1990 (1) TMI 187 - AT - Central Excise

Summary

Issues:
1. Adjudication based on non-accountal of excisable goods
2. Competency of authorities to demand duty under Section 11A
3. Validity of show cause notice alleging suppression and misstatement

Adjudication based on non-accountal of excisable goods:
The case involves an appeal against an order by the Collector (Appeals) regarding non-accountal of 15 bags of pigment dyes in a factory. The Central Excise officers found the goods unaccounted for in the RG-I register during a check. The Asstt. Collector initiated adjudication proceedings resulting in confiscation of the goods and imposition of penalties. The respondents appealed to the Collector (Appeals) who set aside the order, citing that the Asstt. Collector lacked the authority to make allegations of fraud and suppression under Section 11A. The Tribunal agreed that duty payment only arises upon removal of goods and observed that the show cause notice was defective in demanding duty before removal, rendering it void ab initio. The Tribunal upheld the Collector's decision to allow the appeal but noted that the department could adjudicate on the non-accountal of goods separately.

Competency of authorities to demand duty under Section 11A:
The Department argued that the case involved non-accountal of manufactured excisable goods, and duty payment should only occur upon removal, not before. They contended that the Asstt. Collector's order was set aside entirely, potentially absolving the respondents of penalties. However, the Tribunal agreed with the Department's representative that duty demand under Section 11A was unnecessary in this scenario, as goods were still in the factory. The show cause notice issued by the Superintendent demanding duty based on suppression and misstatement was deemed void ab initio, as duty payment was premature before removal. The Tribunal concurred that the Asstt. Collector erred in adjudicating on the defective notice but allowed the department the opportunity to address the non-accountal issue separately.

Validity of show cause notice alleging suppression and misstatement:
The Respondents argued that the show cause notice contained positive allegations of demanding duty based on suppression and misstatement, rendering it void from the beginning. The Tribunal agreed that the notice was defective, as duty demand was premature before removal of goods. The Asstt. Collector should have rectified the notice before adjudicating on it. The Tribunal concurred that the notice was void ab initio and upheld the Collector's decision to set aside the Asstt. Collector's order. They granted the department the chance to address the non-accountal issue separately, emphasizing the need for a proper notice before adjudication.