out though all the three Acts
provide an appeal against any decision or order passed by a Collector to the Tribunal, the appeals
against the order of the Collector (Appeals), the Board or the Appellate Collector or the Gold Control
Administrator are restricted to orders passed under particular sections of the Acts. Insofar as those
three authorities are concerned, the Act did not provide for appeals against any decision or order
passed by them But then so far as the Collectors are concerned, appeal is provided against any decision
or order passed by them if that decision or order was passed as an adjudicating authority. The
expression "as an adjudicating authority" was intentionally employed to restrict the appeal to only such
of the orders or decisions passed by the Collector as an adjudicating authority. The Parliament did not
intend to provide an appeal against the order or decision passed by the Collector in his capacity as an
executive authority or an administrative authority. The words "adjudicating authority" is used in
contra-distinction to administrative or executive authority.

38. What is meant by the expression "adjudication" and the expressions "decision" or "order" was
considered by this Bench in T.G. Merchants and Co. v. Collector of Customs, Bombay, 1984 (16)
E.L.T, 269 (Tribunal) This Bench referred to the definition of the expression 'adjudicating authority'
given in Section 2(1) of the Customs Act. The identical definition is found in Section 2(a) of the
Central Excises Act. The definition reads " 'adjudicating authority1 means any authority competent to
pass any order or decision under this Act; but does not include the Central Board of Excise and
Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), Collector of Central
Excise (Appeals) or Appellate Tribunal" In that order of the Bench it is stated the expression
'adjudication' merely means 'judgment' or 'decision'. This 'judgment' or 'decision' must be under the Act
The 'judgment' or 'decision' implies adjudication of dispute by a judicial process In the matter of
adjudication the Collector exercises the power of a quasi-judicial authority and, therefore, he is
required to have acted judicially and not arbitrarily or capriciously The Bench further observed "the
Collector of Customs is vested with not only quasi but also administrative or executive power. Under
Section 129(l)(a) appeal has been provided against the decision or order of the Collector passed in
exercise of his quasi-judicial powers. Under the above provisions no appeal is provided against the
order of the Collector which are passed in his administrative capacity. In other words, no appeal lies to
the Tribunal against the administrative of executive action of the Collector. The administrative or
executive action can in no sense be said to be judicial in nature. The judicial act must be distinct from
ministerial and administrative or executive acts. If the above distinction is borne in mind it would be
clear that what the Parliament intended Under Section 129A(1) is to provide an appeal against the
decision or order passed by the Collector of Customs not in his administrative or executive capacity,
but in his judicial capacity. More or less similar view was taken by this Bench to which brother
Dilipsinhji was a party, in the case of Coats India Ltd., v. Collector of Central Excise, Bombay-II, 1983
(2) E.T.R. 310. In para 3 of the order, it was observed "in other words, the law recognises that the
Central Excise Officers have dual role to play viz executive and quasi-judicial. In executive capacity
they are passing several decisions and orders and the Collector has competence to modify them. In case
of quasi-judicial capacity the orders and decisions passed by them cannot be modified by the
Collector".
39. The next question for consideration is whether the impugned order was passed by the Collector as
an adjudicating authority. According to the definition of the expression 'adjudicating authority', it
means any authority competent to pass any order or decision under the Act. Though this definition
takes within its ambit any 'order' or 'decision' passed by the Collector under the Act, this Bench had
interpreted that the 'decision' or 'order' should have been passed by the Collector as a quasi-judicial
authority and not as an executive or an administrative authority. The impugned order was not passed by
the Collector in his administrative or executive capacity It has all the trappings of a quasi-judicial
order. M/s Reliance Industries Ltd. required the Collector to consider the maintainability of the first
and second charge in the show cause notice as preliminary issue The Collector has acceded to their
request. The personal . hearing was given with reference to the show cause notice. This is clear from
the Collector's order itself. After the issue of the show cause notice M/s Reliance Industries Ltd. had
filed their reply. Thereafter, they requested the Collector to consider the preliminary issues. The
Collector not only acceded to their request but gave a personal hearing; recorded his findings and also
his ruling. In the circumstances, the order passed by the Collector is nothing, but an 'order' or 'decision'
in his capacity as an adjudicating authority and not in his capacity as an administrative or executive
authority.

