2010 (6) TMI 249 - HC - Customs

Quantification of demand - the show-cause notice issued by the first respondent, pointing out certain omissions and commissions constituting contraventions of various provisions of Central Excise Rules in the manufacture and removal of excisable goods viz., Oorvasi Brand detergent soap and washing powder without payment of duty and noting that the petitioner is liable for payment of Central Excise duty as per the Rules apart from penal action, penalty and interest, under Section 11AC and 11AB of the Central Excise Act, 1944. Held that - large portion of SCN containing factual finding. Quantification of amount liable to be paid and observation on clandestine removal in impugned SCN set aside. Department at liberty to issue fresh SCN deleting words.

Issues Involved:

1. Validity of the show-cause notice issued by the Additional Director General of Central Excise.
2. Validity of the revised assessment orders passed by the Deputy Commercial Tax Officer for the years 1998-99, 1999-2000, and 2000-01.

Issue-wise Detailed Analysis:

1. Validity of the Show-Cause Notice Issued by the Additional Director General of Central Excise:

The petitioner challenged the show-cause notice on several grounds, including violation of principles of natural justice, pre-determination of issues, reliance on assumptions and presumptions, and lack of opportunity to cross-examine witnesses or verify documents. The petitioner argued that the notice was issued with a foreclosed and pre-judged mind, which is against the law and principles of natural justice. The show-cause notice quantified the duty evasion amount and imposed penalties and interest, which the petitioner contended amounted to prejudging the issue.

The court noted that the show-cause notice explained various stages of investigation conducted over nearly two years, involving searches in multiple locations and seizure of documents and goods. The court acknowledged that the statements obtained during preliminary investigation were for making a prima facie case and not for final adjudication. The petitioner was entitled to copies of these statements to provide a proper explanation.

The court found that the show-cause notice had quantified the amount of duty evasion and imposed penalties and interest, which amounted to prejudging the issue. This prejudgment could influence the adjudicating authority, making the adjudication process an empty formality. Therefore, the court set aside the show-cause notice, granting liberty to the respondent to issue a fresh notice without the prejudicial quantification of duty evasion.

2. Validity of the Revised Assessment Orders Passed by the Deputy Commercial Tax Officer:

The petitioner challenged the revised assessment orders for the years 1998-99, 1999-2000, and 2000-01 on grounds of violation of principles of natural justice, improper service of notice, and reliance on the impugned show-cause notice by the Central Excise Department. The court noted that the revised assessment order for 1998-99 was based solely on the show-cause notice issued by the Central Excise Department, which had been set aside. The court also found that the service of notice did not comply with the prescribed rules, as there was no evidence of attempts to serve the notice by registered post before resorting to affixture.

Given that the revised assessment order for 1998-99 was based on the now-invalid show-cause notice and that proper service of notice was not followed, the court set aside the revised assessment order. The court allowed the respondent to take appropriate action after the adjudication process by the Excise Department was completed or upon finding new materials.

Similarly, the court set aside the notices for revision of assessment for the years 1999-2000 and 2000-01, granting liberty to the respondent to issue fresh notices after the conclusion of the adjudicating proceedings by the Excise Department or upon finding new materials.

Conclusion:

The court allowed the writ petitions, setting aside the impugned show-cause notice and revised assessment orders, while granting liberty to the respondents to proceed afresh in accordance with the law after addressing the identified infirmities. The connected miscellaneous petitions were closed, and no costs were imposed.

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