2016 (5) TMI 673 - HC - Central Excise

Demand of duty and tax penalties - Confiscation in lieu of redemption fine - Seizure of gutkha from the retailer - Available recourse under Section 3-A - Provision of Section 3A was not on the statute book during the subject period of 2002-03 to 2004-05. or upto not even for 2005-06 and came to be inserted only on 10.5.2008 - Held that - even if Section 3-A is to apply, then also, a further scrutiny may be required to be undertaken as to whether, for the goods in question, the notification was issued or not. It is only after the two aspects of applicability of Section 3-A and the availability of the notification for production of Gutka, the matter can be considered for finalization of excise duty by the Revenue. As, neither there is reference to such contention nor there is discussion by the Tribunal on the aforesaid aspects which are vital aspects for charging of excise duty, we find that it would be just and proper to remand the matter to the Tribunal for appropriate consideration in accordance with law. Therefore, the impugned order passed by the Tribunal is set aside with a further direction that all Appeal shall stand restored to the Tribunal for its consideration in accordance with law and in the light of the observations made by this Court in the present Judgment. - Appeals allowed by way of remand

Summary

Issues:
1. Tribunal's jurisdiction to confirm duty demand beyond the scope of show cause notice
2. Legality of penalty imposition when duty demand is not sustainable
3. Consideration of omitted Section 3-A in Central Excise Act during the relevant period
4. Need for remand to Tribunal for further consideration based on legal aspects and principles of natural justice

Issue 1: Tribunal's jurisdiction to confirm duty demand beyond the scope of show cause notice
The judgment addresses the appellant's contention regarding the Tribunal's jurisdiction to confirm duty demand beyond the scope of the show cause notice. It is noted that Section 3-A of the Central Excise Act was omitted during the relevant period, and its subsequent reinsertion raised questions about the basis for quantification of duty demanded. The Court emphasized the strict interpretation of taxing statutes and the necessity for conscious inclusion of provisions for charging excise duty based on production capacity. The Court found that the Tribunal did not consider crucial aspects regarding the applicability of Section 3-A and the availability of necessary notifications for charging excise duty. Consequently, the matter was remanded to the Tribunal for proper consideration in accordance with the law.

Issue 2: Legality of penalty imposition when duty demand is not sustainable
The judgment also delves into the legality of penalty imposition when the duty demand itself is deemed unsustainable. The appellant raised concerns about the discrepancy between the figure mentioned in the show cause notice and the supporting reasons provided. While the Tribunal did not specifically address this contention, the Court recognized it as a mixed question of law and fact, impacting natural justice principles. Despite the absence of this issue in the Tribunal's order, the Court allowed the appellant to raise the contention before the Tribunal during the remand process for a comprehensive examination in line with legal requirements.

Issue 3: Consideration of omitted Section 3-A in Central Excise Act during the relevant period
The judgment extensively discusses the historical presence and absence of Section 3-A in the Central Excise Act during the relevant period. It highlights the significance of this provision in determining excise duty based on production capacity and the need for proper notification for charging such duties. The Court's analysis underscores the importance of legal clarity and adherence to statutory requirements for imposing excise duties, especially in scenarios where specific provisions undergo multiple insertions and omissions over time.

Issue 4: Need for remand to Tribunal for further consideration based on legal aspects and principles of natural justice
Lastly, the judgment concludes by setting aside the Tribunal's order and directing a remand of all appeals to the Tribunal for reconsideration. This remand is based on the Court's observations regarding the legal aspects related to Section 3-A, the discrepancy in duty demand quantification, and the principles of natural justice. Both parties are granted the opportunity to present their arguments before the Tribunal, which is tasked with issuing a fresh order within a stipulated timeframe. The Tribunal is instructed to independently evaluate the matter without being influenced by the Court's observations, ensuring a fair and thorough examination of the legal issues at hand.