Civil Appeal  8609/2019 [ Diary No. 17005 of 2018] Commissioner of Central Excise, Haldia  vs.  M/s. Krishna Wax (P) Ltd.

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Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8609    OF 2019 (DIARY NO.17005 OF 2018)

COMMISSIONER OF CENTRAL EXCISE, HALDIA      …Appellant

VERSUS

M/S. KRISHNA WAX (P)LTD.     …Respondent

J U D G M E N T

Uday Umesh Lalit, J.

1. This Appeal under Section 35L of the Central Excise Act, 1944

(‘the Act’, for short) arises out of Order dated 31.05.2017 passed by the

Customs,  Excise  and  Service  Tax  Appellate  Tribunal,  Kolkata  (‘the

Tribunal’,  for  short)  dismissing  Appeal  No.  E/211/07  preferred  by the

Appellant herein.

2. The  facts  leading  to  the  filing  of  this  Appeal,  in  brief,  are  as

under:- a) On 23.09.2005 a  search was conducted at  the registered

office as well as the factory premises of the Respondent

Civil Appeal  8609/2019 [ Diary No. 17005 of 2018] Commissioner of Central Excise, Haldia  vs.  M/s. Krishna Wax (P) Ltd.

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herein  by  the  officers  of  the  Central  Excise

Commissionerate  on  the  basis  that  the  Respondent

manufactured  Foots  Oil,  Pressed  Wax,  Pressed  Paraffin

Wax  without  observing  the  mandatory  procedure  and

clearing Excise Duty.  Soon thereafter, Writ Petition No.

2073 of 2005 was filed by the Respondent before the High

Court1 submitting  inter  alia that  the  Assistant

Commissioner  of  Central  Excise  had  no  authority  to

proceed  in  the  matter  as  no  manufacturing  activity  was

undertaken by the Respondent.  The High Court by Order

dated 28.11.2005 directed as under:-

“Having  heard  the  Learned  Advocates  appearing for  the  parties  and  considering  the  facts  and circumstances of the case, I dispose of this petition by  directing  the  respondent  No.1  to  decide  the preliminary  objection  raised  on  behalf  of  the petitioners  regarding  the  jurisdiction  of  the respondents to proceed in the matter under Central Excise Act before deciding any other issues in this matter on merit.

Since no affidavit in opposition has been used on behalf  of the respondents,  all  allegations levelled against  the  said  respondents  in  this  writ  petition should not be deemed to be admitted.”

1 High Court of Judicature at Calcutta

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b) On 21.03.2006 a  Show Cause Notice was issued by the

office  of  the  Commissioner  of  Central  Excise,  Haldia,

which  stated  inter  alia that  in  terms  of  the  aforesaid

directions of the High Court, the Assistant Commissioner

of Central Excise had considered the preliminary objection

and decided to proceed in the matter.  It further recited that

from  the  facts  available  on  record  it  appeared  that

manufacturing  activity  was  being  undertaken  by  the

Respondent without following due procedure and without

paying any Excise Duty.  It was observed:-

“Whereas  M/s.  Krishna  Wax  (Pvt.)  Ltd.,  having their  Registered  Office  at  Classic  Tower,  10A & 11A Floor, 56 Gariahat Road, Kolkata, had filed a writ petition (No.2073 of 2005) in High Court at Calcutta  and  obtained  an  order,  whereby  the respondent,  namely,  Assistant  Commissioner  of Central Excise, was to decide preliminary objection regarding  jurisdiction  to  proceed  in  the  matter under Central Excise Act on merit and it appears to the  respondent  that  the  matter  can  be  proceeded with  under  Central  Excise  Act  and  whereas  it appears from the facts mentioned below that M/s. Krishna  Was  Private  Ltd.  having  their manufacturing unit at…..”

After  the  aforesaid  opening  recitals,  the  facts  were

considered and finally the Respondent was called upon to

show cause :-

Civil Appeal  8609/2019 [ Diary No. 17005 of 2018] Commissioner of Central Excise, Haldia  vs.  M/s. Krishna Wax (P) Ltd.

