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1996 Supreme(Ori) 197
IN THE HIGH COURT OF ORISSA
P.C. Naik, Dipak Misra, JJ.
N.K. CHEMICALS AND INDUSTRIES - APPELLANT
Versus
ASSTT. COLLECTOR OF CENTRAL EXCISE - RESPONDENT
OJC No. 4532 of 1992
Decided On : 08-11-1996
J. Das, B.S. Tripathy, S. Mallick, K.P. Mishra and A. Das, for the Appellant; A.B. Mishra, Standing Counsel (Central), for the Respondent
A demand notice issued under the Central Excises and Salt Act, 1944, without following the procedure prescribed under Section 11A of the Act is invalid.
Headnote:
CENTRAL EXCISE - DEMAND NOTICE - ISSUANCE OF SHOW CAUSE NOTICE UNDER SECTION 11A OF THE CENTRAL EXCISES AND SALT ACT, 1944 - EFFECT ON DEMAND NOTICE - APPEALABILITY OF ORDER CONFIRMING DEMAND - WRIT JURISDICTION - SCOPE.
Fact of the Case:
The petitioners, manufacturers of washing powder, submitted a classification list claiming classification of their products under a specific sub-heading with a lower rate of duty. The Assistant Collector, Central Excise and Customs, classified the products under a different sub-heading with a higher rate of duty. The petitioners filed an appeal against the classification. During the pendency of the appeal, the Superintendent, Central Excise and Customs, issued a demand notice directing the petitioners to pay the differential duty. The petitioners challenged the demand notice in a writ petition, contending that it was issued without following the mandatory procedure under Section 11A of the Central Excises and Salt Act, 1944 (the Act). The petitioners also challenged the order of the Assistant Collector confirming the demand, arguing that it was passed without giving them an opportunity to file a show cause.
Finding of the Court:
The Court held that the demand notice issued without following the procedure under Section 11A was invalid. The Court also held that the order confirming the demand was passed without giving the petitioners an opportunity to file a show cause and was, therefore, unsustainable. The Court quashed the demand notice and the order confirming the demand and directed the petitioners to file a proper show cause within six weeks. The Court also directed the competent authority to adjudicate the matter after giving an opportunity of personal hearing to the petitioners within two months from the date of filing of the show cause.
Issues: 1. Whether the demand notice issued without following the procedure under Section 11A of the Act was valid? 2. Whether the order confirming the demand was passed without giving the petitioners an opportunity to file a show cause? 3. Whether the writ court had jurisdiction to entertain the writ petition challenging the demand notice and the order confirming the demand?
Ratio Decidendi: 1. Section 11A of the Act mandates the issuance of a show cause notice before making a demand for differential duty. The demand notice issued without following this procedure was, therefore, invalid. 2. The order confirming the demand was passed without giving the petitioners an opportunity to file a show cause. This violated the principles of natural justice and was, therefore, unsustainable. 3. The writ court had jurisdiction to entertain the writ petition challenging the demand notice and the order confirming the demand as the petitioners had no alternative remedy.
Final Decision: The Court allowed the writ petition, quashed the demand notice and the order confirming the demand, and directed the petitioners to file a proper show cause within six weeks. The Court also directed the competent authority to adjudicate the matter after giving an opportunity of personal hearing to the petitioners within two months from the date of filing of the show cause.
JUDGMENT :
Dipak Misra, J. - In this writ application the petitioners call in question the validity of the impugned demand notice dated 21-5-1991 issued by the Superintendent, Central Excise and Customs, Bargarh Range, Bargarh (opposite party No. 2), as well as the legality of the order dated 20-1-1992 passed by the Assistant Collector, Central Excise and Customs, Sambalpur Division, Sambalpur, (opposite party No. 1).
2. The facts giving rise to the present writ application may be shortly stated :-
3. Petitioner No. 1, a registered partnership firm engaged in manufacture of washing powder having brand name "Naya Kiran" and 'Nilma' cleaning powder with effect from 8-2-1990 had submitted a classification list on 8-2-1990 claiming classification of its products under sub-heading No. 3401.10 under Chapter Heading/sub-heading 34.01 under Chapter 34 having rate of Duty Basic 5% ad valorem, and special 50% under Notification No. 175/86-C.E., dated 1-3-1986 as amended from time to time read with Notification No. 33/88-C.E., dated 1-3-86. Without considering the matter in depth and without considering the contentions of the petitioners, opposite party No. 1 classified the products of the petitioners under Tariff sub-heading 3402.90 with basic Excise Duty @15% ad valorem and special service duty 5% of the Basic. Feeling aggrieved by the denial of exemption the petitioners preferred an appeal u/s 35 of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') before the Collector Appeals opposite party No. 3. During the pendency of the appeal opposite party No. 2 issued a demand notice (Annexure-6) directing the petitioners to pay Rs. 5,23,589.40 as differential Duty. As there was non-compliance of the provisions enjoined u/s 11A of the Act and without issuance of notice to show cause, the petitioners preferred another appeal against the aforesaid order of demand passed by Annexure-6 before the appellate authority praying therein for quashment of the impugned demand on the ground that there had been flagrant violation of the mandatory provisions of Section 11A of the Act. Along with the appeal a petition was filed for dispensing with the requirement of pre-deposit as contemplated under the Act. At this juncture, opposite party No. 1 issued a demand-cum-show cause notice u/s 11A of the Act vide Annexure-9 dated 31-8-91. It was mentioned in the said notice that the same was to be read in continuation of the demand letter issued on 21-5-91. While the matter stood thus the appellate authority by order vide Annexure-10 directed the appellants to deposit 50% of the demanded amount within 10 days from the receipt of the said order. At the hearing of the said application it was contended before the appellate authority that by issuance of a further notice on 31-8-91 (Annexure-9) the impugned demand (Annexure-6) had become inoperative, but the said contention was not dealt with. Challenging the demand made under Annexure-6 and the conditional order of stay passed by the appellate authority the petitioners had approached this Court. During the pendency of the writ application opposite party No. 1 passed another order confirming the demand amounting to Rs. 5,23,589.40 (the sum covered under Annexure-6) which was purported to have been passed u/s 11A of the Act. The said order was received by the petitioner No. 2 on 29-6-92 though it was passed on 20th January, 1992. The said order has been annexed as Annexure-11. As the fact situation reveals after issuance of show cause notice by Annexure-9 the petitioners had submitted a representation to opposite party No. 1, inter alia, indicating therein that they had preferred an appeal before the appellate authority challenging the validity of the impugned demand under Annexure-6 and, therefore, the authority should not proceed with the matter and wait till the disposal of the appeal. Despite such a representation and the prayer for deferment of the personal hearing, opposite party No. 1 pass
