2015 (2) TMI 609 - HC - Central Excise

Composite issuance of SCN to two parties - Whether on the facts and circumstances of the case, the CESTAT was right in law, in concluding that duty demand against Assessee could not be confirmed since it was not possible to arrive at the value of clearances separately between M/s. Florida Electrical Industries Limited and assessee - Held that - A look at the CESTAT s order would reveal that the Tribunal was guided principally by the proportion rule directed by the Commissioner in apportioning liability. The Commissioner had dealt with, at some length the nature of evidence and materials gathered during the investigation which included statements of various individuals recorded. It also included several receipts, copies of ledgers, books etc. As to whether it was completely unfeasible for him to attribute production figures based on such seized materials is something which this Court can only speculate on, but not determine through any finding. Undoubtedly, the show cause notice was issued in a composite manner to both the parties. However, in our opinion, that ipso facto did not vitiate the proceedings. If at the stage of determination of liability or at the final stage, it was open to the Commissioner to ascribe one figure or the other, to each of the parties, that course ought to have been adopted. To that extent, the submission of the assessee/respondent that no rule or principle authorizes the apportionment of liability based upon the past figures is justified. - matter requires to be re-examined on the merits of the clandestine removal. - Matter remanded back to tribunal with direction. Jurisdiction of the commissioner to issue the show cause notice - Held that - Held that - Section 38A has the effect of saving investigations, legal proceedings etc. The respondent s submissions that upon the issuance of Notification in 2002, legality of investigations stood protected but upon the ceasing of such proceedings, the appropriate Commissioner necessarily had to exercise jurisdiction is textual and narrow. This Court has to be alive to the fact that the provision was brought with retrospective effect, keeping in mind the larger public interest to avoid precisely the kind of contentions that were successfully urged in the present instance. In tax proceedings, such as the present one, there is certain seamlessness to the entire process, and splitting up that into different stages, i.e., investigation, adjudication, etc. and the spelling up of the process would defeat the underlying object of Section 38A, and lead to startling as well as anomalous results. - Consequently, the second question of jurisdiction is answered in favour of the Revenue and against the assessee.

Summary

Issues:
1. Territorial jurisdiction of the Commissioner of Central Excise, Delhi-I to issue a show cause notice.
2. Validity of duty demand confirmation against two different units.

Issue 1: Territorial Jurisdiction of the Commissioner of Central Excise, Delhi-I
The case involved two units, M/s MIE and M/s FEIL, subjected to independent search operations by Central Excise authorities. The Commissioner issued a show cause notice to both units regarding duty assessment based on seized materials. The Commissioner confirmed duty liability against FEIL, leading to an appeal to CESTAT. CESTAT held that the show cause notice against FEIL was invalid due to jurisdictional issues as it fell under the jurisdiction of a different Commissioner. The CESTAT also found that duty liability could not be imposed without attributing specific clandestine removals to each unit. The Revenue argued that there was enough evidence of clandestine removal, justifying the imposition of liability based on a proportion principle. However, the assessee contended that the proportion rule was not authorized for clandestine removal cases. The Court observed that the CESTAT was guided by the proportion rule in apportioning liability and remitted the matter back to CESTAT for re-examination based on the merits of clandestine removal.

Issue 2: Validity of Duty Demand Confirmation Against Two Units
The Court analyzed the jurisdictional aspect in light of Section 38A of the Central Excise Act, inserted with retrospective effect. It was argued that different stages of action like investigation or legal proceedings could lead to different conclusions. The Court upheld the Revenue's argument that Section 38A protected investigations and legal proceedings, ensuring seamless tax proceedings. The Court found in favor of the Revenue on the jurisdiction question, emphasizing the importance of avoiding contentions that could disrupt the investigative process. Consequently, the Court partially set aside the impugned order and directed the matter to be reconsidered by CESTAT. The Court concluded that splitting the process into different stages would defeat the purpose of Section 38A, leading to anomalous results. The parties were instructed to appear before CESTAT for further proceedings.