2018 (4) TMI 718 - AT - Central Excise

Validity of SCN - Whether issue of SCN for recovery of duty allegedly short paid on the ground of undervaluation under the provisions of the law Section 11A of Central Excise Act read with Rule 9B of CER 1944 was valid? - 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 - SCN not maintainable. The concerned Adjudicating/Competent Authority 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 - decided in favor of appellant.

Summary

Issues:
Validity of show cause notice for recovery of duty under provisional assessment and pending finalization.

Analysis:
The case involved the validity of a show cause notice issued to the appellants regarding the recovery of duty allegedly short paid due to undervaluation during a period when provisional assessment was pending. The issue revolved around the applicability of Section 11A of the Central Excise Act read with Rule 9B of C.E.R., 1944. The appellants, manufacturers of color TV sets under the Videocon brand, were accused of inter-unit marketing to evade government revenue. The show cause notice detailed discrepancies in pricing and duty payments between the appellants and their related companies, leading to demands for differential duties and penalties. The initial order confirmed substantial demands against the appellants and imposed hefty penalties. Upon appeal to the Tribunal, the matter was remanded for detailed examination of records and contentions related to provisional assessment. Subsequent orders reaffirmed demands and penalties, leading to further appeals.

The Tribunal, in its final judgment, referenced a Supreme Court ruling regarding the validity of show cause notices issued before finalization of provisional assessments. Citing the Supreme Court's interpretation of Section 11A, the Tribunal held that a show cause notice issued prior to finalization of provisional assessment, when the assessees were under the provisional assessment scheme, is void ab initio. Therefore, the Tribunal deemed the show cause notice in this case as not maintainable and set aside the impugned order, allowing all appeals. The appellants were granted consequential benefits as per the law. The Tribunal directed the competent authority to finalize the provisional assessment of the appellants and their related companies within a specified period, while also deleting penalties imposed on one of the appellants due to the setting aside of the impugned order.

In conclusion, the judgment focused on the procedural validity of the show cause notice issued during a period of pending provisional assessment. The Tribunal's decision was based on the interpretation of relevant legal provisions and a Supreme Court ruling, ultimately leading to the setting aside of the impugned order and granting relief to the appellants.