1979 (2) TMI 105 - HC - Central Excise

Summary

Issues:
Prohibition sought against show cause notice under Central Excise Rules 1944.

Analysis:
The petitioner filed a writ petition seeking prohibition against the respondent from proceeding with the show cause notice dated 12-7-1976. The Senior Central Government Standing Counsel raised a preliminary objection stating that the petitioner should address objections before the authorities, especially since a hierarchy exists. The main argument presented was the lack of jurisdiction in issuing the show cause notice under Rule 9(2) due to the absence of clandestine removal, as acknowledged by the department. The Collector had set aside the original levy under Rule 10A and directed proceedings under Rule 9(2) for collecting differential levy, which cannot be invoked without clandestine removal. Legal precedents were cited to support the argument that there is a total lack of jurisdiction under Rule 9(2) in such cases, emphasizing that the petitioner should not be required to respond to the show cause notice based on these facts.

The show cause notice accused the petitioner of contravening Rule 9(1) of the Central Excise Rules 1944 by not paying the appropriate duty on goods cleared from their factory. The notice detailed the quantities of paper involved and the differential duty amounts to be demanded, along with the history of previous notices and responses from the petitioner. The Assistant Collector had previously ordered the payment of differential duty, which was later set aside by the Appellate Collector. Subsequently, a fresh show cause notice was issued under Rule 9(2) demanding the same differential duty amounts, leading to the current legal challenge.

The judgment highlighted a fundamental error in the show cause notice, specifically in paragraph 5, where there was a misunderstanding of the legal provisions under Rule 9(2). It was emphasized that Rule 9(2) pertains to the payment of duty upon demand for goods removed in contravention of Rule 9(1), which was not the case here as excise duty was collected after proper removal procedures. The notice's request for differential duty under Rule 9(2) was deemed legally incorrect, showcasing a lack of basic legal knowledge. As a result, the lack of jurisdiction under Rule 9(2) was established, justifying the issuance of a writ of prohibition to prevent the petitioner from being compelled to respond to an invalid show cause notice. The objection raised by the department was overruled, and the writ petition was allowed with costs awarded to the petitioner.