2016 (5) TMI 1066 - AT - Central Excise

Demand of duty alongwith interest - Re-classification of certain mis-classified lubricating oils and denial of exemption notification - No SCN issued for demanding excise duty under Section 11 A of Central Excise Act - Held that - the SCN is vague and issued for re-classification of the goods and no demand was raised. Whereas, under Section 11 A, it is mandatory for any recovery of duty not paid or short paid. There shall be a SCN demanding the recovery of duty under Section 11 A. Here, under no stretch of imagination, the alleged SCN can be construed as SCN issued under Section 11 A as the said SCN was primarily issued for re-classifying and denying exemption notification as per the classification list filed by the appellant under the erstwhile Rules. The adjudicating authority proposed to change the classification and denying exemption, there should be a clear demand issued under Section 11 A. Whereas, in the present case, neither SCN says so, on the contrary, the adjudicating authority after re-classifying the goods and denying exemption, straightaway confirmed the demand under Section 11 A. Therefore, by respectfully, following the Apex Court decisions in the case of Metal Forgings Vs. UOI 2002 (11) TMI 90 - SUPREME COURT OF INDIA and in the case of Gujarat Machinery Manufactures Ltd. Vs. CCE, Baroda 1996 (9) TMI 121 - SUPREME COURT OF INDIA , we find there is no demand in the SCN issued under Section 11 A for recovery or any short levy of duty on account of re-classification. The demand is not sustainable and is set aside. - Decided in favour of appellant

Summary

Issues Involved:
1. Validity of the Show Cause Notice (SCN) under Section 11A of the Central Excise Act, 1944.
2. Legality of the re-classification and denial of exemption notifications.
3. Justifiability of the demand for excise duty without a proper SCN.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice (SCN) under Section 11A of the Central Excise Act, 1944:
The appellant contested that no proper SCN was issued under Section 11A of the CEA, 1944, demanding central excise duty. The SCN dated 12/1992 was argued to be a draft, later issued as a fair SCN, proposing re-classification and denial of exemption without specifying the exact demand amount, period involved, or the relevant provision under Section 11A. The Tribunal found that the SCN did not contain any specific allegations or demand for duty, only proposing reclassification and denial of exemptions. The SCN was deemed vague and not in compliance with the mandatory requirements of Section 11A, as upheld by the Hon'ble Supreme Court in Metal Forgings Vs. UOI, which mandates a clear SCN specifying the amount demanded and the legal basis.

2. Legality of the Re-classification and Denial of Exemption Notifications:
The adjudicating authority re-classified the products under chapter headings 3403 and 2710 99, denied the exemption notifications, and demanded excise duty. The appellant argued that the SCN did not specify the new classification headings or the exact demand, thus exceeding the scope of the SCN. The Tribunal noted that the SCN only proposed re-classification and denial of exemptions without specifying the new headings or the duty amount, making the subsequent demand in the Order-in-Original (OIO) unsustainable.

3. Justifiability of the Demand for Excise Duty without a Proper SCN:
The Tribunal emphasized that the issuance of a proper SCN under Section 11A is a mandatory legal requirement for recovering any duty not paid or short-paid. The SCN in question did not meet these requirements, as it did not specify the exact demand amount or the period involved. The Tribunal relied on precedents, including the Hon'ble Supreme Court's rulings in Metal Forgings Vs. UOI and Gujarat Machinery Manufacturers Ltd., which underscored the necessity of a proper SCN for any recovery of duty. Consequently, the demand confirmed in the OIO was deemed unsustainable due to the absence of a proper SCN under Section 11A.

Conclusion:
The Tribunal concluded that the SCN issued was not in compliance with the mandatory requirements under Section 11A of the CEA, 1944, rendering the demand for excise duty unsustainable. The impugned order was set aside, and the appeal was allowed, emphasizing the necessity of a proper SCN for any recovery of duty.