1991 Supreme(Cal) 256

High Court of Calcutta
Ruma Pal, J.
Nayek Paper Industries Pvt. Ltd. – Appellant
Versus
Union of India – Respondent
C.O. 6332(W) of 1989
Decided On : May 14, 1991

A show cause notice under Section 11A of the Central Excises and Salt Act, 1944 cannot be issued before the final assessment of duty.

Headnote:

CENTRAL EXCISE - SHOW CAUSE NOTICE - PREMATURE ISSUANCE - CLASSIFICATION LIST NOT FINALLY APPROVED - JURISDICTION - INTEREST ON REFUND - WRIT PETITION - ALTERNATIVE REMEDY NOT DIRECTED.

Fact of the Case:

The petitioner manufactured Chromo Board and filed classification lists under Rule 173B of the Central Excise Rules, 1944. The classification lists were provisionally approved by the respondents. The petitioner cleared Chromo Board after payment of duty under the Central Excises and Salt Act, 1944 (the Act). Samples of the Chromo Board were taken by the Anti Evasion Wing, West Bengal Collectorate. A show cause notice was issued to the petitioner alleging that the Chromo Board should have been classified as Duplex Board and that wilful false information had been given by the petitioner's representative. The petitioner challenged the show cause notice and the subsequent proceedings, contending that the show cause notice was issued prematurely as the classification list had not been finally approved, that the respondents had relied upon the statements of third parties who were not produced for cross examination, that the proceedings were time barred, and that there was no scope for raising the plea of unjust enrichment. The respondents contended that the petitioner had not raised any dispute regarding the classification of the goods before the Customs, Excise, Gold (Control) Appellate Tribunal (CEGAT) and therefore could not challenge the same at this stage, that the petitioner had an alternative remedy of preferring an appeal from the decision of CEGAT under Section 35L of the Act, that the evidence of the three witnesses were formal and cross examination was not required in the facts of this case, and that the goods having been released on the basis of provisional assessment, there was no question of limitation.

Finding of the Court:

The court held that the show cause notice was issued without jurisdiction as the classification list had not been finally approved. The court also held that the respondents were at liberty to take any action against the petitioner's in respect of the Chromo Board after the finalisation of the classification list in respect thereof. The court further held that the amount of the differential duty deposited by the petitioner with the respondents must be returned by the respondents to the petitioner with interest at 12 per cent per annum.

Issues: Whether the show cause notice was issued prematurely as the classification list had not been finally approved. Whether the respondents had relied upon the statements of third parties who were not produced for cross examination. Whether the proceedings were time barred. Whether there was any scope for raising the plea of unjust enrichment.

Ratio Decidendi: The court held that the show cause notice was issued without jurisdiction as the classification list had not been finally approved. The court relied on Section 11A of the Act, which provides that a Central Excise Officer may serve a notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or erroneously refunded, within six months from the relevant date. The court held that the relevant date in this case was the date of adjustment of duty after the final assessment thereof, and that since the classification list had not been finally approved, there had been no final assessment and therefore no cause of action had arisen under Section 11A. The court also held that the respondents were at liberty to take any action against the petitioner's in respect of the Chromo Board after the finalisation of the classification list in respect thereof.

Final Decision: The court quashed the impugned show cause notice and all proceedings subsequent thereto. The court also directed the respondents to return the amount of the differential duty deposited by the petitioner with the respondents to the petitioner with interest at 12 per cent per annum.