1990 (12) TMI 80 - HC - Central Excise

Demand - Limitation - Show cause notices - Writ jurisdiction - Demand - Self removal procedure

Summary

Issues Involved:
1. Jurisdiction of issuance of show cause notices.
2. Limitation period for issuing show cause notices.
3. Basis for determining assessable value of excisable goods.
4. Validity of the show cause notices.

Detailed Analysis:

1. Jurisdiction of Issuance of Show Cause Notices:
The petitioners challenged the issuance of six show cause-cum-demand notices under Articles 226 and 227 of the Constitution. They argued that the notices were issued without jurisdiction and amounted to an abuse of power. The petitioners contended that the show cause notices demanded excise duty based on an incorrect assessment of the value of motor vehicle chassis, which was not justified under the Central Excises and Salt Act, 1944.

2. Limitation Period for Issuing Show Cause Notices:
The petitioners argued that five out of the six show cause notices were time-barred as they were issued beyond the six-month limitation period prescribed under Section 11A(1) of the Act. The court noted that the department did not refer to the proviso to sub-section (1) of Section 11A, which extends the limitation period to five years in cases of fraud, collusion, or wilful mis-statement. Since the department did not allege any such factors, the five show cause notices were deemed barred by limitation and were struck down.

3. Basis for Determining Assessable Value of Excisable Goods:
The primary contention was whether the assessable value of motor vehicle chassis should include the value of six tyres as specified in the classification list, even when the chassis were cleared with only four tyres. The court held that the assessable value should be based on the actual goods cleared from the factory gate, which in this case were chassis with four tyres. The court rejected the department's claim that the value should include two additional tyres, as this was notional and not based on the actual transaction.

4. Validity of the Show Cause Notices:
The court examined the validity of the show cause notices, particularly the one dated February 20, 1985, which was within the limitation period. The court held that the issuance of this notice was also without jurisdiction as it was based on an incorrect assumption that the assessable value should include the value of six tyres. The court emphasized that excise duty should be calculated based on the actual goods cleared and not on hypothetical specifications.

Conclusion:
The court concluded that all six show cause notices were invalid. Five notices were struck down due to being time-barred, and the sixth notice was invalidated for being based on an incorrect assessment of the assessable value. The petition succeeded, and the rule was made absolute in terms of prayer (a), with no order as to costs.