1993 (9) TMI 116 - HC - Central Excise

Summary

Issues Involved:

1. Validity of the show cause notice dated 29-5-1992.
2. Invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excises and Salt Act, 1944.
3. Alleged contravention of various Central Excise Rules by the petitioners.
4. Alleged suppression of facts and evasion of excise duty.
5. Jurisdiction of the Collector of Central Excise to issue the show cause notice.
6. Requirement of following Chapter X procedure of the Central Excise Rules, 1944.
7. Admissibility and relevance of evidence and records.
8. Preliminary stage of quashing the show cause notice.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice Dated 29-5-1992:

The petitioners challenged the validity of the show cause notice issued by the Collector of Central Excise, Raipur, alleging that it was based on false premises and fabricated charges. The notice related to the period from 1-4-1987 to 31-3-1992 and included allegations against two units, M/s. Satna Cement Works and M/s. Birla Vikas Cement, both belonging to M/s. Birla Jute and Industries Ltd. The petitioners argued that the notice was baseless as the excise authorities had full knowledge of the operations and storage practices of the petitioners, and the daily production reports had been regularly scrutinized and found correct.

2. Invocation of the Extended Period of Limitation:

The petitioners contended that the extended period of limitation under the proviso to Section 11A(1) of the Central Excises and Salt Act, 1944, could not be invoked as there was no fraud, collusion, willful misstatement, or suppression of facts. They argued that the excise authorities had accepted their daily production reports and annual stock taking reports, which had been duly checked and verified. The respondents, however, argued that there was deliberate evasion of excise duty by suppression of material facts, justifying the invocation of the extended period of limitation.

3. Alleged Contravention of Various Central Excise Rules:

The show cause notice alleged that the petitioners had contravened several Central Excise Rules, including Rules 9(1), 52A, 53, 54, 173F, 173G(4) & (5), 174, and Rule 226. The allegations included the removal of cement clinker without payment of duty, failure to issue gate passes, and non-accounting of the receipt and removal of cement clinker and cement in the daily stock register. The petitioners denied these allegations, asserting that all operations were conducted with the knowledge and approval of the excise authorities.

4. Alleged Suppression of Facts and Evasion of Excise Duty:

The respondents alleged that the petitioners had willfully suppressed facts and evaded excise duty by not accounting for the quantities of cement clinker and cement removed from one factory to another. The petitioners argued that the shifting of clinker between the units was done due to space constraints and with the knowledge of the excise authorities. They maintained that there was no suppression of facts or evasion of duty.

5. Jurisdiction of the Collector of Central Excise to Issue the Show Cause Notice:

The petitioners questioned the jurisdiction of the Collector of Central Excise to issue the show cause notice, arguing that the excise authorities had no basis to invoke the extended period of limitation. The court, however, held that the Collector of Central Excise had the authority to issue the notice if there was an intention to evade payment of duty as stated in the proviso to Section 11A.

6. Requirement of Following Chapter X Procedure of the Central Excise Rules, 1944:

The respondents argued that the petitioners had not followed the procedure set out in Chapter X of the Central Excise Rules, 1944, for the transportation of clinker between the units, which was a requirement for claiming exemption from payment of excise duty. The petitioners contended that such procedures were not applicable for the period when the units had a common L-4 license and that the shifting of clinker was for captive consumption within the same premises.

7. Admissibility and Relevance of Evidence and Records:

The court noted that the excise authorities had issued the show cause notice based on the records of the company, including statements from company officers and private records not produced before the excise authorities. The court held that the excise authorities were justified in making investigations and inquiries based on these records to determine whether there was deliberate evasion of excise duty.

8. Preliminary Stage of Quashing the Show Cause Notice:

The court emphasized that it was not advisable or necessary to determine questions of fact at this preliminary stage. The court's role was to ensure that there was material on record justifying the initiation of proceedings and that the proceedings were not merely to harass the petitioners. The court concluded that the petitioners should submit their reply to the show cause notice, and the matter should be adjudicated by the Collector of Central Excise.

Conclusion:

The petition was dismissed with costs, and the petitioners were directed to submit their reply to the show cause notice to the respondent. The court found that there was sufficient material on record to justify the issuance of the show cause notice and the initiation of proceedings by the excise authorities.