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“i) Why  the  Central  Excise  Duty  of Rs.1,56,31,712.00 (rupees one crore fifty six lakhs thirty  one  thousand  seven  hundred  and  twelve only)  Education  Cess  of  Rs.2,11,007.00  (rupees two  lakhs  eleven  thousand  and  seven  only  as detailed in Annexure-A) should not be demanded and  recovered  under  the  extended  proviso  to Section 11A of the said Act?

ii) Why  interest  as  applicable  at  the appropriate rate should not charged under Section 11 AB of the said Act?

3.6. The “said party” is directed to produce all the  evidence  upon  which  they  intend  to  rely  in support of his defense, when the case will be heard before the Adjudicating Authority.

3.7 The  “said  party”  should  also  inform whether they wish to be heard in person or through authorized  representative  when  the  case  will  be posted for hearing.”

c) The Respondent again approached the High Court by filing

Writ Petition No. 1719 of 2006, which was disposed of on

27.11.2006  by  the  High  Court  with  following

observations:-  “The  show  cause  notice  has  mainly  been challenged on the ground that notwithstanding an order  dated  28.11.2005  of  this  Court  (P.K. Chattopadhyay,  J.)  directing  the  respondent, Commissioner  of  Central  Excise,  Anti-Evasion Unit to decide the preliminary objection raised by the  petitioners  regarding  jurisdiction  of  the respondents  to  proceed  against  the  petitioners under  the  Central  Excise  Act,  1944,  he  said respondent had not done so.  It was alleged that the Show  Cause  Notice  had  been  issued  without deciding the preliminary objection of the petitioner.

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Mr. Tarafdar has produced the records pertaining to  the  case.   It  appears  that  the  preliminary objection  of  the  petitioners  was  decided  by  an order dated 15th March, 2006.  A copy of the said order  shall  immediately  be  furnished  to  the petitioner  and  in  any  case  within  a  week  from date.

… … …

The  petitioners  shall  submit  their  reply  to  the Show Cause Notice impugned within four weeks from date.   It  will  be open to the petitioners to take objection to the jurisdiction of the concerned Respondents  to  proceed  against  the  petitioner under  the  Central  Excise  Act,  1944.   The adjudication  proceedings  shall  be  conducted strictly in accordance with law and in compliance with principles of natural justice.

The writ application is disposed of accordingly.”

d) Consequently,  a  copy  of  the  Internal  Order  dated

15.03.2006  was  furnished  to  the  Respondent.   Without

filing any reply to the Show Cause Notice and, adopting

the course in tune with the observations of the High Court

in its Order dated 27.11.2006, the Respondent chose to file

Appeal  No.01/HAL/07  before  the  Commissioner  of

Central  Excise  (Appeals-I)  Kolkata  challenging  the

aforementioned Internal  Order dated 15.03.2006.  It  was

submitted  that  no  manufacturing  process  was  being

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undertaken by the Respondent.  An objection was taken on

behalf  of  the  Appellant  that  the  Appeal  was  completely

premature as the matter was not yet gone into; no reply to

the Show Cause Notice was filed by the Respondent and

there  was,  as  a  matter  of  fact,  no  adjudication  by  the

concerned authority.  The objections were rejected by the

Appellate  Authority  observing  that  an  appeal  could  lie

against any order passed under the Act by a Central Excise

Officer lower in rank to the Commissioner.  It was further

concluded that the process undertaken by the Respondent

did not amount to manufacture as under:-

“I,  therefore,  find  that  no  new  produce  has emerged.  The names are used interchangeably in literature,  character  is  not  changed;  only  by  a mechanical process oil has been separated, but still a high oil content has remained in the wax.  Both the  raw  materials  and  end  products  are  sold  to grease manufacturers and lubricant manufacturers. From tariff also no new entry can be cited for the product.  The process involved as such cannot be called incidental to manufacture.  Department has failed  to  discharge  the  burden  to  prove manufacture.”

The appeal was thus allowed by the Appellate Authority

vide order dated 10.01.2007.

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e) The Appellant, being aggrieved, filed Appeal No. E/211/07

before the Tribunal, which came to be dismissed by order

dated  31.05.2017.   The  Tribunal  concluded  that  the

decision  dated  15.03.2006  was  appealable  before  the

Commissioner (Appeals) under Section 35 of the Act as it

entailed civil consequences.  It observed:- “12.  On  perusal  of  the  process  as  stated hereinabove, we find that the Respondent imported the materials  under  CTH 27129090 & 27129090 amongst others and the Revenue also classified the processed material under the same tariff item.  We find  that  the  entire  process  undertaken  by  the Respondent-assessee  is  mainly  a  manual  process and there is a marginal use of hydraulic pressure in the process.