40. Though, Shri Senthivel did not contend that it is only against those orders which are covered Under
Section 33 of the Act, appeal is provided to the Tribunal, brother Dilipsinhji's order gives an
impression that appeal to the Tribunal lies only against the orders which are passed Under Section 33
or 11A of the Act. This very question came up before this Bench in T.G. Merchant's case. Shri Jain,
then SDR, had contended that appeal to the Appellate Tribunal lies only against the order by which the
Collector adjudges confiscation or penalty. The Bench, however, rejected this contention. It is true that
brother Dilipsinhji did take a view similar to the one he had taken in the case of Coats India Ltd. It has
to be pointed out that the decision of the Bench in Coats India Ltd. had not been brought to the notice
of the Bench in T.G, Merchant's case, even though the decision in Coats India Ltd. was earlier to T.G.
Merchant's case. Since then brother Dilipsinhji had taken a view that appeal to the Tribunal would also
lie against the order of the Collector passed Under Section 11A also, thereby diluting his earlier
decision in Coats India Ltd I shall now consider whether the appeals against the order of the Collector
are restricted only to the orders made in terms of Sections 11A and 33 of the Act

41. The language employed in Section 35B does not admit such an interpretation. Appeal is provided
against any decision or order passed by the Collector of Central Excise as an adjudicating authority.
The order should have been passed as an adjudicating authority and not as an administrative or
executive authority. That order may be under any of the provisions of the Act or the Rules. Whereas in
the case of appeals against the orders of the Collector (Appeals), Central Board of Excise and Customs
and the Appellate Collector the appeal is restricted to orders under the relevant sections of the Act only.
Insofar as Collector (Appeals) is concerned, the order should be Under Section 35A. As regards the
Board and the Appellate Collector Under Section 35 as it stood immediately before the appointed day.
Similarly, as regards the Board and the Collector against the order Under Section 35A as it stood
immediately before the appointed day. But then so far as Collector's order is concerned, no particular
section has been specified in Clause (a) of Section 35B, If the Parliament intended to restrict the appeal
against the order of the Collector only Under Sections 11A and 33, Clause (a) of Section 35B would
have been worded as "against a decision or order passed by the Collector Under Sections 11A and 33
of the Act", as has been done in the case of the orders passed by other authorities against which appeals
are provided to the Tribunal under Clauses (b) to (d) of Section 35B of the Act.

42. If the view expressed by brother Dilipsinhji is correct, then the Tribunal cannot entertain any
appeal in the following matters :

(i) Refund of duty;

(ii) Remission of duty;

(iii) Valuation for the purpose of assessment;

(iv) Assessment orders;

(v) Cancellation of licences;

(vi) Orders Under Rule 56A;

(vii) Orders Under Rule 56B;

(viii) Orders Under Rule 173A;

(ix) Orders Under Rule 173B;

(x) Orders Under Rule 173E.

But then the Tribunal has been entertaining appeals against the orders passed under those Sections. As
has been stated earlier, excepting Section 35B, there is no other section which provides for an appeal
against an order passed by the Collector of Central Excise which term includes the order passed by the
Additional Collector of Central Excise.

43. Section 33 conferred power on the Collector and others to adjudge confiscations and penalties. In
the absence of that section the Collector and others who have been authorised under that section would
not have the power to adjudge confiscations and penalties. Under the Act the adjudication is not
limited to confiscation and penalties. We have seen the definition of adjudicating authority. We have
also considered the meaning of adjudication. It means 'judgment' or 'decision'. A 'judgment' or
'decision' implies adjudication of disputes by a judicial process. The language employed in Clause (a)
of Section 35A is also a decision or order passed by the Collector as an adjudicating authority. Section
33 appears in Chapter VI. The chapter heading is not adjudication. But adjudication of confiscations
and penalties. Section 33 provides for one type of adjudication. Chapter VI-A deals with appeals. It is
not confined to appeals against the order of confiscation and penalties. It provides appeals against any
'decision' or 'order'.

44. For the reasons set out above, I disagree with the view of brother Dilipsinhji that the Tribunal can
entertain appeals Under Section 35B only against the order made Under Sections 11A and 35B of the
Central Excises Act by the Central Excise Collector.

45. Shri Senthivel had contended that there is a great deal of difference between an appeal to the
Tribunal under the Central Excises and Salt Act and one under the common law. I really could not
comprehend what exactly the learned Departmental Representative meant by contending that there is
difference between an appeal under the Central Excises and Salt Act and under the common law. It is
well settled that a right of appeal is a creature of statute. A litigant does not have an inherent right to
prefer an appeal against an order unless such a right is conferred on. the litigant by law. There is no
common law appeal. Appeal is and has always been a creature of the statute. If the statute does not
provide for an appeal, no appeal can lie. Hence, the contention of Shri Senthivel that the appeal under
Central Excises Act are not to be confused with the appeals under the common law is the result of
misconception. I repeat that there is no such thing as an appeal under common law.

