2010 (2) TMI 557 - HC - Central Excise

Show cause notice short payment of duty - conflict between the main Act and Rules Maintainability of appeal to High court - show cause notices were issued by the Superintendent of Central Excise and not by the competent authority and secondly, that no penalty and interest could be imposed - only Assistant Commissioner was competent to issue the notices Held that - matter remit to the Tribunal for deciding the appeal afresh.

Summary

Issues Involved:
1. Maintainability of the appeal under Section 35-G of the Central Excise Act, 1944.
2. Legality of show cause notices issued by the Superintendent of Central Excise.
3. Determination of non-payment of duty and imposition of penalty under Rule 96ZP of the Central Excise Rules, 1944.

Detailed Analysis:

1. Maintainability of the Appeal:
The primary issue raised by the assessee was regarding the maintainability of the appeal under Section 35-G of the Central Excise Act, 1944. The assessee argued that since the appeal involved the determination of the value of goods for assessment purposes, it should not be maintainable under Section 35-G. However, the court found this argument devoid of merit, stating that the appeal involved pure questions of law, specifically legal interpretations, and not the valuation of goods. Hence, the appeal was deemed maintainable under Section 35-G.

2. Legality of Show Cause Notices:
The next significant issue was whether the show cause notices issued by the Superintendent of Central Excise were legal. The Tribunal had previously held that only the Assistant Commissioner was competent to issue such notices based on a Board's Circular dated 27-2-1999. However, the court referred to the judgment of the Hon'ble Supreme Court in Pahwa Chemicals Pvt. Ltd. v. Commissioner of Central Excise, Delhi, which established that any Central Excise Officer, including the Superintendent, had the jurisdiction to issue show cause notices as per the Act. The court concluded that the Board's Circular could not override the statutory provisions of the Act. Therefore, the show cause notices issued by the Superintendent were held to be legal and valid, reversing the Tribunal's contrary findings.

3. Determination of Non-Payment of Duty and Imposition of Penalty:
The assessee admitted to the non-payment of duty but contended that the short payment was due to a conflict between the Act and the Rules, arguing that benefits under the Act could not be negated by the Rules. The Adjudicating Authority and the Commissioner (Appeals) rejected this explanation, imposing penalties under Rule 96ZP. The Tribunal, however, did not address this controversy adequately. The court noted that the Hon'ble Supreme Court, in the cases of Union of India v. Dharamendra Textiles Processors and Union of India v. Rajasthan Spinning & Weaving Mills, had clarified that the provisions for imposing penalties under Rule 96ZO and 96ZQ were mandatory and did not allow for discretion. Consequently, the penalties imposed under Rule 96ZP were also mandatory, and the Tribunal's failure to consider this was a significant oversight.

Remand for Fresh Decision:
Given the legal interpretations and the mandatory nature of the penalty provisions, the court found it necessary to remit the matter back to the Tribunal for a fresh decision. The Tribunal was directed to reconsider the appeal in light of the conclusions that the show cause notices issued by the Superintendent were valid and the penalties under Rule 96ZP were mandatory, as established by the relevant Supreme Court judgments.

Conclusion:
The appeal was accepted, the impugned order of the Tribunal was set aside, and the matter was remitted back to the Tribunal for a fresh decision, with specific directions to consider the validity of the show cause notices and the mandatory nature of the penalties under the relevant legal provisions and Supreme Court judgments. The parties were directed to appear before the Tribunal on 25-3-2010.