1997 (6) TMI 35 - HC - Central Excise

Demand - Show cause notice - Validity of - Limitation - Writ jurisdiction - Existence of alternate remedy

Issues Involved:
1. Legality of the show cause notice proposing to levy duty during the exemption period.
2. Validity of the show cause notice in relation to the extended period of limitation.
3. Jurisdiction of the Court to interfere with the show cause notice, and whether the activities mentioned amount to the manufacture of goods.

Issue-wise Detailed Analysis:

1. Legality of the Show Cause Notice Proposing to Levy Duty During the Exemption Period:

The petitioner challenged the show cause notice on the grounds that it proposed to levy excise duty on computer software in the form of recorded media during a period covered by an exemption notification issued under Section 11C of the Central Excises and Salt Act, 1944. The court noted that the exemption notification dated 10th of July, 1991, exempted duty on computer software for the period from 28th of February, 1986 to 27th of April, 1988. This notification was issued after the impugned show cause notice. Therefore, while the show cause notice remained valid, the proposal to levy duty for the period covered by the exemption notification became redundant. The court directed that further action pursuant to the show cause notice must give effect to the exemption notification and allow the petitioner the benefit of the same.

2. Validity of the Show Cause Notice in Relation to the Extended Period of Limitation:

The petitioner argued that the show cause notice was barred by limitation as it proposed to levy duty on goods cleared more than six months prior to its issue. The court examined Section 11A of the Act, which allows the Central Excise Officer to initiate proceedings within six months from the relevant date, extendable to five years in cases involving fraud, collusion, or wilful mis-statement or suppression of facts. The court found that the show cause notice specifically accused the petitioner of wilful suppression of the fact of manufacture and clandestine clearance of goods without accounting for the same in statutory records. The court held that the notice sufficiently conveyed the intent to evade duty, and the extended period of limitation was applicable. The court rejected the petitioner's argument that there could be no intent to evade duty due to the government's exemption notification and policy statements, stating that this was a factual question to be determined by the competent authority.

3. Jurisdiction of the Court to Interfere with the Show Cause Notice, and Whether the Activities Mentioned Amount to the Manufacture of Goods:

The court emphasized that interference with proceedings initiated by statutory authorities in exercise of extraordinary writ jurisdiction is justified only in exceptional circumstances, such as challenges to the constitutional vires of the enactment, violation of principles of natural justice, or orders being totally without jurisdiction. The court noted that the Central Excises and Salt Act provides a comprehensive machinery for adjudication, including appeals to higher authorities. The court held that the validity of the show cause notice could not be questioned on the grounds that the proposed action was beyond the period of limitation or contrary to a notification. The court stated that whether the petitioner's activities amounted to the manufacture of goods was a matter for the competent authority to determine, given the technical complexities involved. The court concluded that there was no reason to short-circuit the proceedings initiated by the Collector and dismissed the writ petition, reserving liberty for the petitioner to file a reply to the show cause notice within four weeks.

Conclusion:

The writ petition was dismissed, and the petitioner was directed to file a reply to the show cause notice within four weeks. The respondents were instructed to expedite the disposal of the matter and pass appropriate orders in accordance with law within six months. No costs were awarded.

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