46. The last contention of Shri Senthivel was that the impugned order dealt with only two out of the six
allegations contained in the show cause notice and even with regard to those two allegations, the
Collector's order was not final in the sense that the Collector did not go into the merits of the
allegations. He had not given any decision on the question of levy of duty or penalty. In the said
circumstances no appeal could lie to the Tribunal Under Section 35B. This contention found favour
with brother Dilipsinhji. In his order brother Dilipsinhji observed "The show cause notice had been
issued and the merits of the explanation offered by M/s Reliance Industries Ltd, were yet to be decided
by the Collector. Therefore, the Collector's order dated 3-3-1986 does not affect the vital rights of M/s
Reliance Industries Ltd. except to the extent of showing that the allegations (i) and (ii) in the show
cause notice are maintainable. M/s Reliance Industries Ltd. have been left free to dispute these
allegations, the dispute is yet to be decided by the Collector. Therefore, it cannot be said that the
Collector's order dated 3-3-1986 is final in the sense that it fastens any liability regarding payment of
duty or fine or penalty on the appellants Even otherwise, the concept of common law appeals cannot be
imparted into the Central Excises and Salt Act, 1944". In the earlier paragraphs of my order, i had dealt
with the two aspects, namely, as to the final nature of the order passed by the Collector as well as the
common law concept. If the Collector had decided the merits of the allegations (i) and (ii) in the show
cause notice, it would not have been open to Shri Senthivel to contend that no appeal lies against such
an order because both Shri Senthivel as well as brother Dilipsinhji have expressed the view that there
could be adjudication in part and if the part adjudication fastens any liability regarding the payment of
duty or penalty or fine, there could be an appeal. Therefore, in my order, 1 have observed that the
contention of Shri Senthivel amounts to begging the question.

47. The next question is whether an appeal would lie against the order passed by the Collector as an
adjudicating authority, even though his order does not finally determined the merits of all or any of the
allegations contained in the show cause notice This very question was dealt with by His Lordship Mr.
Justice Fazal Ali in the case of Shah Babulal Khimji I have earlier referred to that part of the judgment.
His Lordship has observed that a judgment can be of three kinds : (') a final judgment; (2) a
preliminary judgment and (3) intermediary or interlocutory judgment His Lordship further categorised
the preliminary judgment into two parts; (a) where the trial judge by an order dismisses the suit without
going into the merits of the suit but only on a preliminary objection raised by the defendant or the party
opposing on the ground that the suit is not maintainable and that also the suit is finally decided one
way or the other, the order passed by the trial Judge would not be finally deciding against so far as the
Trial Judge is concerned and therefore appealable to the larger Bench. (b) Another shape which a
preliminary judgment may take is that where the trial Judge passes an order after hearing the
preliminary objections raised by the defendant relating to maintainability of the suit e.g. bar of
jurisdiction, res-judicata, a manifest defect in the suit, absence of notice Under Section 80 and the like,
and these objections are decided by the trial Judge against the defendant, the suit is not terminated but
continues and has to be tried on merits, but the order of the trial Judge rejecting the objections
doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled
to get the suit dismissed on preliminary grounds. Thus, such an order even though _it_ keeps the suit
alive, undoubtedly decides an important aspect of the trial which affects a vital right of the defendant
and must, therefore, be construed to be a judgment so as to be appealable to a larger Bench. Dealing
with the intermediary or interlocutory judgment, His Lordship observed "there may also be
interlocutory orders which are not covered by Order 43, Rule 1 but which also possess the
characteristics and trappings of finality in that, the orders may adversely affect a valuable right of the
party or decide an important aspect of the trial in an ancillary proceeding. Before such an order can be
a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect
or remote".

48. As observed earlier, if the preliminary issues raised by M/s Reliance Industries Ltd. has been
accepted by the Collector, they would have been relieved of the liability of payment of nearly Rs. 24
crores. Even if the order passed by the Collector is characterised as an inter-ocutory, it does cause gross
injustice to M/s Reliance Industries Ltd. whose valuable right, namely, as to the maintainability of the
two allegations contained in the show cause notice has affected. The impugned order has all the
trappings and characteristics of finality insofar as it relates to the maintainability of the two charges in
the show cause notice. The contention raised by M/s Reliance Industries Ltd. is not a routine nature
such as non-supply of relevant documents, or statement of witnesses, or not making avail of the
witnesses for cross-examination or not permitting to adduce additional evidence, not summoning
additional witnesses; or documents or seeking adjournment of the personal hearing, but the objection
raised is of a fundamental nature which, if upheld, debars the Collector from going into the merits of
the allegations.

49. It cannot be contended that an adjudicating authority has no power to decide preliminary questions.
If that be so can it be contended that no appeal would lie against a decision on the preliminary issue on
the ground that the Collector's order did not finally determined on merits one or all the allegations
contained in the show cause notice? The above pect can be brought home by the following illustrations
:

Take a case of an appeal filed before the Tribunal against the order passed by the Collector (Appeals)
holding that the appellant was not an aggrieved person and therefore, no appeal lies. Can it be
contended in such a case that an appeal does not lie to the Tribunal because the Collector (Appeals) did
not decide the appeal on merits?