… … …

15. In  the  present  case,  we  find  that  the imported Slack Wax, Residue Wax is in semi-solid form in drums.  Foots Oil is part of Residue Wax or Slack Wax being lighter comes up on surface and siphoned by tilting the drums.  The thinner Slack Wax  called  Foots  Oil  is  thus  separated.   The pressure created by liquid through orifice for  the purpose of exit is known as the hydraulic pressure. Basically,  processed  materials  are  emerging from the imported materials and the Revenue classified the  processed  material  under  the  same  Tariff Heading & CTH.  The Hon’ble Supreme Court and the  Tribunal  in  various  decisions  held  that  such process  cannot  be  treated  as  manufacture  under Section 2(f) of the Central Excise Act, 1944.  Thus, we  find  force  in  the  findings  of  the  ld. Commissioner (Appeals).”

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3. We heard Ms. Nisha Bagchi, learned Advocate, in support of this

Appeal and Ms. Christi Jain, learned Advocate, for the Respondent.

Ms.  Bagchi,  learned  Advocate  submitted  that  the  process  of

adjudication had never taken place in the matter; there was no response to

the  Show  Cause  Notice;  nothing  was  submitted  by  the  Respondent

denying or disputing the assertions made in the Show Cause Notice and

the matter was considered by the Appellate Authority and the Tribunal

from completely incorrect perspective.  According to her, in cases such as

the present one, where the manufacturing process was undertaken and the

goods were cleared without payment of any Excise Duty, the Show Cause

Notice itself would cover not only the basic issue whether the process so

undertaken amounted to manufacture or not but also the resultant liability,

in case the process in question amounted to manufacture; and it would

always be open to the assessee to make such submissions touching upon

both the issues; and the proper course was to let the proceedings pursuant

to the Show Cause Notice, be taken to a logical conclusion.  

Ms. Christi  Jain,  learned Advocate for the Respondent submitted

that the Internal Order dated 15.03.2006 had taken a view that the process

amounted to  manufacture  and such  assessment  was  arrived at  without

affording any hearing to the Respondent.  Said order affected the interest

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of the Respondent adversely and the Respondent was therefore entitled to

challenge the Order dated 15.03.2006. According to her, after due service

of said Order dated 15.03.2006, the Respondent was well within its rights

to challenge said Order.  In support of her submission, reliance was placed

on the decision of this Court in GKN Driveshafts (India) Ltd. v. Income

Tax Officers and others2 and of the decision of the Tribunal in Reliance

Industries Ltd. v. Collector of Central Excise3.

4. The Act was enacted to consolidate and amend the law relating to

Central Duties of Excise.  Section 3 of the Act provides that duty of excise

as prescribed shall be levied and collected on all excisable goods which are

produced or  manufactured in India  as,  and at  the rates,  set  forth in the

Fourth Schedule to the Act.  Section 4 deals with the subject of valuation

of excisable goods for purposes of charging of duties of excise and Section

6  obliges  a  person  who  is  engaged  inter  alia in  the  production  or

manufacture  of  any  specified  goods  to  get  himself  registered  in  such

manner as may be prescribed. Section 11A of the Act deals with recovery

of duties not levied or not paid or short-levied or short-paid or erroneously

refunded and is to the following effect:-

2 (2003) 1 SCC 72 3 1987(11) ECR287 (Tri.-Mumbai)

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“Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-

(1) Where any duty of excise has not been levied or paid  or  has  been  short-levied  or  short-paid  or erroneously refunded, for any reason, other than the reason  of  fraud  or  collusion  or  any  wilful misstatement or suppression of facts or contravention of any of the provisions of this  Act  or of the rules made  thereunder  with  intent  to  evade  payment  of duty,-

(a)  the Central  Excise Officer shall,  within one year from the relevant date, serve notice on the person chargeable  with  the  duty  which has  not been so levied or paid or which has been so short- levied or short-paid or to whom the refund has erroneously  been  made,  requiring  him to  show cause  why  he  should  not  pay  the  amount specified in the notice; (b) the person chargeable with duty may, before service  of  notice  under  clause  (a),  pay  on  the basis of,-

(i) his own ascertainment of such duty; or (ii)the duty ascertained by the Central Excise Officer  

the  amount  of  duty along with interest  payable thereon under section 11AA.

