NON MENTIONING OR MERE WRONG MENTION OF PROVISIONS OF LAW IN THE SHOW CAUSE NOTICE, DOES NOT VITIATE THE PROCEEDINGS IF THE ALLEGATIONS AND CHARGES AGAINST THE ASSESSEE ARE MENTIONED IN CLEAR TERMS IN THE SHOW CAUSE NOTICE

[Mr. M. GOVINDARAJAN]

                        Under the tax laws it is necessary to issue show cause notice to the assessee indicating the relevant provisions which is considered as violated by the assessee.   In 'Amrit Foods V. Commissioner of Central Excise, Uttar Pradesh' - 2005 -TMI - 47461 - (SUPREME COURT OF INDIA) which was set aside on the specified as to which particular clause of Rule 173Q had been allegedly contravened by the appellant.   It was observed that before imposing the penalty, it was necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under the provisions of Rule 173-Q.

 In 'Commissioner of Central Excise, Chandigarh V. Dabur India Limited' 2004 (178) ELT 819 (Tri. Del) the Tribunal held that mere wrong mention of provisions of the law did not vitiate show cause notice when all the allegations are contained in the show cause notice.   In 'Standard Industries Limited V. Commissioner of Central Excise, Mumbai' - 2003 (158) ELT 623 it has been held that non mention of Rule in the show cause notice not fatal if the facts lead to understanding of the same.  The Supreme Court in 'Fortune Impex V. Commissioner' - 2004 (167) ELT A 134 (SC) held that non mentioning of particular section of Customs Act, 1962 would not vitiate the proceedings when allegations and charges against all the appellants were mentioned in clear terms in the show cause notice.

The above said view has been confirmed by the Delhi High Court in 'Avi .  Steel Traders V. Commissioner of Central Excise' - 2010 -TMI - 77446 - (DELHI HIGH COURT).   In this case a show cause notice was issued to the appellant in which, inter alia, allegations against the appellant was that the appellant had removed excisable goods in contravention of the provisions of Excise Act and Rules particularly Rule 11(1) of the Central Excise Rules.   It was further specifically alleged that the appellant had contravened the provisions of Rule 11 of the Rules as well as Rule 3, 4 and 7 of CENVAT Rules, 2002.  On the basis the appellant was called upon to show cause as to why:

Penalty should not be imposed upon M/s Avi Steel Traders under Rule 13 of CENVAT Credit Rules, 2002 read with Sec. 11AC and 38A of the Central Excise Act, 1994 for the contravention;

·  The amount of CENVAT credit of Rs.3,92,449/- lying unutilized in RG-23D register should not be lapsed.

The appellant replied to the show cause.   After giving reasonable opportunity to the appellant the Assistant Commissioner ordered-

Ø      The CENVAT credit of Rs.3,92,449/- lying in the dealer's account shall be expunged from his records; and

Ø      There shall be a penalty of Rs.1,00,000/- on AVI Steel Traders under Rule 25 of Central Excise Rules, 2002; and

Ø      There shall be another penalty of Rs.1,00,000/- under Rule 13(1) of the CENVAT Credit Rules, 2002.

The appellant challenged the penalty imposed under Rule 25 of the Central Excise Rules by filing appeal before the Commissioner (Appeals) contending that Rule 25 of the Central Excise Rules was not invoked in the show cause notice and therefore no penalty could be imposed under that provision.

 The Commissioner (Appeals) observed as follows:

So far as the imposition of penalty of Rs.1,00,000/- under Rule 25 of the Central Excise Rules, 2002 is concerned, there is no doubt that the appellants had contravened the provisions of Central Excise Law and had rendered themselves liable to penal action;

·  The show cause notice specifically allege that the appellant had contravened the provisions of Rule 11 of the Central Excise Rules, 2002;

·  The Adjudicating Authority held that the appellants had violated the provisions of Rule 11 of the Rules with an ulterior motive of passing on the CENVAT credit in respect of the entire quantity of 132.95 MTs of  goods found short;

·  Though Rule 25 has not been specifically invoked but the show cause notice clearly mentioned the allegation and charges against the appellant under Central Excise Rules, 2002;

·  In view of the settled propositions of law the non mentioning of the provisions of law in the impugned show cause notice had not vitiated the present proceedings and the Adjudicating Authority has rightly held that the appellants liable to penal action under Rule 25 of the Central Excise Rules, 2002;

In view of the above the Commissioner (Appeals) confirmed the order of the Adjudicating Authority.

Not satisfied with the aforesaid decision the appellant moved to the Tribunal.   The Tribunal affirmed the order of Commissioner (Appeals) and giving the same reasoning and rejected the contention of the appellant.

The appellant filed appeal before the High Court.   The High Court held that the appellant was specifically put on notice about the exact nature of contravention i.e., Rule 11 of the Central Excise Rules, 2002.   It is reiterated that no excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent.   It is contravention of this Rule for which penalty is provider under Rule 25(1) of the Central Excise Rules.   In the show cause notice not only the allegations are made in detail as to how the appellant removed the goods from the factory without invoice but it is also specifically mentioned that by the aforesaid act, the appellant had contravened the provisions of Rule 11 of the Rules.   Thus the appellant was put on clear notice as to what kind of violation it had made.   The penalty is a consequence thereof and, therefore, non mentioning of Rule 25 of the Rules was mere inadvertent omission.   

The High Court further observed that the requirement of putting the assessee on notice about the exact nature of contravention i.e., Rule 11 of the Central Excise Rules, 2002 is to make sure that the noticee be in a position where he can an effective reply.   The purpose is to adhere to the principles of natural justice before taking any action.   Since the appellant in the instant case was communicated in no uncertain terms, the allegations against him on the basis of which contravention of Rule 11 of the Rules was lodged in the show cause notice, proper opportunity was given to him to reply.   Therefore no prejudice can be said to be caused to the appellant thereby.  The High Court confirmed the view taken by the authorities below.