1. Issue whether completion of assessment is sine qua non for notice under Section 11-A of the Central Excise Act, 1944. (Para 1 )
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2006 Supreme(SC) 1021
Supreme Court Of India
S.B. Sinha & Dalveer Bhandari
Commnr. Central Excise & Customs, Mumbai & Ors. - PETITIONER
Versus
M/s. I.T.C. Ltd. & Ors.- RESPONDENT
Appeal (civil) 1669-1679 of 2005
Decided On : 31/10/2006
Completion of final assessment is a prerequisite for issuing a show cause notice under Section 11-A of the Central Excise Act, 1944. For provisionally assessed goods, the limitation period for such notices begins only from the date of duty adjustment after final assessment.
Headnote:(A) Central Excise Act, 1944 - Section 11-A - Central Excise Rules, 1944 - Rule 9B - Recovery of duties not levied, short-levied, or short-paid - Provisional assessment - Issuance of show cause notice - Whether completion of assessment proceedings is a sine qua non for issuance of notice under Section 11-A - In cases where duty of excise is provisionally assessed, the "relevant date" for invoking Section 11-A is the date of adjustment of duty after the final assessment thereof - A proceeding under Section 11-A cannot be initiated without completing the assessment proceedings.
(B) Interpretation of penal provisions - Since Section 11-A provides for a penal provision, the golden rule of literal interpretation must be applied - The power under Section 11-A can be invoked only when a duty has not been levied or paid or has been short-levied or short-paid, and such a condition arises only after the levy has been laid in accordance with law through final assessment.
Facts of the case:
A manufacturer of cigarettes had its goods provisionally assessed for a specific period. While the provisional assessment was pending, the revenue department issued several show cause notices demanding differential duty on grounds of undervaluation and additional considerations. The respondent challenged these notices, contending they were invalid as they were issued prior to the finalization of the provisional assessment. The tribunal set aside the show cause notices and subsequent orders, ruling that they could not be issued during the pendency of proceedings for final assessment.
Findings of Court:
The court upheld the tribunal's finding that the impugned show cause notices were illegal as they were issued before the final assessment proceedings were completed.
Issues: Whether the completion of assessment proceedings is a prerequisite for the issuance of a notice under Section 11-A of the Central Excise Act, 1944, especially in cases involving provisional assessment.
Ratio Decidendi: The court reasoned that under Section 11-A(3)(ii)(b) of the Act, the "relevant date" for the purpose of limitation in cases of provisional assessment is the date of adjustment of duty after final assessment. Because Section 11-A is a penal provision requiring strict literal interpretation, a show cause notice for short-levy or non-levy of duty cannot be issued until the final assessment is completed, as the final liability of the assessee is determined only at that stage.
Result: Appeal dismissed.
Legal Category Hierarchy
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central excise
-
recovery of duties
- show cause notice (Para 1)
- limitation period
-
assessment
- provisional assessment
- final assessment
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valuation
- related persons
-
recovery of duties
-
statutory interpretation
- literal interpretation
-
definitions
- levied
- payable
Table of Contents
JUDGMENT
S.B. SINHA, J.
Completion of an assessment proceedings whether is a sine qua non for issuance of notice under Section 11-A of the Central Excise Act, 1944 (for short "the Act") is the question involved in this appeal which arises of a judgment and order dated 18.6.2004 as modified by an order dated 2.7.2004.
M/s. ITC Ltd., Respondent No. 1 herein manufactures cigarettes. It gets the work done also by way of job work through various factories. These factories inter alia belonged to M/s. Master Tobacco Company situated at 36/40, Mahalaxmi Birdege Arcade, Mahalaxmi Road, Mumbai and M/s. Crown Tobacco Co. situated at 9, St. John Baptist Road, Bandara, Mumbai. A provisional price list was issued by the Department for the period 1.3.1973 to 28.2.1983.
It appears that their existed a dispute as regards mode of valuation for the purpose of levy of excise duty. By a judgment and order dated 19.7.1995, this Court opined that excise duty should be paid on the wholesale dealers price to their customers and not on the price of Respondent No. 1 to its wholesale dealers.
A show cause notice was issued on 10.4.1986 as to why Respondent and its wholesale dealers, being related persons, the cost of Corrugated Fibre Containers (CFCs) should not be added to the manufacturing cost. A show cause notice was also issued on 10/11.8.1983 asking the respondent to show cause as to why differential duty of Rs. 57,22,63,857.70 for the period from 1.7.1980 to 31.3.1982 shall not be directed to be paid. Another notice was issued on 8.10.1984 demanding the differential duty of Rs. 43,53,137.70 for the period 1.4.1982 to 30.6.1983. One show cause notice was furthermore issued on 13.4.1987 demanding Rs. 34 crores claiming freight, administrative charges collected by Respondent herein to be added as additional consideration.
Indisputably, the issue between the parties as regards valuation of the goods was decided in favour of Respondent by CEGAT by an order dated 18.3.1994.
By reason of the order dated 30.8.1996, the assessees contention that the show cause notices issued prior to finalization of the provisional assessment was invalid had been rejected by the adjudicating authority directing:
"(i)The contention of the noticees that the show cause under consideration is invalid on the ground that it has been issued prior to the finalization of the provisional assessment is not sustainable in law or on facts and hence it is rejected.
(ii)The Assistant Commissioner of Central Excise concerned or any other officer who is competent to make final assessment in the case under the relevant provisions of the Central Excise & Salt Act read with the Rules made thereunder will finalize the pending provisional assessment in respect of each of the three notices as per law for the period covered in the show cause notice involved in the present proceedings. The said competent authority while finalizing the provisional assessment as aforesaid is entitled and at liberty to proceed with any enquiry for the purpose of making final assessment in this case. Nothing prevents the said competent authority for the purpose of making the final assessment from utilizing any material collected by the Deptt. and that such material does not cease to be available to the said competent authority by reason alone of the circumstances that such material had been referred to and incorporated in the show cause notice involved in the present proceedings. The material contained in the said notice can be used as independent material to support final assessment, after affording an opportunity to the noticees concerned to meet the case and after considering the cause shown. The finalization of provisional assessment as aforesaid should be completed as expeditiously as possible.
(iii)The said competent authority is further directed to intimate the Adjudicating Authority (CCE, Delhi) as soon as he completes the finalization of the said provisional assessment. After that, this show cause notice
