2019 (1) TMI 1729 - HC - Central Excise

Method of Valuation - Section 4 of the Central Excise Act, 1944 or not - validity of Circulars issued by the second respondent dated 2-11-1999 and 28-10-2002 - HELD THAT - This Court is of an opinion that the instructions/circulars issued by the competent authorities can supplement the provisions of law. However, such circulars/instructions can never supplement the provisions of statutes. Thus, the provisions of the statutes alone should prevail over and the powers conferred on the authority competent to adjudicate the issues on facts and based on the materials and the provisions of the statutes can never be diluted or taken away by way of a circular by the Commissioner or by any other authority. Section 37B(a) denotes that provided that no such orders I instructions or directions shall be issued - a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner - The above provision is unambiguous that the Central Excise officer is competent to adjudicate the facts and the materials available on record and pass an assessment order in respect of the tax liabilities and other charges to be paid by the assessee concerned. Such a power when provided under the provisions of the statute, the writ petitioner cannot challenge the show cause notices by stating that the show cause notices are in contravention with the circular issued by the Commissioner. Circulars/instructions are issued for the purpose of clarifying certain procedures to be followed or to provide instructions to the Subordinate officials. Such circulars/instructs would not have any statutory enforceability and the same cannot be equivalent with the statutes or rules as a matter of fact. Thus, it is made clear that the instructions/circulars cannot have any enforceability as far as the statutory provisions are concerned and therefore, the very ground raised in this regard by the writ petitioner deserves no merit consideration. This Court is of an undoubted opinion that the writ petitioner has not raised any acceptable ground for the purpose of granting the relief as such sought for in the writ petitions - Petition dismissed.

Summary

Issues Involved:
1. Validity of Show Cause Notices issued by the first respondent.
2. Authority of the Commissioner of Central Excise to adjudicate issues.
3. Applicability of Circulars issued by the Ministry of Finance.
4. Precedent set by the Appellate Tribunal and Supreme Court judgments.
5. Jurisdiction of the High Court to entertain writ petitions against show cause notices.

Detailed Analysis:

1. Validity of Show Cause Notices:
The petitioner sought to quash the Show Cause Notices dated 3-5-2006 and 5-8-2005 issued by the first respondent. The petitioner argued that they were not liable for any tax and other liabilities as proposed under these notices. They contended that the notices were issued in violation of the circulars by the Ministry of Finance and lacked authority under the Central Excise Act, 1944.

2. Authority of the Commissioner of Central Excise:
The petitioner argued that the Commissioner of Central Excise had no authority to adjudicate the issues set out in the impugned show cause notices due to the circulars issued by the Ministry of Finance. However, the court held that circulars/instructions issued by competent authorities can supplement but not supplant statutory provisions. The powers conferred on the authority to adjudicate issues based on facts and materials under the statute cannot be diluted or taken away by a circular.

3. Applicability of Circulars:
The petitioner relied on the circulars issued by the second respondent on 2-11-1999 and 28-10-2002, arguing that these should prevent the issuance of the show cause notices. The court clarified that circulars are meant for providing instructions to subordinate officials and do not have statutory enforceability. The provisions of the statutes prevail over circulars, and the power of adjudication conferred under the Act cannot be taken away by any circular.

4. Precedent Set by Appellate Tribunal and Supreme Court Judgments:
The petitioner cited previous decisions, including the Appellate Tribunal's judgment in Cavinkare Pvt. Ltd. v. Commissioner of Central Excise and the Supreme Court's judgment in Commissioner of Central Excise VAPI v. Kraftech Products. The court acknowledged these precedents but emphasized that the power of adjudication by the Central Excise officer under the statute remains intact and cannot be overridden by circulars.

5. Jurisdiction of the High Court:
The court stated that writ petitions against show cause notices can only be entertained if issued by an incompetent authority, if there are allegations of mala fides, or if they violate statutory rules. The petitioner must submit explanations/objections to the show cause notices and defend their case through the proper legal channels. The court cannot adjudicate the merits of the case in writ proceedings under Article 226 of the Constitution of India.

Conclusion:
The court dismissed the writ petitions, affirming that the petitioner should approach the original authority for adjudication of the facts and materials. The petitioner was granted liberty to file objections/explanations within four weeks, and the respondents were directed to consider these submissions and adjudicate the matter on merits in accordance with the law. The court emphasized that circulars cannot override statutory provisions, and the power of adjudication conferred under the Central Excise Act remains with the competent authority.