2017 (5) TMI 146 - HC - Central Excise

Jurisdiction to issue SCN - time limitation - the appellant had suppressed the manufacture of the activity warranting invocation of extended period of time limit under proviso to Section 11A of the Central Excise Act, especially when the matter involves interpretation of the said activity - the allegation was that, the excisable goods had been cleared, without following the requisite procedures and without payment of excise duty - Held that - A mere perusal of Section 11A of the Act would show that in a case where duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded and the said amount is ₹ 1 Crore or less, a SCN under Section 11A(1) read with first proviso to the sub-section could only be issued by the Commissioner of Central Excise or, with his prior approval, by any officer, subordinate to him. The vital issues, which had been raised by the appellant, were not dealt with, by the authorities below. On account of failure of the authorities below to discuss the issues and/or the defences raised by the appellant, we are constrained to answer the questions, as framed, including one framed via this order, in favor of the appellant - The matter is remanded to the Adjudicating Authority for a fresh decision - appeal allowed by way of remand.

Issues Involved:
1. Jurisdiction to issue the Show Cause Notice (SCN).
2. Alleged suppression of manufacture warranting invocation of the extended period under Section 11A of the Central Excise Act.
3. Whether the demand is barred by limitation.
4. Failure to appreciate the appellant's defense in its reply dated 06.03.2001.

Detailed Analysis:

1. Jurisdiction to issue the Show Cause Notice (SCN):
The appellant contended that the SCN was not issued by a competent authority, asserting that only the Commissioner of Central Excise could issue such a notice for the extended period. The Joint Commissioner issued the SCN, which the appellant argued was invalid without explicit approval from the Commissioner. The court noted that the Joint Commissioner’s assumption that the SCN was valid merely because it was stated to be approved by the Commissioner was flawed. The court emphasized the necessity for the Joint Commissioner to provide concrete evidence of such approval, as required by Section 11A(1) of the Act. The court found that the authorities below failed to address this jurisdictional challenge adequately, which goes to the root of the matter.

2. Alleged suppression of manufacture warranting invocation of the extended period under Section 11A of the Central Excise Act:
The appellant argued that there was no active suppression of facts, and the mere cutting of wires did not amount to manufacture. The court observed that the Tribunal failed to provide specific findings on whether the act of cutting wires constituted manufacture and whether the goods were marketable. The court noted that the Tribunal relied on the partner's statement without adequately addressing the appellant's defenses. The court emphasized that a charge of suppression must be specific and substantiated by relevant material, which was not sufficiently demonstrated in this case.

3. Whether the demand is barred by limitation:
The appellant contended that the demand was barred by limitation as the SCN was not served within six months from the material period. The court found that the Tribunal primarily focused on the limitation issue and the aspect of whether cutting wires amounted to manufacture. However, it did not adequately address other critical issues raised by the appellant, such as the marketability of the goods and the inclusion of tailor-made items in the aggregate value of clearances.

4. Failure to appreciate the appellant's defense in its reply dated 06.03.2001:
The appellant argued that the authorities failed to consider its detailed defense, including the claim that tailor-made goods should be excluded from the aggregate value of clearances and that the mere cutting of wires did not constitute manufacture. The court agreed that the authorities did not adequately address these defenses. The court highlighted that the Tribunal's general observations were insufficient to substantiate a charge of suppression and that specific findings were necessary to support such a conclusion.

Conclusion:
The court concluded that the authorities below did not adequately address the vital issues raised by the appellant. The court set aside the impugned order and remanded the matter to the Adjudicating Authority for a fresh decision. The Adjudicating Authority was instructed to consider the matter anew, uninfluenced by the court's observations, and to pass a fresh order after giving the appellant a due opportunity for a personal hearing. The appellant was granted the liberty to raise all defenses previously articulated. The Civil Miscellaneous Appeal was disposed of accordingly, with no order as to costs.

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