2016 (9) TMI 427 - AT - Central Excise

Whether two show cause notices on the same issue, proposing same cause of action, can be issued & whether extended period can be invoked in the second show cause notices - Held that - it is observed that first show cause notice dt 23/9/97 was issued by AC CCx. Cuttack for 1202.187 MT of Alumina as per auditor s report, demanding duty of ₹ 23,95,091/- under Rule 57 I (2) and proposing penalty under Rule 173 Q of the Central Excise Rules 1944. The same cause is existing in show cause notice dt 28/9/2000, except for the difference that later show cause notice was as a result of one investigation conducted by Central Preventive Unit of HQ. There is no indication that some glaring additional documents were recovered by the department, which were not available while issuing the first show cause notice dt 23/9/97, requiring issuing of a second show cause notice by invoking extended period. It is now a well accepted legal proposition that a second show cause notice on the same issue can not be issued when no additional evidence has been recovered by the investigating agency. Whether a Commissioner can decide show cause notice made answerable to Assistant Commissioner - Held that - Rule 3 (3) of the Central Excise Rules 2002 allows a Senior Central Excise Officer to exercise the powers and discharge the duties conferred on any Central Excise Officer subordinate to him. This power was earlier available under Rule 6 of the Central Excise Rules 1944. Otherwise also appellant should not have any objection if their dispute is settled at a higher level of Adjudication Rather revenue is losing one level of appeal. It is thus held that preliminary objection raised by the appellant, regarding jurisdiction of Adjudicating authority to decide show cause notice dated 23/9/97, is not sustainable. Whether there was a shortage in the stock of duty paid Alumina received by the appellant as per their auditor s report dt 25/10/1996 - mid year stock taking done by the appellant s auditors indicated a shortage of 1202. 187 MT of duty paid Alumina brought by the appellants as inputs from their sister concern on which Modvat credit was taken - Held that - it is the case of appellant that midyear stock taking is not accurate as all the standards, followed during year end stock taking, are not followed during midyear stock taking. It is also appellant s case that mid year stock taking is done when appellant s smelting plant is being continuously run and dip measurement taken during such continuous run could be defective. It is observed that this aspect has been highlighted by the appellant before the Adjudicating authority in their reply to the second show cause notice & reply to the first show cause notice. Appellant filed before this bench a chartered Accountant s certificate, alongwith Annual Report of NALCO for the year 1995-96 and other documents, to argue that mid year stock taking done by their auditors is not of much relevance as during the year end reconciliation no shortage was found. Since the above Chartered Accountant certificate and other documents, were not produced before the Adjudicating Authority, therefore, the matter is required to be remanded to the Adjudicating authority to examine whether the mid year audit report done in Oct 1995 can still be relied upon in the light of documents now furnished by the appellant. However, it is observed that appellant being a Public Sector undertaking and has a reasonable explanation for the alleged shortages, can not be fastened with the penal liability. Accordingly penalty imposed upon the appellant under Rule 173 Q of the Central Excise Rules 1944 is set aside. - Appeal disposed of

Summary

Issues:
1. Whether two show cause notices on the same issue, proposing the same cause of action, can be issued and whether the extended period can be invoked in the second show cause notices?
2. Whether a Commissioner can decide a show cause notice made answerable to an Assistant Commissioner?
3. Whether there was a shortage in the stock of duty-paid Alumina received by the appellant as per their auditor's report dated 25/10/1996?

Analysis:

Issue 1:
The first show cause notice was issued for a shortage of Alumina, and a subsequent notice was issued based on the same issue without any additional evidence. The Tribunal held that a second show cause notice on the same issue cannot be issued without new evidence. However, the Adjudicating authority decided to adjudicate both notices, confirming the proceedings for the first notice and disregarding the second notice.

Issue 2:
The Tribunal observed that a senior Central Excise Officer can adjudicate matters of a junior officer as per Rule 3(3) of the Central Excise Rules 2002. Therefore, the objection raised by the appellant regarding the jurisdiction of the Adjudicating authority to decide the show cause notice made answerable to an Assistant Commissioner was deemed unsustainable.

Issue 3:
The appellant argued discrepancies in the mid-year stock taking process, highlighting the differences in methodology compared to year-end stock taking. The Tribunal noted the appellant's explanation and the evidence provided, including a Chartered Accountant's certificate. As these documents were not presented before the Adjudicating authority, the matter was remanded for further examination. The Tribunal acknowledged the appellant's reasonable explanation for the alleged shortages and set aside the penalty imposed, allowing the appeal partially and remanding it for denovo adjudication.

In conclusion, the Tribunal addressed the issues raised by the appellant comprehensively, considering legal provisions, evidence presented, and precedents to arrive at a decision that balanced the interests of both parties.