IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Ex. Reference No. 13 of 2000. Date of Decision: 16.7.2008 ________________________________________________________________ Commissioner Central Excise … Petitioner. Versus M/s Bhillai Wires Limited … Respondent. ________________________________________________________________ Coram: The Hon’ble Mr. Justice Deepak Gupta, J. The Hon’ble Mr. Justice V.K.Ahuja, Judge. Whether approved for reporting? No. For the Petitioner : Mr. Sandeep Sharma, Assistant Solicitor General of India. For the Respondent(s) : Mr. K.D.Sood, Advocate. ________________________________________________________________ Deepak Gupta, J (Oral). The present reference is directed against the order No. 320/200-A dated 3.5.2000 passed by the learned Commissioner, Central Excise Gold (Control) Appellate Tribunal, New Delhi. Brief facts of the case are that the respondent- assessee is a manufacturer of Optic Cable Fibre. It was supplying optic cable fibre to the Department of Telecommunication (DOT) as well as Mahanagar Telephone Nigam Limited (MTNL). According to the - 2 - assessee as per the terms of the contract entered into between the assessee and the Government Departments/buyers were entitled to deduct liquidated damages in case of delayed supplies. Therefore, while submitted its return and fixing the cost of the product, the assessee deducted the amount of liquidated damages as deducted by the DOT and MTNL while making payment to the assessee. A show cause notice was issued to the assessee on 3.6.1996 calling upon the assessee to show cause why action should not be taken and why the amount so deducted be not added to the cost of the goods so as to make it excisable. The assessee sent a reply to the show cause to the Assessing Authority and the Assessing Authority on 31.3.1997 accepted the explanation and held that the deduction of liquidated damages from the contractual price is permissible in terms of Section 4 of the Central Excise Act, 1944. He accordingly dropped the demand. The department did not file any appeal in terms of Section 35B of the Central Excise Act, 1944 ( hereinafter referred to as the Act). The limitation for filing of appeal under this Section is three months though the Collector - 3 - (Appeals) has the power to condone further delay upto a period of three months. The Collector, Central Excise has been vested with certain powers under Section 35E(2) of the Act. Sections 35E(2) and (3) read as follows:- 35E. Powers of Board or Commissioner of Central Excise to pass certain orders (1) xx xx xx xx xx xx (2) The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order. (3) No order shall be made under sub-section (1) or sub-section (2) after the expiry of (one year) from the date of the decision or order of the adjudicating authority. . A perusal of this clause clearly shows that the Collector, Central Excise may call for the record of any case or any proceedings in which an adjudicating authority subordinate to him has passed any decision or order to examine the legality or propriety of such order. Sub section (3) provides that no order shall be made under sub-section (2) after the expiry of one year from the date of decision or order of the adjudicating authority. - 4 - In the present case, as noted above, the adjudicating authority had passed the order on 31.3.1997. The Commissioner, Central Excise, exercised his powers under Section 35E(2) on 7.4.1998 i.e. one week after the limitation of one year had expired. He vide his order dated 7.4.1998 directing the Assistant Commissioner, Shimla to file an appeal before the Commissioner (Appeals), Central Excise, Chandigarh in the prescribed form. Thereafter, an appeal was filed by the department and this appeal was allowed by the Commissioner (Appeals) on 29.10.1999. The Commissioner (Appeals) held that the liquidated charges deducted by the department from the assessee are not to be excluded from the price of the product. The assessee thereafter approached the Tribunal. The main ground raised before the Tribunal was that the Commissioner, Central Excise who reviewed the order of the adjudicating authority did not exercise his powers within a period of one year as provided in Section 35 E(3) of the Act. The Tribunal relying upon some judgments of the apex Court held that the review order had been passed beyond the prescribed period and held - 5 - that the appeal filed in pursuance of the said order was, therefore, not maintainable. We have heard Shri Sandeep Sharma, learned Assistant Solicitor General of India on behalf of the revenue and Shri K.D.Sood, learned counsel on behalf of the assessee. The main contention raised by Shri Sandeep Sharma is that no ground of limitation was urged or argued when the appeal was argued before the Commissioner (Appeals) who passed the order on 29.10.1999. He further submits that the order dated 7.4.1998 was never challenged by the assessee and at the stage when appellate authority had already passed the order, the assessee could not challenge the same. On the other hand, Shri K.D.Sood has relied upon the judgment of the Apex Court and contends that when the order on the basis of which appeal was filed is illegal, the appeal itself was not maintainable and this plea could be raised at any stage. At the outset, we may notice that Section 35E does not require the reviewing authority to hear the assessee before passing an order. Even a perusal of the order dated 7.4.1998 does not show that this order was - 6 - passed after issuing notice or hearing the assessee. The appeal was filed on the basis of this review order. No doubt, from a perusal of the appellate order dated 29.10.1999, it does appear that the question of limitation was not argued before the Commissioner (Appeals) but here we are not really concerned with limitation in filing the appeal. The question which has been raised is whether the appeal itself was maintainable or not. This is a legal question and the question with regard to maintainability of a legal action can be raised at any stage of the proceedings. There is no manner of doubt that in the present case, the reviewing authority i.e. Commissioner (Appeals) passed the order on 7.4.1998 i.e. after the expiry of one year of the date of the order of the adjudicating authority as specified in Section 35E of the Act. The apex Court has considered this question in a number of cases but we may refer to only one decision. The Apex Court in Collector of Central Excise, Madras versus M/s M.M.Rubber and Co. Tamil Nadu, AIR 1991 Supreme Court 2141, held as follows:- Section 35E comes under the latter category of an authority exercising its own powers under the Act. It is not correct to equate the Board to one of the two - 7 - parties to a quasi-judicial proceeding before the Collector and the Board's right under Section35E to the exercise of the right of appeal by an aggrieved assessee from an order passed to its prejudice. The power under Section 35E is a power of superintendence conferred on a superior authority to ensure that the subordinate officers exercise their powers under the Act correctly and properly. Where a time is limited for the purposes by the statute such power should be exercised within the specified period from the date of the order sought to be reconsidered. To hold to the contrary would be inequitable and will also introduce uncertainties into the administration of the Act for the following reason. There appears to be no provision in the Act requiring the endorsement, by a Collector, of all orders passed by him to the Board. If there is such a practice in fact or requirement in law, the period of one year from the date of the order is more than adequate to ensure action in appropriate cases particularly in comparison with the much shorter period an assessee has within which to exercise his right of appeal. If, on the other hand, there is no such requirement or practice and the period within which the Board can interfere is left to depend on the off- chance of the Board coming to know of the existence of a particular order at some point of time, however distant, only administrative chaos can result. A perusal of the aforesaid decision of the apex Court makes it absolutely clear that the apex Court has held that where a time is fixed for the purpose of exercising some power by the statute, such power must be exercised within the period so specified. Since power has - 8 - not been exercised within the stipulated period, the direction to file an appeal was illegal. Therefore, the appeal filed by the department on the basis of such direction itself was not maintainable. Consequently, we uphold the order passed by the learned Tribunal. The reference is answered in the aforesaid terms. ( Deepak Gupta ), J. July 16, 2008. ( V.K.Ahuja ),J. s.