1978 (9) TMI 61 - HC - Central Excise

Sodium Bichromate Liquor - Liability - Excise Duty - Show Cause Notice - Short Levy - Criteria for raising demand

Issues Involved:

1. Whether sodium bichromate liquor falls within the definition of bichromate of sodium under Tariff Item 14AA(1) to attract excise duty.
2. Whether the respondents are justified in raising the demand without giving the petitioner an opportunity to show cause against the revision of assessment.

Issue-wise Detailed Analysis:

1. Whether sodium bichromate liquor falls within the definition of bichromate of sodium under Tariff Item 14AA(1) to attract excise duty:

The petitioner argued that sodium bichromate liquor is not an excisable item under Tariff Item 14AA(1) as it is only an intermediary product used for captive consumption and not an end product like sodium bichromate crystals. The petitioner highlighted the differences in form and content between sodium bichromate liquor and sodium bichromate crystals, emphasizing that the liquor is not marketed and exists in a solution state, unlike the crystalline form which is sold in the market.

In support, the petitioner cited Supreme Court decisions in Union of India v. Delhi Cloth and General Mills and South Bihar Sugar Mills v. Union of India, arguing that excise duty should only be levied on the end product known to the market, not intermediary products.

The respondents countered that excise duty is payable on goods manufactured, not necessarily sold, and that sodium bichromate liquor fits the description of sodium bichromate under Tariff Item 14AA(1). They referenced the petitioner's own admissions regarding the chemical composition of the liquor and crystals being essentially the same, differing only in concentration. The respondents also presented evidence of the petitioner selling sodium bichromate liquor, thus treating it as a marketable product.

The court concluded that sodium bichromate liquor falls within the definition of sodium bichromate under Tariff Item 14AA(1) and attracts excise duty. The court emphasized that the form of the product (liquor or crystals) does not alter its excisability, and the petitioner's own actions of selling the liquor reinforced its marketable nature.

2. Whether the respondents are justified in raising the demand without giving the petitioner an opportunity to show cause against the revision of assessment:

The petitioner contended that the demand for differential duty was raised without giving an opportunity to show cause, violating the principles of natural justice. The petitioner argued that the procedure adopted by the respondents was not in accordance with law, as it was denied the chance to object to the revised demand.

The respondents explained that the self-removal procedure followed by the petitioner involved provisional assessments based on cost particulars from previous years. The final assessable value was determined later, and any differential duty was demanded accordingly. The respondents argued that there was no need for a show cause notice before raising the demand, as the assessment was provisional and not final.

The court agreed with the respondents, stating that the self-removal procedure inherently involves provisional assessments, and the department can re-fix excise duty based on updated cost particulars. The court noted that the petitioner's reliance on the department's initial mistake of issuing show cause notices did not entitle it to a show cause notice before the final demand. The court found that the revised demand was based on the petitioner's own cost particulars, and there was no completed assessment requiring a show cause notice under Rule 10.

Conclusion:

The writ petition was dismissed on both grounds. The court held that sodium bichromate liquor is excisable under Tariff Item 14AA(1) and that the respondents were justified in raising the demand without a show cause notice, given the provisional nature of the assessments under the self-removal procedure.

← Previous Next →