2010 (11) TMI 623 - HC - Central Excise

Period of limitation - Manufacture - Assessbale value - affixing the hardware items to the door, and installing the door in the building - Suppression of facts - Writ petition against SCN - Held that - A show-cause notice does not infringe the rights of anyone - The purpose of issuing a show-cause notice is to afford an opportunity of hearing to the person concerned, and Courts should be reluctant to interfere at that stage as it would be premature - The appropriate course for the recipient is to reply to the show-cause notice enabling the authorities to record their findings and then, if necessary, the matter can be carried in appeal to the Tribunal and, thereafter, to this Court.

Issues Involved:
1. Legality of Writ Petitions challenging show-cause notices.
2. Jurisdiction and appropriateness of show-cause notices.
3. Classification and valuation of excisable goods.
4. Allegations of suppression of facts and extended period for demand of duty.

Issue-wise Detailed Analysis:

1. Legality of Writ Petitions challenging show-cause notices:
The court emphasized that Writ Petitions questioning the legality of a show-cause notice should not be entertained unless the notice is non-est. The petitioner should respond to the show-cause notice and take all stands highlighted in the Writ Petition therein. The court cited several precedents, including *Special Director v. Mohd. Ghulam Ghouse* and *Union of India v. Kunisetty Satyanarayana*, to support this view.

2. Jurisdiction and appropriateness of show-cause notices:
The court reiterated that a show-cause notice is not an adverse order affecting the rights of a party and does not infringe anyone's rights. The purpose of a show-cause notice is to afford an opportunity of hearing to the person concerned. Courts should be reluctant to interfere at this stage as it would be premature. Interference is justified only when the notice is ex-facie a 'nullity' or non-est in the eye of the law for absolute want of jurisdiction. This principle was supported by cases like *Executive Engineer, Bihar State Housing Board v. Ramesh Kumar Singh* and *M. Ramalinga Reddy*.

3. Classification and valuation of excisable goods:
The petitioner argued that their activities of trading and rendering services do not amount to manufacture and that bought-out hardware items should not be included in the value of manufactured goods for excise duty purposes. The respondents contended that these hardware items form an integral part of the manufactured doors and should be included in the assessable value. The court referred to the Supreme Court judgment in *Commissioner of Central Excise v. Frick India Ltd.*, which stated that bought-out items forming an integral part of manufactured items are liable to excise duty.

4. Allegations of suppression of facts and extended period for demand of duty:
The petitioner argued that the department had accepted the exclusion of bought-out items from the value of manufactured items in 2004 and that there was no suppression of facts. The respondents argued that after the introduction of a new tariff heading in 2005, further investigation revealed that excise duty is leviable on the hardware items. The court noted that the show-cause notice alleged suppression of facts with an intent to evade duty, invoking the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944. The court stated that these contentions could be raised before the adjudicating authority.

Conclusion:
The court concluded that the show-cause notice cannot be said to be non-est, a nullity, or wholly without jurisdiction. The petitioner should submit their reply to the show-cause notice, and the adjudicating authority should consider the matter without being influenced by the court's observations on merits. The Writ Petition was dismissed, and the petitioner was directed to submit their reply within three weeks.

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