1980 (4) TMI 115 - HC - Central Excise

Summary

Issues:
Violation of Rule 10 in issuance of demand notice without a prior show cause notice.

Analysis:
The petitioners, manufacturers of nuts and bolts, were granted an exemption from duty under a Notification if the value of goods did not exceed Rs. 5,00,000. However, they cleared goods exceeding this value without paying the requisite duty. A notice of demand was issued under Rule 10 of the Central Excise Rules, demanding payment of Rs. 49,852.92. The petitioners contended that the demand notice was issued without a prior show cause notice, violating Rule 10(1). The Assistant Collector, after a personal hearing, upheld the demand notice, leading to an appeal by the petitioners against this decision.

A judgment delivered by Rege J. in a different case concluded that a demand notice without a show cause notice was invalid as per Rule 10. The petitioners cited this judgment before the Appellate Collector, arguing that the demand was illegal and void. However, the Appellate Collector summarily rejected this contention, failing to provide reasons for disregarding the precedent judgment. The petitioners' argument was based on the fact that the demand notice was issued straightaway without a show cause notice, rendering it invalid under Rule 10.

The Appellate Collector's decision was deemed dishonest as he failed to address the petitioners' valid argument regarding the legality of the demand notice. The petitioners' counsel was unable to demonstrate how the judgment did not apply to the present case, raising similar contentions that were previously rejected. Additionally, the argument that the demand could be covered under Rule 10A instead of Rule 10 was deemed irrelevant, as both rules require a show cause notice before making a demand. The court held that the absence of a show cause notice rendered the demand illegal and void, regardless of the specific rule under which it was made.

Consequently, the Rule was made absolute in favor of the petitioners, and the respondents were directed to pay the costs of the petition. The judgment highlighted the importance of adhering to procedural requirements, specifically the issuance of a show cause notice before demanding payment under the Central Excise Rules.