(2) The person who has paid the duty under clause (b) of  sub-section  (1),  shall  inform  the  Central  Excise Officer of such payment in writing, who, on receipt of such  information,  shall  not  serve  any  notice  under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder.

(3) Where the Central Excise Officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall  proceed to issue the  notice  as  provided for  in clause  (a)  of  that  sub-section  in  respect  of  such

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amount  which  falls  short  of  the  amount  actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under sub-section (2).

(4) Where any duty of excise has not been levied or paid  or  has  been  shortlevied  or  short-paid  or erroneously refunded, by the reason of-

(a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,  

by any person chargeable with the duty, the Central Excise  Officer  shall,  within  five  years  from  the relevant date,  serve notice on such person requiring him to show cause why he should not pay the amount specified  in  the  notice  along  with  interest  payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice.

(5 ) to (7) Omitted4

(7A)  Notwithstanding  anything  contained  in  sub- section (1) or sub-section (3) or sub-section (4), the Central Excise Officer may, serve, subsequent to any notice  or  notices  served  under  any  of  those  sub- sections, as the case may be, a statement, containing the details of duty of central excise not levied or paid or short-levied or short-paid or erroneously refunded for the subsequent period, on the person chargeable to duty of central excise, then, service of such statement shall be deemed to be service of notice on such person under the aforesaid sub-section (1) or subsection (3) or  sub-section (4)  or  sub-section (5),  subject  to  the condition  that  the  grounds  relied  upon  for  the subsequent period are the same as are mentioned in the earlier notice or notices.

4 By Act 20 of 2015.

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(8) Where the service of notice is stayed by an order of a court or tribunal, the period of such stay shall be excluded in computing the period of one year referred to  in  clause  (a)  of  sub-section  (1)  or  five  years referred to in sub-section (4), as the case may be.

(9) Where any appellate authority or Tribunal or court concludes that the notice issued under sub-section (4) is not sustainable for the reason that the charges of fraud  or  collusion  or  any  wilful  mis-statement  or suppression of  facts  or  contravention  of  any of  the provisions of this Act or of the rules made thereunder with intent  to  evade payment  of  duty has  not  been established against the person to whom the notice was issued, the Central Excise Officer shall determine the duty of excise payable by such person for the period of  one  year,  deeming  as  if  the  notice  were  issued under clause (a) of sub-section (1).

(10) The Central Excise Officer shall, after allowing the concerned person an opportunity of being heard, and after considering the representation, if any, made by  such  person,  determine  the  amount  of  duty  of excise due from such person not being in excess of the amount specified in the notice.

(11)  The Central  Excise Officer shall  determine the amount of duty of excise under sub-section (10)-

(a) within six months from the date of notice in respect of cases falling under subsection (1); (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4)

(12) Where the appellate authority or tribunal or court modifies the amount of duty of excise determined by the  Central  Excise  Officer  under  sub-section  (10), then the amount of penalties and interest under this section shall stand modified accordingly, taking into account the amount of duty of excise so modified.

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(13) Where the amount as modified by the appellate authority or tribunal or court is more than the amount determined  under  sub-section  (10)  by  the  Central Excise Officer, the time within which the interest or penalty  is  payable  under  this  Act  shall  be  counted from the date of the order of the appellate authority or tribunal or court in respect of such increased amount.

(14) Where an order determining the duty of excise is passed  by  the  Central  Excise  Officer  under  this section,  the  person  liable  to  pay  the  said  duty  of excise shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately.

(15)  The  provisions  of  sub-section  (1)  to  14  shall apply,  mutatis  mutandis,  to  the  recovery  of  interest where interest payable has not been paid or part paid or erroneously refunded.

(16) The provisions of this section shall not apply to a case where the liability of duty not paid or short-paid is self-assessed and declared as duty payable by the assessee in the periodic returns filed by him, and in such case, recovery of non-payment or short-payment of  duty  shall  be  made  in  such  manner  as  may  be prescribed.

