2006 (10) TMI 149 - SC - Central Excise

Completion of an assessment proceedings whether is a sine qua non for issuance of notice under Section 11A of the Central Excise Act, 1944? Held that - Where provisional duty is levied in terms of Sub-Rule (1) of Rule 9B, final assessment is contemplated under Sub-Rule (5) thereof by reason of which the duty provisionally assessed shall be adjusted against the duty finally assessed and in the event, the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee will pay the deficiency or will be entitled to a refund, as the case may be. Ultimately, thus, the liability of the assessee would depend upon the undertaking of exercises by the assessing officer to complete the assessment proceeding as contemplated under the Rules. On a plain reading of the provisions of the Act and the Rules framed thereunder, no doubt in our mind that the Tribunal was correct in its finding that the impugned show cause notices were illegal. Appeal dismissed.

Issues Involved:
1. Whether completion of assessment proceedings is a sine qua non for issuance of notice under Section 11A of the Central Excise Act, 1944.
2. Legality of show cause notices issued during the pendency of provisional assessment.
3. Interpretation and application of Section 11A and Rule 9B of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Completion of Assessment Proceedings for Issuance of Notice under Section 11A:
The main issue in this appeal was whether the completion of assessment proceedings is a prerequisite for issuing a notice under Section 11A of the Central Excise Act, 1944. The Court referred to the text of Section 11A, which allows recovery of duties not levied or paid, short-levied or short-paid, or erroneously refunded. It was emphasized that proceedings under Section 11A can only be initiated after the final assessment is completed. The Court noted that the jurisdiction under Section 11A can be invoked only when a duty has not been levied or paid, which can be determined only after the completion of assessment proceedings.

2. Legality of Show Cause Notices Issued During Pendency of Provisional Assessment:
The Court examined the validity of show cause notices issued prior to the finalization of provisional assessments. It was observed that the provisional assessment is an interim measure, and final assessment is necessary to determine the exact duty liability. The Court held that initiating proceedings under Section 11A during the pendency of provisional assessment is illegal. The Tribunal's decision to set aside the show cause notices was upheld, as the notices were issued before the final assessment was completed.

3. Interpretation and Application of Section 11A and Rule 9B:
The Court analyzed the provisions of Section 11A and Rule 9B of the Central Excise Rules, 1944. Rule 9B allows for provisional assessment in cases where the proper officer deems it necessary due to incomplete information or the need for further inquiry. The final assessment, as per Rule 9B(5), involves adjusting the provisionally assessed duty against the finally assessed duty. The Court emphasized that the liability of the assessee is determined only after the final assessment is completed. The Tribunal's interpretation that the show cause notices issued during the provisional assessment were invalid was affirmed.

Conclusion:
The Supreme Court dismissed the appeals, confirming that the completion of assessment proceedings is essential before issuing a notice under Section 11A. The show cause notices issued during the provisional assessment were deemed illegal. The Court reaffirmed the principles laid down in previous judgments, emphasizing the necessity of final assessment for determining duty liability. The appeals were dismissed with no costs.

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