Take a case where an assessee to whom a show cause notice was issued calling upon him to show
cause as to why excise duty should not be levied on his product and why excise duty should not be
levied at a particular rate and why an 'X' amount should not be recovered from him and if suppose the
assessee appears before the adjudicating authority and makes a request to the adjudicating authority to
decide the issue regarding the exigibility of excise duty of his product as a preliminary issue. If the
adjudicating authority accedes to the request and hears the question of exigibility of the duty as a
preliminary issue and holds against the assessee, can it be contended that no appeal would lie to the
Tribunal against that order because the adjudicating authority had not determined the rate of duty or the
quantum of duty?

Take a case where an assessee during the assessment proceedings raises a preliminary objection as to
the competency of the Collector to proceed with the assessment on the grounds of territorial
jurisdiction and if the Collector decides the preliminary issue regarding jurisdiction against the
assessee, can it be contended that no appeal would lie to the Tribunal because the Collector did not
decide the allegations in the show cause notice on merits?

In my humble view, the answer to all the three illustrations is emphatic 'no'. In all such cases, appeal
would certainly lie to the Tribunal.

50. The Collector has power and jurisdiction to decide an issue as a preliminary issue, is covered by
the decision of the Supreme Court cited by Shri Nariman. In Special Leave Petition No. 4790 of 1986
Parmali Wallace Ltd. v. Union of India and Ors. Their Lordships Mr. Justice E.S. Venkataramiah and
Mr. Justice Sabyasachi Mukherji passed the following order :

"Special leave granted. We have learned Counsel for the appellants and learned Additional Solicitor
General. We set aside the order of the High Court and direct the Collector of Central Excise to
determine as a preliminary issue the issue relating to the exigibility of excise duty on the goods in
question and then proceed to decide the rest of the issues. This appeal is disposed of accordingly. There
will be no order as to costs."

51. In this appeal, it is not necessary for us to consider whether the Collector was justified or not
justified in proceeding to hear the issue as a preliminary issue. What we are concerned is whether the
Collector' passed an order or decision on the preliminary issue which finally determined the
preliminary issue. As stated earlier, the Collector accepted the contention as to the jurisdictional issues
raised by M/s Reliance Industries Ltd. and he heard Shri Nariman on behalf of M/s Reliance Industries
Ltd. He recorded his findings and also his ruling and in the said circumstances, the contention of Shri
Senthivel that the impugned order is not appealable because the Collector had not decided the merits of
the allegations contained in the show cause notice, is untenable in law.

52. I will be "failing in my duty if I do not refer to the decisions cited by Shri Senthivel in support of
his contention. The first decision referred to by him is the order made by this Bench in Stay Petition
No. 172 of 1986 in appeal ED(BOM)88/86, M/s Natwar Textile Processors Ltd., Bombay v. Collector
of Central Excise and Customs, Baroda. Brother Dilipsinhji had observed in his order that this decision
has no relevance. The question before the Bench was whether a stay could be granted when an appeal
itself was not maintainable. The appeal in that case was filed against the order refusing to grant
inspection of certain documents. The Bench found that it was not an appealable order. In that
connection, the Bench did observe "in order to be an appealable order the order should affect the rights
or liability". In this order, I did not see anything which militates against the view taken by me.

53. The second decision relied upon by Shri Senthivei is the one referred to in the stay order and
reported in 1983 (2) E.T.R. 310. I had earlier referred to this decision. It is the decision of brother
Dilipsinhji and Shri Harish Chander, Member (Judicial). It is in this decision brother Dilipsinhji had
observed that the Central Excise Officers have dual role to play, namely, executive and quasi-judicial.
In executive capacity, they are passing several decisions and orders and the Collector has competence
to modify those orders. In case of quasi-judicial capacity, Collector was not given jurisdiction to
interfere. Brother Dilipsinhji has, however, did take a view that only in respect of powers exercised by
Collector Under Section 33, there should be appeal to the Tribunal Under Section 35B(l)(a). As has
been observed by me earlier, brother Dilipsinhji himself had changed his view and he have now taken a
view that even in respect of an order made Under Section 11A an appeal lies. I have in detail dealt with
the scope and ambit of the appeals provided in Section 35B.

54. The third decision relied upon by Shri Senthivel is the one reported in 1983 E.L.T. 2012 (CEGAT),
Hindustan Aeronautics, Bangalore v. Collector of Customs, Bombay. The subject-matter of the appeal
in that case was an order made on a request for payment of duty voluntarily. There was no demand for
payment of the short-levied duty. In the circumstances the Bench held that the appellants were not an
aggrieved party and they cannot make use the appeal provisions for obtaining a ruling regarding the
interpretation of exemption notification. This decision has no bearing to the issue involved.

