2012 (8) TMI 625 - HC - Central Excise

Demand of excise duty Held that - Activity of cutting and polishing of granites amount to manufacture only from 1-3-2006 in view of the budgetary changes in 2006 - alleged clandestine removal of granite slabs for the period from 1996-2000 does not amount to manufacture and hence no excise duty is payable

Summary

Issues:
1. Validity of the procedure adopted by the authority in quasi-judicial proceedings.
2. Applicability of Customs Act and Central Excise Act to the case.
3. Validity of show cause notice and demand of excise duty.
4. Transformation of demand from customs duty to excise duty.
5. Interpretation of cutting and polishing of granites as manufacturing activity.

Analysis:

Issue 1:
The High Court addressed the challenge by the revenue against the Tribunal's order, which deemed the procedure adopted by the authority as bad procedure for quasi-judicial proceedings and bad in law. The Tribunal set aside the demand of excise duty based on this reasoning.

Issue 2:
The case involved a show cause notice issued under the Customs Act, demanding duty and proposing penalties. However, the revenue later issued a letter for demand of duty under the Central Excise Act, leading to a dispute regarding the applicability of the two acts to the case.

Issue 3:
The Tribunal found that the show cause notice issued under the Customs Act was not proper, and the subsequent letter for demand of duty under the Excise Act was not valid. It emphasized the necessity of a valid show cause notice as a condition precedent before levying duty, ultimately setting aside the order of the adjudicating authority and allowing the appeal of the assessee.

Issue 4:
The revenue contended that issuing a letter converting the demand from customs duty to excise duty after the assessee objected to the original show cause notice did not cause prejudice to the assessee. However, the High Court, in line with previous judgments, held that a valid show cause notice is essential before levying duty and penalty, and converting notices between enactments is impermissible.

Issue 5:
The High Court considered the historical treatment of cutting and polishing of granites as a manufacturing activity and noted that prior to 1996, it was not classified as such. The Court highlighted that only from 1-3-2006, cutting and polishing of granites attracted excise duty as a manufacturing activity. Based on this analysis and the lack of merit in the revenue's case, the appeal was dismissed.

In conclusion, the High Court dismissed the appeal by the revenue, emphasizing the importance of valid show cause notices, the distinction between different enactments, and the evolution of the classification of certain activities as manufacturing for the purposes of levying excise duty.