Explanation 1.-For the purposes of this section and section 11AC,-

(a) "refund" includes rebate of duty of excise on excisable  goods  exported  out  of  India  or  on excisable  materials  used  in  the  manufacture  of goods which are exported out of India; (b) "relevant date" means,-

(i) in the case of excisable goods on which duty of excise has not been levied or paid or has  been short-levied or  short-paid,  and no periodical  return  as  required  by  the provisions of this Act has been filed, the last date on which such return is required to be

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filed  under  this  Act  and  the  rules  made thereunder; (ii) in the case of excisable goods on which duty of excise has not been levied or paid or has  been short-levied or  short-paid and the return has been filed, the date on which such return has been filed; (iii) in any other case, the date on which duty of excise is required to be paid under this Act or the rules made thereunder; (iv)  in  a  case  where  duty  of  excise  is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (v) in the case of excisable goods on which duty  of  excise  has  been  erroneously refunded, the date of such refund; (vi) in the case where only interest is to be recovered,  the  date  of  payment  of  duty  to which such interest relates.

(c) Omitted.

Explanation  2:- For  the  removal  of  doubts,  it  is hereby declared  that  any non-levy,  short  levy,  non- payment, short-payment or erroneous refund where no show cause notice has been issued before the date on which the Finance Bill,  2015 receives the assent of the President, shall be governed by the provisions of section 11A as amended by the Finance Act, 2015.”

5. Section 11A thus deals with various facets including non-levy and

non-payment of excise duty and contemplates issuance of a show cause

notice by the Central Excise Officer requiring the “person chargeable with

duty” to show cause why “he should not pay the amount specified in the

notice.”  In terms of sub-section 10 of said Section 11A, the concerned

person has to be afforded opportunity of being heard and after considering

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his  representation,  if  any,  the amount  of  duty  of  excise  due  from such

person has to be determined by the Central Excise Officer.  Without going

into other details regarding the period of limitations and the circumstances

under which show cause notice can be issued, the crux of the matter is that

such determination is after the issuance of show cause notice followed by

affording of opportunity and consideration of representation, if any, made

by the concerned person.

6. If  the  process  or  activity  undertaken  does  not  amount  to

manufacture or if no duty is payable for any reason including the benefit

under any scheme of exemption holding the field, it shall always be open

to  the  concerned  person  to  project  such  view point  while  making  any

representation in response to the show cause notice.  There can be variety

of  cases  namely  that  the  process  in  question  does  not  amount  to

manufacture; and if it does, the goods would be entitled to avail benefit of

any prevalent exemption; or that the duty would be chargeable at a rate

lesser than the rate at which it was set out in the show cause notice or that

the quantity of goods manufactured by the concerned person was in any

way lesser than what was attributed in the show cause notice, or that the

benefit of any remission has to be made available etc.  All such possible

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submissions can always be advanced and considered during the course of

hearing pursuant to issuance of show cause notice.  

7. However,  the scheme of Section 11A does not  contemplate  that

before issuance of any show cause notice, there must, prima facie, be: (a) a

preliminary determination that  the process or  activity  undertaken in  the

matter amounts to manufacture; and (b) before arriving at such preliminary

determination, any hearing to the concerned person is contemplated.  In

other words, there is no segregation of the matter at different stages and all

the  possible  contours  of  the  matter  including  whether  the  process  in

question  amounts  to  manufacture  or  not  are  to  be  gone  into  while

considering the response to the show cause notice itself.  It is only after

considering  all  the  relevant  aspects  of  the  matter  that  the  final

determination under sub-section 10 of Section 11A is to be arrived at.   

8. The issuance  of  show cause  notice  under  Section  11A also  has

some significance in the eyes of law. The day the show cause notice is

issued, becomes the reckoning date for various issues including the issue

of limitation.  If we accept the submission of the respondent that a prima

facie view entertained by the department whether the matter requires to be

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proceeded with or not is to be taken as a decision or determination, it will

create an imbalance in the working of various provisions of Section 11A of

the Act including periods of limitation.  It will be difficult to reckon as to

from which date the limitation has to be counted.