55. The fourth decision relied upon by Shri Senthivel is the one reported in 1984 (18) E.L.T. 538. The
facts as revealed by the decision are : the appellants before the Tribunal filed an application before the
Collector (Appeals) for dispensation with the requirements of pre-deposit. His request was, however,
rejected by the Collector (Appeals), against which, the party preferred an appeal. The Special Bench
'D' held that appeal was not maintainable on two grounds. Firstly, that the appeal was filed not against
the order passed by the Collector (Appeals) but against a communication communicating the decision
of the Collector by the Superintendent. Secondly, that the Act did not provide for an appeal against an
order passed by the Collector (Appeals) Under Section 35F. This decision also has no bearing on the
issue involved. As has been seen earlier, Under Section 35B(2) appeal is provided against the order of
the Collector (Appeals) made Under Section 35(a) and not orders made under any other section. It is
not contended that the impugned order falls Under Section 35(a). Such a contention is also not
permissible because the impugned order is the one passed by the Collector and not by the Collector
(Appeals).

56. The fifth decision relied upon by Shri Senthivel is the order of Gujarat High Court in Special Civil
Application No. 4611 of 1984. The complaint made before the Gujarat High Court was that certain
documents for which the Petitioner would like to rely were not made available to them, despite their
request and that would vitiate the proceedings, as it would be in violation of the principles of natural
justice. The Gujarat High Court held that they are not persuade to agree that interference sought at that
stage was called for. The High Court observed "it is open to the petitioner to place all their contentions
in answer to the show cause notice including their contention as to why the copies of the documents
sought for by them are necessary for the proper conduct of their defence and as to why non-supply of
those copies would vitiate the proceedings". This decision is again has no relevance. As pointed out
earlier, the objection raised by M/s Reliance Industries Ltd. is not of a routine nature, but fundamental
in character, namely, as to the maintainability of the two allegations contained in the show cause notice
in the absence of determination of norms of production as provided in Rule 173E of the Central Excise
Rules.

57. The next decision on the issue relied on by Shri Senthivel is the one made by the Supreme Court in
an applicatipn for ex parte stay in Special Leave Application No. 7611 of 1984. The Supreme Court
observed "the point as to the limitation before us can be raised in reply to the show cause notice
received by the petitioners. The request for inspection of documents can also be raised by the
petitioners before the Collector of Customs and Central Excise. We trust that the request will be duly
considered. The Special Leave Petition is dismissed accordingly". This decision again has no
relevance. Even before sending a reply to the show cause notice, the petitioners approached the
Supreme Court. In the absence of other facts, it is not possible to state whether the petitioners
contention regarding limitation was raised as a preliminary issue before the adjudicating authority and
that adjudicating authority had refused to consider it as a preliminary issue or passed any order with
regard to the question of limitation.

58. Lastly, Shri Senthivel relied on a decision reported in AJR 1940 Privy Council 105, Secretary of
State v. Mask and Co. The contention of Shri Senthivel was that the power of appeal conferred Under
Section 35 is wider than the power of appeal conferred Under Section 35B. He had laid stress on the
words 'any decision or order' appearing in Section 35 and contrasted that with the words 'a decision or
order' appearing in Clause (a) of Section 35B(1). I have already dealt with this aspect. I have observed
that there is no difference with regard to scope and ambit of the appeals provided Under Sections 35
and 35B, excepting that in the case of Collector (Appeals), appeal lies from only one source, whereas
in the case of Appellate Tribunal, appeal is provided against the orders of four authorities. I have
further pointed out that Under Section 35B an aggrieved person is entitled to file an appeal against any
decision or order passed by the Collector of Central Excise as an adjudicating authority, though his
power to appeal is restricted in regard to the orders passed by the authorities specified in Clauses (b) to
(d) of Section 35B(1). Shri Senthivel had relied on the above decision in support of his contention that
the scope and ambit of Section 35B is wider than the scope and ambit of Section 35. I have carefully
gone through the judgment of the Privy Council. The following propositions were laid down by the
Privy Council :

(i) Adjudication as to confiscations, increased rates of duty or penalties made under the power
conferred by Section 182 of the Sea Customs Act are decisions or orders within the meaning of Section
188 of the said Act;

(ii) The word decision or order in Section 188 are wide words, and of a more general nature than the
adjudications referred to in Section 182 and are not confined to adjudications Under Section 182, but
includes decisions by an officer of Customs as to the rate of duty applicable to particular goods, which
necessarily involves the determination of the particular category in the tariff classification into which
the goods fall;

(iii) The appeals are not co-related with the offences.

Proviso to Section 188 does not necessarily involve the narrow construction of the opening of the
section. The Privy Council also laid down certain other propositions of law with which we are not
concerned. This decision, in my opinion, far from helping the contention taken by Shri Senthivei helps
the contention of Shri Nariman. The Supreme Court had held that words 'any decision or order
appearing in Section 188 are wide words and of a more general nature and are not confined to
adjudications Under Section 182. This decision incidentally demolish the view taken by brother
Dilipsinhji that the scope of the appeal Under Section 35B(l)(a) is restricted to the order passed Under
Section 33 or 11A.

