2017 (11) TMI 1886 - AT - Central Excise

Validity of issuance of SCN - short paid on the ground of undervaluation - provisional assessment was pending for the relevant period - Section 11A of Central Excise Act read with Rule 9B of C.E.R. 1944 - whether the SCN issued pending the finalization of provisional assessment is valid? HELD THAT - The show cause notice issued prior to finalization of provisional assessment when admittedly the assessees were under provisional assessment scheme is ab initio void. Accordingly the SCN is not maintainable. Impugned order set aside - the concerned Adjudicating/Competent Authority are directed to finalize provisional assessment of M/s Venugopal Engineering Ltd. now known as M/s Electroparts India Private Ltd. and M/s Domebell Electronics India Private Ltd. with effect from 01/03/1994 - appeal allowed.

Summary

Issues involved:
1. Validity of show cause notice for recovery of duty allegedly short paid during pending provisional assessment.
2. Validity of show cause notice issued while provisional assessment is pending.

Analysis:
1. The case involved the question of the validity of a show cause notice issued for the recovery of duty allegedly short paid during a period when provisional assessment was pending. The Appellants, manufacturers of colour TV sets, were under investigation for undervaluation. The issue was whether the show cause notice issued under Section 11A of the Central Excise Act, read with Rule 9B of C.E.R., 1944, was valid. The Assistant Commissioner had directed provisional assessment under Rule 9B in 1994. The subsequent show cause notice alleged undervaluation and evasion of duty by selling goods at lower prices within related companies. The Appellants contested the allegations, claiming deductions for sales tax and transportation charges.

2. The Appellants challenged the validity of the show cause notice issued during the pending provisional assessment. The initial Order-in-Original confirmed demands and imposed penalties on the manufacturers and the brand owner for alleged undervaluation and evasion of duty. The case went through multiple rounds of litigation, with the Tribunal remanding the matter for detailed examination of records and contentions related to provisional assessment. The subsequent orders confirmed demands against the manufacturers and imposed penalties. However, in the final round of litigation, the Tribunal held that the show cause notice issued before finalization of provisional assessment was ab initio void, citing a Supreme Court ruling. The Tribunal set aside the impugned order, allowing all appeals and directing the finalization of provisional assessments for the manufacturers.

In conclusion, the Tribunal found the show cause notice invalid due to being issued before finalization of provisional assessment, granting relief to the Appellants. The judgment emphasized the importance of adhering to procedural requirements under the Central Excise Act and relevant rules. The manufacturers were directed to finalize their provisional assessments within a specified period.