2003 (3) TMI 611 - AT - Central Excise

Summary

Issues:
1. Duty demandability for activity to comply with legal requirements.
2. Legality of Show Cause Notices issued without Chief Commissioner's permission.
3. Principles of natural justice violation in not granting personal hearing.

Analysis:
1. Duty Demandability for Compliance Activity:
The appellants imported finished medicines requiring labeling to comply with Rule 96 of the Drugs and Cosmetics Rules, 1945. Initially, affixing labels was not considered manufacturing per a 1996 circular. However, a 2001 circular deemed it as manufacture under Chapter Note 5 of Chapter 30. Show Cause Notices demanded duty retrospectively, challenging the legality of demands made before the circular revision. The Tribunal held that demands based on a circular must be prospective, citing various Supreme Court decisions. As the circular authorized non-payment, demands for the period before its revision were deemed unsustainable.

2. Legality of Show Cause Notices:
The appellants contested the legality of Show Cause Notices issued without Chief Commissioner's prior permission for duty demands exceeding Rs. 1 crore. The Tribunal did not delve into this issue due to the primary finding that demands based on the circular were unsustainable. Thus, the legality of the notices issued without proper authorization was not specifically addressed in the judgment.

3. Violation of Principles of Natural Justice:
The appellants raised concerns about the lack of a personal hearing granted by the Commissioner regarding the Show Cause Notice dated 4-5-2001. However, as the Tribunal's primary decision was based on the unsustainability of demands due to circular provisions, the issue of natural justice violation was not extensively discussed or determined in the judgment.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal based on the finding that demands made before the circular revision were not sustainable. The judgment emphasized the binding nature of circular interpretations and the need for demands to align with such interpretations. The issues regarding the legality of Show Cause Notices and violation of natural justice principles were not extensively addressed due to the primary decision on the circular's retrospective impact on duty demands.