59. The above decision apart, Shri Nariman had relied on a decision of the Calcutta High Court
reported in 1975 Tax Law Reporter 1351, M.S. Naina v. Collector of Customs, West Bengal. Before
the Calcutta High Court, it was contended that an appeal would lie against an interlocutory order
passed in an adjudication proceeding Under Section 128 of the Customs Act. The Calcutta High Court
accepted this contention and held that any decision or order under the Act may well be construed to
include interlocutory orders passed in the course of the adjudication proceedings. Shri Senthivei had
contended that Calcutta High Court judgment is in respect of the provisions similar to the provisions of
Section 35 and not similar to the provisions of Section 35B. But this contention is not well, founded.
From the facts narrated in the judgment, it is seen that Mr. Naina made two requests before the
adjudicating authority, firstly, that a certified copy of the forensic laboratory regarding the key may be
granted to him; secondly, that summons may be issued on M/s Godrej Boyce Manufacturing Company
Private Limited, Calcutta, to send their agent to give evidence about the seized Godrej lock and its key.
Both his requests were turned down by the adjudicating authority. . Aggrieved by this interlocutory
decision of the adjudicating authority, the petitioner preferred an appeal Under Section 128 of the
Customs Act as it then stood to the Central Board of Excise and Customs. But the Board returned the
memo of appeal with an order dated September 17, 1969, to the effect that no appeal lies against an
interlocutory order Under Section 128 of the Customs Act, 1962. Shri Naina challenged the
interlocutory orders passed by the adjudicating authority as well as by the Board. Section 128 which
was the subject-matter of the Calcutta High Court at the relevant time, read "128. Appeals. - (1) Any
person aggrieved by any decision or order passed under this Act (not being an order passed Under
Section 130) may, within three months from the date of the communication to him of. such decision of
order -

(a) where the decision or order has been passed by a Collector of Customs, appeal to the Board;

(b) where the decision or order has been passed by an officer of customs lower in rank than a Collector
of Customs, appeal to the Appellate Collector of Customs".

Rest of the section is not relevant for our purpose. I do not see any material difference between the old
Section 128 and present Section 129A of the Customs Act, which is identical to the provisions of
Section 35B(1) of the Central Excise Act, excepting that old Section 128 incorporated the provisions of
the present Section 128 of the Customs Act, which is identical to the provisions of Section 35. The
decision of the Calcutta High Court as well as the decision of the Privy Council in the case of Secretary
of State v. Mask & Co. do support the contention of Shri Nariman that there could be an appeal against
interlocutory order of the Collector. I have already held that interlocutory order passed by the Collector
is not of a routine nature, but it finally determined the fundamental question as to the maintainability of
the two important allegations in the show cause notice.

60. Having regard to my finding that the impugned order is an order passed during the adjudication
proceedings and as an adjudicating authority and since the impugned order finally determined the
preliminary issue regarding the competency of the Department to issue show cause notice and also as
to the maintainability of the two allegations in the show cause notice, I hold that the impugned order is
an appealable order and that appeal lies to the Tribunal Under Section 35(l)(b) of the Act.

61. Coming to the merits, the prayer in the appeal are three-fold; firstly, that the order dated 3-3-1986
passed by the Collector over-ruling the preliminary objection and deciding to proceed with the
allegations (i) and (ii) in the show cause notice on merits be set aside; secondly, that it be held and
declared that as contended by the appellants the show cause notice dated October 28/29, 1985 in
respect of charges (i) and (ii) is not maintainable in law and is liable to be set aside and thirdly, that it
be declared that there is no jurisdiction to proceed with charges (i) and (ii) of the said show cause
notice.

62. At the outset, it is necessary to point out that before the Collector, it was not contended that he has
no jurisdiction to proceed with the charges (i) and (ii) in the show cause notice. The request made was
that he should pronounce that the said two charges are not maintainable and they are ultra vires of the
Acts and the Rules. Having regard to the contentions raised before the Collector, the declaration as to
jurisdiction stated in the third prayer is of the jurisdiction of the authority, which issued the show cause
notice and not the Collector to enquire into the allegations contained in the show cause notice. The
request made to the Collector was not to embark on an enquiry into the allegations contained in the
charges (i) and (ii) of the show cause notice and not to consider their sustainability on merit. Therefore,
the scope of this appeal is also limited, namely, whether the Collector was unjustified in holding that
the two charges in the show cause notice are maintainable. The arguments advanced by Shri Nariman
regarding the competence or maintainability of the two charges in the show cause notice and the reply
of Shri Senthivel have been elaborately set out in paragraphs 5 to 10 at pages 6 to 10 of the order of
brother Dilipsinhji and therefore, I do not propose to set them again in detail.

