1989 (7) TMI 226 - AT - Central Excise

Summary

Issues:
1. Validity of the demand raised without a show cause notice under Section 11A of the Act.
2. Interpretation of Rule 13 of the Central Excise Rules regarding duty liability.
3. Compliance with principles of natural justice in issuing the notice of demand.
4. Application of promissory estoppel in revenue matters.
5. Effect of subsequent withdrawal of the "in bond" export facility to Nepal on prior exports.

Analysis:

Issue 1: The appellant contended that the demand raised lacked a valid show cause notice, a statutory requirement. The notice of demand issued under Rule 13 of the Rules did not meet the criteria under Section 11A of the Act. Citing legal precedents, the appellant argued that the notice should be precise and unambiguous, specifying the case to be addressed. The respondent argued that the notice did serve as a show cause notice by specifying the grounds for the demand and providing an opportunity for the appellant to respond.

Issue 2: The judgment highlighted that Rule 13 of the Rules pertains to permitting exports without duty payment and does not address duty recovery. Therefore, any duty liability should be pursued under Section 11-A of the Act, which necessitates a show cause notice. Legal precedents, such as the Precision Steel Fasteners case, emphasized the requirement of a show cause notice before demanding duty.

Issue 3: The judgment discussed the importance of complying with principles of natural justice in issuing the notice of demand. While the appellant argued that granting a personal hearing did not cure the lack of a show cause notice, legal precedents, including the Hydraulics Ltd. case, emphasized the necessity of a valid show cause notice before proceeding with demands.

Issue 4: The appellant raised the doctrine of promissory estoppel in revenue matters, contending that they acted in reliance on government circulars and notifications. However, the judgment did not delve into this argument as the primary focus was on the procedural irregularities in issuing the demand notice.

Issue 5: The judgment noted the discrepancy between the reasons for the demand in the notice and the grounds cited in the adjudication. The demand was based on the suspension of the "in bond" export facility, while the adjudication referenced the absence of a specific notification under Rule 13(2) of the Rules. This discrepancy raised questions about the validity of the demand and the subsequent orders.

In conclusion, the appeal was allowed on the basis of the absence of a proper show cause notice, rendering the demand unsustainable. The judgment highlighted the importance of procedural compliance and statutory requirements in revenue matters, ultimately leading to the decision to allow the appeal due to the lapsed statutory period for the demand.