1. Writ petitions filed under Article 226 to quash show-cause notices regarding excise duty liability, bypassing the reply process to the adjudicating authority. (Para 2 )
Back
Next 
1997 Supreme(SC) 1023
SUPREME COURT OF INDIA
J.S. Verma, CJI., B.N. Kirpal, J.
UNION OF INDIA, APPELLANT
Versus
BAJAJ TEMPO LIMITED, OTHERS, RESPONDENTS.
Civil Appeals Nos. 5238-5244 of 1997 (Arising out of SLPs Nos. 3894-3900 of 1996), with Nos. 9245, 9360 of 1996,
decided on July 29, 1997.
Writ petitions to quash show-cause notices are not maintainable when the determination of tax liability depends on findings of fact not yet recorded. The assessee must first reply to the notice to allow the adjudicating authority to establish the factual basis for the duty.
Headnote:(A) Constitution of India - Article 226 - Excise Duty - Quashing of show-cause notices - Determination of tax liability depends on findings of fact relating to the process of production of end-products - Filing of writ petitions instead of replying to show-cause notices is not justified - Trade notices are not decisive of the question before the Tribunal or the Court. (Paras 2, 3)
(B) Procedure for adjudication - Proper course for an assessee is to reply to the show-cause notice to enable authorities to record findings of fact - Subsequent remedies available through the Tribunal and higher courts. (Para 3)
Facts of the case:
Assessees filed writ petitions under Article 226 to quash show-cause notices issued for the payment of excise duty. The assessees contended that a trade notice issued by the department left no scope for their contentions to be accepted, thereby justifying the filing of writ petitions instead of replying to the notices.
Findings of Court:
The question of exigibility to excise duty depends on the facts relating to the process by which the end-product came into existence. Since no findings of fact had been recorded by any authority for the items in question, the matter must be decided by the appropriate authority after considering the assessees' replies.
Issues: Whether the filing of writ petitions to quash show-cause notices is maintainable when the liability for excise duty depends on factual determinations not yet recorded.
Ratio Decidendi: Where the liability for duty depends on factual findings regarding the manufacturing process, the assessee must first reply to the show-cause notice to allow the adjudicating authority to record such facts. A trade notice does not preclude the authority from considering contentions or the court from reviewing the matter.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Assessees contended that a trade notice issued by the department left no scope for their contentions, justifying the filing of writ petitions. (Para 2 )
3. Exigibility to excise duty depends on factual findings regarding the production process, which must be recorded by the appropriate authority before judicial review. (Para 3 , 4 )
4. Writ petitions are not maintainable to bypass the factual adjudication process when tax liability depends on findings of fact to be recorded by authorities. (Para 2 , 3 , 4 )
5. Appeals allowed; matters remanded to the Assistant Collector for factual adjudication after receiving replies from the assessees. (Para 5 )
6. Is the issuance of a trade notice a valid ground to bypass replying to a show-cause notice and file a writ petition?
No. A trade notice is not decisive of the question before the Tribunal or Court; the proper course is to reply to the show-cause notice to enable authorities to record findings of fact. (Para 2 , 3 )
7. How is the exigibility of excise duty determined when the process of product creation is in question?
Exigibility depends on the facts relating to the process by which the end-product came into existence, requiring findings of fact to be recorded by the appropriate authority. (Para 3 , 4 )
8. What is the appropriate procedural sequence for challenging a demand for excise duty?
The assessee should first reply to the show-cause notice, allowing the authority to record findings of fact, followed by appeals to the Tribunal and then to the Court. (Para 3 )
ORDER
1. Leave granted.
2. These appeals by special leave arise out of writ petitions filed under Article 226 of the Constitution in the High Court for quashing show-cause notices issued to the assessees. The assessee in each of these cases denies its liability to pay the excise duty demanded and instead of replying to the show-cause notices issued by the Assistant Collector, filed the writ petitions which have been allowed. The justification for filing the writ petitions given by learned counsel for the respondents/assessees, is that a trade notice which was issued left no scope with the departmental authorities to accept the assessees contention. In our opinion, this is no ground to justify the filing of writ petitions in any of these cases.
3. It is clear that the question of exigibility to the duty demanded depends on the facts found relating to the process by which the end-product on which duty is demanded came into existence. The items in question are several and in each case a finding has to be given on the facts pertaining to the particular item. This has not been done by any authority in respect of any of these items or goods. There is thus no finding of fact on which the question of exigibility to excise duty on any of the items or goods can be decided. The appropriate course for the assessee in each case was to reply to the show-cause notice enabling the authorities to record their findings of fact in each case and then if necessary, the matter should have been proceeded to the Tribunal and thereafter to this Court. The trade notice was not decisive of the question either before the Tribunal or in this Court.
4. We are satisfied that the question of excise duty which has been raised in these matters can be decided only after recording the findings of fact in each case in respect of goods or items given by the appropriate authority.
5. These matters must, therefore, go back to the Assistant Collector for decision of questions of fact. It would be open to the assessee in each case to submit its reply to the adjudicating authority within four weeks. The adjudicating authority would then proceed to decide the same in accordance with law. The further remedy thereafter would be available to the aggrieved party in accordance with law. These appeals are allowed in the manner indicated above.
