1992 (2) TMI 104 - SC - Central Excise

Whether the notice refers to the period from November, 1983 to July, 1988 and that at least the period prior to 1-12-1983 is beyond the period of five years? Whether the Department could not supplement its case by the material referred to in the notice dated 7-3-1990 which is admittedly beyond a period of five years in respect of a substantial period covered by the earlier notice? Held that - The proceedings under Section 11A have been initiated within the period of five years and validly covered the period from 2-12-1983 to July, 1988. The addendum, as it is called, is only a letter bringing to the notice of the assessee the further material which had come to the hands of the Department. The issue of this notice is only intended to bring the material in the hands of the Department to the notice of the assessee and give him an opportunity to rebut the same. This cannot deprive the Department of its jurisdiction to proceed to make an enquiry under the notice of 2-12-1988 validly issued by it and pass appropriate orders. Allow this appeal, set aside the order of the High Court and restore the proceedings before the Collector of Central Excise. The proceedings will continue in pursuance of the notices dated 2-12-1988 and 7-3-1990 in accordance with law.

Summary

Issues:
1. Validity of show cause notice under Section 11A of the Central Excises and Salt Act, 1944.
2. Time limitation for issuing show cause notice.
3. Authority of the Collector of Central Excise to issue notice.
4. Supplementary notice issued beyond the time limit.
5. Opportunity for the assessee to rebut the allegations and request for material from the Department.

Detailed Analysis:
1. The judgment concerns the challenge to the validity of a show cause notice issued by the Collector of Central Excise under Section 11A of the Central Excises and Salt Act, 1944. The notice alleged that the assessee had removed woollen worsted yarn without payment of Central Excise Duty, leading to evasion of duty amounting to approximately Rs. 30 lakhs. The High Court allowed the writ petition on the grounds of the notice being issued beyond the six-month period and lack of response from the Department to the objections raised by the assessee. The High Court quashed the notices but allowed the Union of India to issue fresh notices with proper disclosure of jurisdiction and basis.

2. The Supreme Court held that the notice issued was within the extended period of limitation and sufficient grounds existed for its issuance. The Court disagreed with the High Court's requirement for a preliminary inquiry to establish the notice's timeliness. The Court emphasized that the show cause notice was not time-barred, as evident from the material presented. The Court also noted that the assessee did not dispute the applicability of the five-year period for the case, further supporting the validity of the notice within the limitation period.

3. The judgment addressed the contention that the notice was issued under the directions of higher authorities and not independently by the Collector of Central Excise. The Court found this objection vague and lacking material support. Additionally, the Court doubted the applicability of principles from other tax laws to the Central Excise Act. The Court dismissed this contention as unsubstantiated and upheld the validity of the notice.

4. The Court also addressed the issuance of a supplementary notice beyond the five-year period covered by the original notice. It clarified that the supplementary notice aimed to provide the assessee with additional material for rebuttal and did not affect the jurisdiction established by the initial notice. The Court emphasized that the Department's jurisdiction to proceed with the enquiry remained valid based on the original notice's issuance within the limitation period.

5. Lastly, the judgment ensured that the assessee would have the opportunity to challenge the validity of the notices, except for the point of limitation. The Court directed the Department to provide necessary material to the assessee for a fair opportunity to respond to the allegations. The appeal was allowed, setting aside the High Court's order and reinstating the proceedings before the Collector of Central Excise in accordance with the law. The Court emphasized the importance of providing the assessee with a full opportunity to present its case and rebut the Department's allegations.