Central Excise – High Court not to interfere at Show cause Notice stage : Madras High Court
CHENNAI, JAN 27, 2008 : THE appellant, a manufacturer of threads and textiles, unprocessed and processed varieties of cotton fabrics, was visited with a show cause notice NO.13/2001 dated 3.7.2001 issued by the Deputy Commissioner of Central Excise, Madurai . The show cause notice proceeded that the appellant have contravened the provisions of Central Excise Act, 1944, and the Central Excise Rules, 1944, and the contraventions were stated as follows:
i) Rule 173B of the Central Excise Rules in as much as the appellant have mis-declared the cropped fabrics as unprocessed fabrics in order to avail exemption from payment of Central Excise Duties;
ii) Rule 53 of Central Excise Rules in as much as the appellant have not kept the daily stock account of dutiable cropped fabrics in their RG1 records properly;
iii) Rule 54 of Central Excise Rules in as much as the appellant have not furnished the details of the manufacture of cropped fabrics in the RT-12 returns submitted;
iv) Rule 9(1) of Central Excise Rules with Rule 49(1) ibid, in as much as the excisable goods were cleared without payment of appropriate duty;
v) Rule 173 F of Central Excise Rules in as much as duty liability was not determined and paid on the excisable goods removed and
vi) Rule 173 G of Central Excise Rules in as much as the appellant have not followed the procedures prescribed therein and not produced the statutory records for verification."
In respect of those violations, the appellant was directed to show cause to the Commissioner of Central Excise as to why
i) the fabrics as detailed in Annexure VI to the Statement of Facts in question should not be classified as cropped fabrics under appropriate tariff entries for the purpose of levy of Central Excise duties as applicable,
ii) the duty of excise of Rs.8,2261,848/- (Rs.4,46,77,977/- as BED and Rs.3,75,83,871/- as AED (GSI) payable on the clearances of the said excisable goods treating them as cropped fabrics (as detailed in Anexure VI to the Statement of Facts) during the period between June '96 to Oct'2000 should not be demanded under proviso to Section 11A of the Central Excise Act, 1944,
iii) a penalty should not be imposed on them under Section 11 AC of the Central Excise Act,
iv) interest should not be levied under section 11AB of the Central Excise Act, and
v) a penalty should not be imposed on them under Rule 173Q of the Rules."
Against the above Show cause Notice, the assessee approached the High Court in writ petition on the premise that the entire issue as stated in the show cause notice has been settled in favour of the appellant in the decision of the Supreme Court in MAFATLAL FINE SPINNING AND MANUFACTURING COMPANY LIMITED VS. THE COLLECTOR OF CENTRAL EXCISE and INDORE WIRE COMPANY LIMITED VS. UNION OF INDIA .
A single Judge of the High Court dismissed the writ petition with liberty to file detailed reply within a period of two weeks from the date of receipt of copy of that order and further directed the Revenue to proceed further on receipt of such reply in accordance with law.
The assessee is in writ appeal before the Division Bench of the High Court.
The Division Bench observed,
i) It is not the case, rather it cannot be the case of the appellant that the respondent, who is exercising the power under the Central Excise Act, has denuded of his jurisdiction or he has no jurisdiction to issue the show cause notice on the view that the assessee contravened the provisions of the Act and Rules on the basis of the material gathered by him.
ii) On the other hand, the respondent is vested the power to issue the show cause notice in cases where on the basis of the material available before him or gathered by him, he is of the view that the assessee has violated the provisions of the Central Excise Act or the Rules, as the case may be.
iii) Even if the reasons stated in the show cause notice are not sustainable on the face of the facts and as well as in law, it is well open to the appellant to place all the materials including the decision of the Supreme Court, which the appellant relied on in his favour before the respondent and satisfy the respondent and get an order in his favour.
iv) On the other hand, if the respondent even on the material placed by the appellant is not satisfied and passed ultimate order with which he has jurisdiction, the appellant can very well agitate the matter before the appellate authority.
v) On receipt of the show cause notice, rushing up to the High Court by invoking Article 226 without facing the charges has been dealt with by the Apex; Court in several cases and in all those cases, the appellant was directed to go before the authorities and place the facts.
vi) In the show cause notice dated 3.7.2001, number of violations have been catalogued to the effect that the appellant has violated the same.
vii) These are the factual issues and they could very well be settled with the authorities.
viii) In a somewhat similar facts of the case, the Supreme Court in the case of UNION OF INDIA VS. HINDALCO INDUSTRIES reported in (2004) 135 STC 281, has held that there could be no doubt that in matters of taxation, it is inappropriate for the High Court to interfere in exercise of jurisdiction under article 226 of the Constitution of India either at the stage of show cause notice or at the stage of assessment where alternative remedy by way of filing a reply or appeal, as the case may be, is available but these are limitations imposed by the Courts themselves in the exercise of their jurisdiction.
ix) In this case, as already stated, so many violations, which are factual in issue, have been alleged against the appellant and the appellant was only required to submit his explanation to the alleged violations, it is not expected a writ Court on the basis of an affidavit and counter affidavit, resolve the disputed questions of fact.
x) Furthermore, what is impugned is only a show cause notice calling upon the petitioner to submit its reply. It is not a final determination. The respondent would have very well dropped the proceedings, if the cause to be shown by the petitioner are well founded.
So the High Court found no merit in the writ appeal and dismissed the same though after giving the appellant time up to 21.1.2008 to file their reply to the Show cause Notice.
They would be filing the reply to the Show cause Notice dated 3.7.2001 by 21.1.2008 after nearly seven years!