9. In the present case, the respondent had not registered itself and was

not paying any excise duty on the products that it was manufacturing.  The

search conducted by the Department at the registered office and the factory

premises of the respondent led to the recovery of certain material on the

basis of which the Department was considering the matter.  At that stage, a

writ petition was filed in which an order was passed by the High Court on

28.11.2005 directing the appellant to decide whether the Department had

jurisdiction to proceed in the matter before deciding any other issues on

merits.  As stated above, the provisions of the Act do not contemplate any

such prima facie determination to be arrived at and requiring that a copy of

such  determination  to  be  submitted  to  the  concerned  person  and  only

thereafter  to  proceed in  the matter.   Nonetheless,  since a direction was

issued by the High Court, the Department in deference to such direction

did consider the matter and by an Internal Order dated 15.03.2006 prima

facie recorded an opinion that the authorities under the Act had jurisdiction

to proceed in the matter. Since the provisions of the Act do not contemplate

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any  prima  facie determination  which  must  be  communicated  to  the

concerned person, the Department was justified in not communicating the

Internal Order on its own.  The matter was correctly assessed by the High

Court on the next occasion when in spite of having directed that a copy of

the Internal  Order be supplied,  it  acknowledged that  the remedy of the

respondent  lied in  submitting reply to  the show cause notice,  in  which

reply  it  would  be  open  to  the  respondent  to  take  objections  to  the

jurisdiction of the appellant to proceed against the respondent under the

provisions of the Act.

10. The communication of  the Internal  Order  dated  15.03.2006 was

only in deference to the order passed by the High Court.  At the cost of

repetition,  it  must  be stated that  neither  the Act  contemplates any such

prima facie determination which must be communicated only whereafter

the proceedings could be initiated nor was such course undertaken by the

Department on its own.  Therefore, merely because the Internal Order was

communicated  to  the  respondent,  it  would  not  afford  the  respondent  a

cause  of  action  to  file  an  appeal  against  said  Internal  Order.   The

communication  of  said  Internal  Order  was  only  in  obedience  of  the

directions issued by the High Court.  It was not a decision or determination

which  was  arrived  at  in  terms  of  sub-section  10  of  Section  11A.  The

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respondent  therefore  could  not  have  preferred  any  appeal  against  said

Internal Order dated 15.03.2006.  The Appellate Authority as well as the

Tribunal, in our view, completely failed to appreciate this basic distinction.

11. It  must  be  noted  that  while  issuing  a  show cause  notice  under

Section 11A of the Act, what is entertained by the Department is only a

prima facie view, on the basis of which the show cause notice is issued.

The  determination  comes  only  after  a  response  or  representation  is

preferred by the person to whom the show cause notice is addressed.  As a

part of his response, the concerned person may present his view point on

all  possible  issues  and  only  thereafter  the  determination  or  decision  is

arrived at.  In the present case even before the response could be made by

the respondent and the determination could be arrived at, the matter was

carried in appeal against said Internal Order.  The appellant was therefore,

justified in submitting that the appeal itself was pre-mature.

12. It  has  been  laid  down  by  this  Court  that  the  excise  law  is  a

complete code in itself and it would normally not be appropriate for a Writ

Court to entertain a petition under Article 226 of the Constitution and that

the concerned person must first raise all the objections before the authority

who had issued a  show cause  notice  and the  redressal  in  terms  of  the

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existing provisions of the law could be taken resort to if an adverse order

was passed against  such person.   For  example  in  Union of  India and

another vs.  Guwahati Carbon Limited5,  it  was concluded; “The Excise

Law is  a  complete code in  order to  seek redress in  excise  matters  and

hence may not be appropriate for the writ court to entertain a petition under

Article 226 of the Constitution”, while in Malladi Drugs and Pharma Ltd.

vs. Union of India6, it was observed:-

“…The High Court, has, by the impugned judgment held  that  the  Appellant  should  first  raise  all  the objections before the Authority who have issued the show cause notice and in case any adverse order is passed  against  the  Appellant,  then  liberty  has  been granted to approach the High Court…

…in our view, the High Court was absolutely right in dismissing the writ petition against a mere show cause notice.”

