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Issues:
1. Interpretation of Section 11A(1) of the Central Excise Act regarding wilful suppression or wilful mis-statement. 2. Commencement of proceedings against petitioners under Section 11A(1) based on alleged wilful suppression. 3. Validity of the show-cause notice issued by Respondent No. 2 regarding secondary packing charges. 4. Authority of the Collector to levy duty and penalty under Rule 173Q(1). 5. Legality of criminal proceedings instituted by the Department. 6. Application of proviso to Section 11A(1) in cases of fraud, collusion, wilful suppression, or wilful mis-statement. Analysis: The judgment in this case involved the interpretation of Section 11A(1) of the Central Excise Act concerning wilful suppression or wilful mis-statement. The petitioners, a subsidiary of a company, were issued a show-cause notice by the Assistant Collector of Customs regarding the inclusion of secondary packing charges in the assessable value of goods sold. The Collector later demanded duty and penalty based on a change in law indicated by a Supreme Court judgment. However, the petitioners had already paid duty on the packaging post the Supreme Court judgment in question. The main contention raised by the petitioners was that the Department had no authority to commence proceedings under Section 11A(1) without establishing fraud, collusion, wilful misstatement, or wilful suppression of facts. The petitioners argued that the Collector's order and subsequent criminal proceedings were without legal basis as there was no intentional evasion of duty on their part. The petitioners highlighted that they had complied with the law post the relevant Supreme Court judgment. On the other hand, the Department argued that the petitioners, being aware of the duty liability, deliberately avoided paying it, justifying the proceedings initiated under the proviso to Section 11A(1). They contended that the criminal proceedings were warranted due to the alleged offense committed by the company. The Court, after considering the arguments, found merit in the petitioners' contentions. It clarified that under Section 11A, proceedings could only be initiated if there was deliberate evasion of duty, not mere failure to pay. Referring to previous Supreme Court judgments, the Court emphasized that intentional avoidance of duty was necessary to trigger the proviso to Section 11A(1). As the petitioners had complied with the law post the relevant judgment, the Court held that the Collector had no authority to commence proceedings without evidence of wilful evasion. Consequently, the Collector's order and the criminal proceedings were set aside, ruling in favor of the petitioners in both Writ Petitions. In conclusion, the Court made the rules absolute in favor of the petitioners, setting aside the Collector's order and quashing the criminal proceedings. No costs were awarded in the case.
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