2010 (3) TMI 778 - HC - Central Excise

Undervaluation - Search and seizure - Classification - Provisional assessment - it is well-settled that no show cause notice under Section 11A of the Central Excise Act, 1944 can be issued, where the assessment is provisional - If the assessment was not finalized within one year also, the Chief Commissioner could grant further extension for such period as he found reasonable, provided there were good and sufficient reasons for the inability to complete assessment within one year - No documents have been disclosed to the petitioner, save and except the earlier show cause notice dated 5th March, 1992 and the Appellate Order of the Tribunal arising from proceedings that commenced pursuant to the said show cause notice dated 5th March, 1992 - It is true, that an earlier writ petition was filed challenging the impugned show cause notice inter alia on the ground of the same being violative of the principles of natural justice, since documents relied upon by the respondent Collector had not been disclosed to the petitioners - the writ petition having been kept pending for about four years, and affidavits having been filed, pursuant to the directions of this Court, this Court is not inclined to reject this writ petition on the sole ground of existence of an alternative remedy, more so when the impugned notice is patently unsustainable in law - The writ petition is disposed of

Issues Involved:
1. Legality of the show-cause notice dated 27th March, 2002.
2. Non-disclosure of documents relied upon in the show-cause notice.
3. Applicability of the extended period of limitation under Section 11A of the Central Excise Act, 1944.
4. Jurisdiction of the respondent authorities to issue the show-cause notice.
5. Availability of an alternative remedy and its impact on the writ petition.

Issue-wise Detailed Analysis:

1. Legality of the show-cause notice dated 27th March, 2002:
The petitioners challenged the show-cause notice alleging undervaluation of excisable goods and short payment of duty amounting to Rs. 3,20,97,303/-. The notice was issued based on documents that were not disclosed to the petitioners. The court found that the impugned show-cause notice was essentially a notice under Section 11A of the Central Excise Act, 1944, which could not be issued if the assessment was provisional. The court noted that provisional assessments must be finalized within a specific period, which had long expired, making the show-cause notice unsustainable.

2. Non-disclosure of documents relied upon in the show-cause notice:
The petitioners contended that despite multiple requests, the documents relied upon in the show-cause notice were not provided. The court held that non-disclosure of these documents amounted to a denial of natural justice. The respondents' claim that the records were missing and only the earlier show-cause notice and appellate order were relied upon was found to be contradictory and inconsistent.

3. Applicability of the extended period of limitation under Section 11A of the Central Excise Act, 1944:
The court examined whether the extended period of limitation of five years could be invoked. It was found that the impugned notice, issued on 27th March, 2002, for the period from 1986 to 2001, was beyond the one-year limitation period. Even under the extended period, the notice could not cover any period prior to 27th March, 1997. The court cited several Supreme Court judgments establishing that the extended period of limitation could not be invoked when facts were known to both parties or when an earlier show-cause notice on the same issue had been dropped.

4. Jurisdiction of the respondent authorities to issue the show-cause notice:
The court held that the respondent authorities lacked the jurisdiction to issue the show-cause notice after five years from the relevant date. The conditions precedent for exercising jurisdiction to issue the notice did not exist, rendering the notice and subsequent proceedings without jurisdiction.

5. Availability of an alternative remedy and its impact on the writ petition:
The court acknowledged that while it generally refrains from exercising writ jurisdiction where an alternative remedy exists, there are exceptions. These include cases where proceedings are in violation of natural justice, without jurisdiction, or under a provision of law that is ultra vires. The court found that the impugned notice violated principles of natural justice and was issued without jurisdiction. Given the circumstances and the time elapsed since the filing of the writ petition, the court decided not to reject the petition on the ground of an alternative remedy.

Conclusion:
The court quashed the impugned show-cause notice and all proceedings pursuant thereto, citing non-application of mind, inconsistencies, and illegality. The writ petition was disposed of accordingly, with the court emphasizing the importance of adhering to procedural fairness and jurisdictional limits in administrative actions.

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