2021 (4) TMI 368 - HC - Central Excise

Liability of Central Excise Duty - principal manufacturer or job-worker - Territorial Jurisdiction - Recovery of duty u/s 11D as amount collected in the name of Duty of central excise - safety razor blades and shaving system - It was alleged that as principal manufacturer, petitioner had failed to discharge the duty in terms of the provisions of section 4A of the Central Excise Act on the goods cleared by Tigaksha from its factory at Una, Himachal Pradesh - extended period of limitation - HELD THAT - it is evidently clear that the taxable event i.e. manufacture of the goods in question had taken place in the factory premises of Tigaksha at Una in Himachal Pradesh. Thus, neither respondent No.2 nor respondent No.3 has the territorial jurisdiction to issue any notice to show cause-cum-demand for levy of central excise duty on such products. Though on this point itself a clear conclusion can be reached that the impugned show cause-cum-demand notice dated 26.05.2020 is without jurisdiction, we may also add that in the order in original dated 20.11.2019 the adjudicating authority had recorded a clear finding that the only presumption for the demand was that because the maximum retail price of the goods manufactured at Una, Himachal Pradesh and those manufactured elsewhere by the petitioner, which included excise duty, were the same, therefore the maximum retail price of the goods manufactured at Una, Himachal Pradesh included central excise duty which were collected from the ultimate consumers but not deposited in the government treasury. Negating the fallacy of this presumption the adjudicating authority held that other than such a presumption, there was no evidence at all to establish that any amount was collected by the petitioner as representing duty of excise. In such a case, provisions of section 11D of the Central Excise Act would not be applicable. This again is a conclusive finding of fact which has remained undisturbed. The impugned show cause-cum-demand notice is clearly without jurisdiction and is an attempt to reopen an issue which was concluded by the adjudicating authority vide the order in original is not permissible - Petition allowed.

Issues Involved:
1. Jurisdiction of the Commissioner of Central Goods and Services Tax and Central Excise, Thane to issue the show cause-cum-demand notice.
2. Applicability of Section 11D and Section 11A(4) of the Central Excise Act.
3. Principle of res-judicata in the context of the previous adjudication.
4. Ownership and liability for excise duty under job work agreements.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Central Goods and Services Tax and Central Excise, Thane:
The petitioner challenged the jurisdiction of the Thane Commissionerate to issue the show cause-cum-demand notice dated 26.05.2020. The court noted that the goods in question were manufactured by Tigaksha at Una, Himachal Pradesh. The taxable event for central excise is the manufacture of excisable goods, and the jurisdiction lies with the Commissioner of Central Excise, Shimla, who oversees the entire State of Himachal Pradesh. The court held that neither respondent No.2 nor respondent No.3 had the territorial jurisdiction to issue any notice for levy of central excise duty on such products.

2. Applicability of Section 11D and Section 11A(4) of the Central Excise Act:
The court examined the provisions of Section 11D, which requires any amount collected as representing duty of excise to be deposited with the central government. The adjudicating authority in the previous order dated 20.11.2019 found no evidence that the petitioner collected any amount as representing duty of excise. This finding was undisturbed and conclusive. The court also discussed Section 11A(4), which allows for an extended period of limitation in cases involving fraud, collusion, willful misstatement, or suppression of facts. The court found no basis for invoking this provision as there was no evidence of such conduct by the petitioner.

3. Principle of Res-judicata:
The petitioner argued that the impugned show cause-cum-demand notice was hit by the principle of res-judicata, as the same issue had been conclusively decided in the order dated 20.11.2019. The court agreed, noting that the basic premise for issuing both notices remained the same. The earlier notice was based on the assumption that the maximum retail price (MRP) of goods included central excise duty, which was collected but not deposited. This assumption was found to be unsupported by evidence. The court held that the impugned notice was an attempt to reopen an issue already concluded, which is not permissible.

4. Ownership and Liability for Excise Duty Under Job Work Agreements:
The court examined the job work conversion agreement dated 01.04.2015, which stated that the ownership and all other rights in the product remained with the petitioner. The respondents argued that this made the petitioner the principal manufacturer responsible for discharging the central excise duty. However, the court reiterated that the taxable event for central excise is the manufacture of goods, not ownership. Since the manufacturing process took place at Tigaksha's factory in Himachal Pradesh, the liability for excise duty did not rest with the petitioner.

Conclusion:
The court concluded that the impugned show cause-cum-demand notice dated 26.05.2020 was without jurisdiction and an attempt to reopen an issue already decided by the adjudicating authority. The notice was set aside and quashed, and the writ petition was allowed.

← Previous Next →