63. The most important ground on which the charges (i) and (ii) was assailed by M/s Reliance
Industries Ltd. was that the allegation in the show cause notice pertaining to those two charges
proceeded on the assumption that there were norms of production for the unit and those norms of
production have been determined and there had been a shortfall in respect thereof. But then the
Department at no time determined the norms of production. The Rules, namely, Rule 173E specifically
provided for determination of normal production. But then that Rule had not been resorted to and
therefore, there is no warrant of the issuance of the show cause notice, particularly charges (i) and (ii).
During the hearing of the appeal, Shri Nariman had contended that after the introduction of Rule 173E,
the only mode of' assessing duty on notional production is by first determining the quantum and period
of time for normal production by the duly empowered officer as provided Under Rule 173E. But then
no such determination had taken place and therefore, the allegations (i) and (ii) are ex-facie not
maintainable. Shir Nariman had further contended that it is a well established legal position that show
cause notice cannot be issued on the basis of assumptions or presumptions or any theoretical basis and
in that connection, Shri Nariman had relied upon a judgment of the Supreme Court in Oudh Sugar
Mills Ltd. v. Union of India, 1978 E.L.T. 172. The further contention of Shri Nariman was that even if
any departmental officer had made studies of normal production, it could only apply prospectively and
not retrospectively. The show cause notice nowhere discloses any studies conducted, but on the other
hand reliance was placed on some theoretical formula. It was also contended by Shri Nariman that the
finding of the Collector that the determination of normal production is not mandatory before any
allegation can be made against an assessee is contrary to law. Shri Nariman urged that when a law
requires a thing to be done in a particular manner, it should be done in that manner only or not at all. In
this connection Shri Nariman had placed reliance an the ruling of the Supreme Court reported in AIR
1975 SC 915. The further contention of Shri Nariman was that the finding of the Collector "the basic
question having been so determined nothing prevents M/s Reliance Industries Ltd. from disputing the
allegations and disproving them on the basis of material in defence placed by them on record" is
contrary to principles of natural justice and fairplay. The onus to establish the charges is on the
Department. By throwing the said onus on the appellants, the Collector had clearly disregarded the
judicial pronouncements including that of the Supreme Court.

64. Shri Senthivel had urged that there is a clear distinction between the maintainability of show cause
notice and the Collector's jurisdiction to hold an enquiry on the allegations in the show cause notice
Under Section 33 of the Act. Shri Senthivel contended that show cause notice was for suppression of
production. There is no vagueness in the charges. The basis for the charges are also given in the
Annexures. Shri Senthivel had further submitted that in the show cause notice, Rule 173Q was also
invoked. .n support of his contention that the maintainability of the show cause notice is not the same
as jurisdiction of the Collector to adjudicate upon, Shri Senthivel relied on a decision of the Calcutta
High Court reported in AIR 1971 Calcutta 112.

65. Let me now proceed to consider the validity of the arguments advanced by either side. In order to
appreciate the contentions of Shri Nariman, it is necessary to understood the scope of the show cause
notice. In the show cause notice the appellants were not called upon to pay the duty amount of Rs.
10,90,67,625/-alleged in charge (i) and Rs. 13,65,12,50Q/-alleged in charge (ii). The appellants were
only asked to show cause notice why the said amount should not be demanded and recovered from
them. There is no demand for payment of the duty amounts specified in charges (i) and (ii). The show
cause notice contained only allegations. The Department is required to establish the allegations. It is
only when the allegations are established, the question of demand and the liability to pay the duty
demanded would arise. The appellants have understood the scope and ambit of the show cause notice.
They have filed detailed reply to the allegations contained in the show cause notice. Their reply is
dated 31-12-1985. They have vehemently disputed their liability to pay any amounts. Having regard to
the scope of the show cause notice, I am afraid the contention of Shri Nariman that without invoking
the provisions of Rule 173E, the charges (i) and (ii) cannot be levelled or that the authority which
levelled the charges has no jurisdiction to make such allegations or that the allegations themselves are
not maintainable is not tenable in law. Shri Nariman during the arguments has conceded that Rule
173E provides for best judgment assessment. Rule 173E reads :

"173E. (1) Any officer duly empowered by the Collector in this behalf may fix the quantum and period
of time when the production in the assessee's factory was considered normal by such officer having
regard to the installed capacity of the factory, raw material utilisation, labour employed, power
consumed and such other relevant factors as he may deem appropriate. The normal quantum of
production during a given time so determined by such officer shall form the norm. The assessee shall,
if so required by the said officer, be called upon to explain by shortfall in production during any time
as compared to the norm, If the shortfall is not accounted for to the satisfaction of the said officer, he
may assess the duty thereon to the best of his judgment, after giving the assessee a reasonable
opportunity of being heard.