It  is  thus  well  settled  that  writ  petition  should  normally  not  be

entertained against mere issuance of show cause notice.  In the present case

no show cause notice was even issued when the High Court had initially

entertained  the  petition  and  directed  the  Department  to  prima  facie

consider whether there was material to proceed with the matter.    

5 (2012) 11 SCC 651 6 2004 (166) ELT 153 (S.C.)

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13. We now deal with the decisions relied upon by Ms. Jain, learned

counsel for the appellant.  The decision of this Court in GKN Driveshafts

(India) Ltd.  2 was in the context of Section 148 of the Income Tax Act.

Said  Section  148  itself  contemplates  that  the  Assessing  Officer  shall,

before issuing any notice under said Section 148, record his reasons for

issuing such notice.  In the backdrop of such requirement, this Court had

observed:-

“5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file  return and if  he  so desires,  to seek reasons for issuing  notices.  The  assessing  officer  is  bound  to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.”

The decision of the Tribunal in the case of Reliance Industries Ltd.3

was also in a completely different context. The order of the Collector dated

03.03.1986 which was subject matter of appeal in that case, was a record

of a personal hearing in the course of the adjudication proceeding that was

communicated to the assessee.  It was therefore concluded that an appeal

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against such order would be maintainable. The point of distinction is that it

was communicated by the Department during the course of adjudication

proceedings  whereas  in  the  present  matter  there  was  no  such

communication  by  the  Department  on  its  own  and  the  order  dated

19.03.2016  was  not  a  part  of  any  adjudication  proceedings.  The

proceedings  would  have  begun  only  after  the  issuance  of  show  cause

notice under Section 11A of the Act.

14. We must at this stage refer to an aspect which was projected after

the  judgment  was  reserved in  the  matter.   By filing  an  application  for

directions, attention of the Court was invited to Circular dated 22.08.2019

issued by Ministry of Finance, Department of Revenue, Central Board of

Indirect Taxes and Customs (Judicial Cell),  the relevant portion of which

is to the following effect:-

“In  exercise  of  the  powers  conferred  by Section 35R of the Central Excise Act, 1944 and made applicable to Service Tax vide Section 83 of the  Finance  Act,  1994,  the  Central  Board  of indirect  Taxes  and  Customs fixes  the  following monetary limits below which appeal shall not be filed in the CESTAT, High Courts and Supreme Court.

S. No.

Appellate Forum Monetary Limit

1. CESTAT Rs.50,00,000/- 2. High Courts Rs.1,00,00,000/-

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3. Supreme Court Rs.2,00,00,000/-

2. This instruction applies only to legacy issues i.e. matters relating to Central Excise and Service Tax, and will apply to pending cases as well.

3. Withdrawal  process  in  respect  of  pending cases in above forums, as per the above revised limits,  will  follow  the  current  practice  that  is being followed for the withdrawal of cases from the  Supreme  Court,  High  Courts  and  CESTAT. All  other  terms  and  conditions  of  concerned earlier instructions will continue to apply.  

4. It  may  be  noted  that  issues  involving substantial  questions  of  law  as  described  in para1.3  of  the  instruction  dt  17.08.2011  from F.No.390/Misc/163/2010-JC  would  be  contested irrespective of the prescribed monetary limits.”

15.  In the present case, there was no assessment and computation of

any duty  element.   The  matter  had not  gone beyond the  Show Cause

Notice.  The questions in the matter pertained to the correctness of the

view whether there was any adjudication in the matter and whether the

appeal at the instance of the Respondent was maintainable.  In our view

the issues involved in the matter do not strictly come within the confines

of the aforesaid Circular.   

16. We therefore allow this appeal, set aside the appellate order dated

10.01.2007 and  the  order  under  appeal  and direct  that  the  proceedings

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pursuant  to  show  cause  notice  dated  21.03.2006  be  taken  to  logical

conclusion. The respondent shall be entitled to put in its response to said

show cause notice within three weeks from the date of this judgment and

shall  also be entitled to place such material  on which it  seeks to place

reliance, in support of its case. The matter shall thereafter be proceeded

with in accordance with law.

17. The appeal stands allowed in aforesaid items. No costs.  

…………………….J. [Uday Umesh Lalit]

…………………….J. [Vineet Saran]

New Delhi; November 14, 2019.