(2) The officer empowered as aforesaid may revise the norm as determined by him at any time, if after
such further inquiry as he may consider necessary, he has reason to believe that any factory affecting
the production of the factory, has undergone a material change:

Provided that the norm as determined by the officer empowered as aforesaid shall not be revised to the
disadvantage of the assessee unless such assessee has been given a reasonable opportunity of being
heard."

66. Rule 173E envisages determination of normal production of the assessee's factory. In determining
the normal production the authorised officer shall have to take into consideration the installed capacity
of the factory, raw material utilisation, labour employed, power consumed and such other factors as he
may deem appropriate. This Rule further contemplates of requiring the assessee to explain any shortfall
in production during any time as compared to the norm. It empowers the officer to assess the duty to
the best of his judgment, if the shortfall is not accounted to his satisfaction. But then before proceeding
to pass best judgment, the officer is required to give the assessee a reasonable opportunity of being
heard. Admittedly, no normal production has been determined by any officer, No best judgment
assessment had been made by any officer. If there had been best judgment assessment, question of
issuing show cause notice as to why duty should not be demanded or recovered, would not arise. On
the other hand, there would have been a straightforward demand for payment of the duty determined
on the basis of the best judgment, Rule 173E is a complete code by itself. It provided for determination
of the normal production. It also provided for assessment. The determination of norms of production
contemplated by Rule 173E is for passing a best judgment assessment. Having regard to the scope of
Rule 173E, the contention urged on behalf of M/s Reliance Industries Ltd,, that the allegations in the
show cause notice are either nor competent or not maintainable, in my view, is not legally tenable. On
this ground alone, this appeal is liable to be rejected. The decision of the Supreme Court in Oudh Sugar
Mills v. Union of India is not attracted at this stage. From the facts of that case, it is clear that after the
issue of the show cause notice, after reply, after personal hearing, there was an adjudication order and
appeal to the Board and a revision to the Government and thereafter Special Leave Petition was filed
under Article 136 of the Constitution. There was no challenge to the show cause notice as such. The
contention was that the allegations in the show cause notice are not established. The question of
establishment of the allegations arises only after the enquiry or adjudication is held. That stage has not
yet reached.

67. The decision of the Supreme Court reported in AIR 1975 SC 915 is also not relevant. What has
been laid down therein is when a power is given to do a certain thing in a certain way, the thing must
be done in that way or not at all and other methods of performance are necessarily forbidden. This
judgment would have been relevant if there had been a best judgment assessment Under Rule 173
without fixing the normal production or without affording an opportunity to the assessee before
proceeding to pass best judgment assessment. There is considerable force in the contention of Shri
Senthivel that there is a difference between maintainability of the show cause notice and the Collector's
jurisdiction to adjudicate the allegations in the show cause notice. It may be pointed out that it was not
contended before the Collector that he cannot enquire into the allegations contained in the charges (i)
and (ii). The contention urged was that he should pronounce that those charges themselves are not
maintainable. The Calcutta High Court in the above said decision has held "In deciding the question of
jurisdiction, the question of truth or validity of the charges and the show cause notices and the question
whether the charges can be sustained are not matters relevant for consideration. The only question is
whether the statute has conferred upon the Respondent No. 1 the jurisdiction to adjudicate upon the
matter set out in the show cause notice."

68. As has been contended by Shri Senthivel, the appellants could dispute the allegations in the show
cause notice and as a matter of fact, the appellants have vehemently denied the allegations in the show
cause notice in their reply.

69. The contention of Shri Nariman |hat the Collector had placed the burden of disproving the
allegations on, the appellants does not appear to be correct. The Collector's order is not susceptible to
such a construction. When the Collector has not gone into the merits of the allegation the question of
his holding that the appellants are required to disprove the allegations, would not arise. What the
Collector apparently meant was that if the Department were to establish or prove the allegations, the
appellants could always rebutt them or disprove them.

70. M/s Reliance Industries Ltd. by their request wanted to confer jurisdiction on the Collector to
quash the show cause notice, which jurisdiction, I am afraid, was not conferred on the Collector or
even this Tribunal. A Collector who has been empowered to hold an enquiry into the allegations
contained in the show cause notice could only record his finding whether the allegations are proved or
not established. He will have no jurisdiction to hold that the show cause notice is ultra vires of the Act
or the Rules. He is a creature of the statute. So also the Tribunal. Even if the allegations contained in
the show cause notice are false, frivolous or baseless, the Collector cannot refuse to enquire into the
allegations. Neither the Collector nor the Tribunal has been empowered to issue writs in the nature of
certiorari or mandamus or any other writ.

71. After careful consideration of all aspects, I hold that there is no merit in this appeal and accordingly
I reject this appeal.