2011 (3) TMI 1107 - HC - Central Excise

Court upholds show cause notices on manufactured items classification under Central Excise Tariff Act, emphasizes examination and debate.

AGV Alfab Limited Versus Commissioner of Central Excise, Delhi II

The court refused to quash the show cause notices challenging the classification of manufactured items under the Central Excise Tariff Act, emphasizing ... Manufacture - Petitioner contended that it is engaged in doing work of structural glazing (curtain walls) and cladding which cannot be regarded as identifiable commercial products in a factory or in any other manufacturing premises - It is alleged that the said activity involves only erection and installation of curtain walls and cladding and not manufacturing and, therefore, no excisable goods come into existence - Held that:- In the present case, only show cause notices have been issued and there has not been any determination or decision by the authorities. The stand taken by the respondent in the counter affidavit is that the matter requires examination and consideration in view of the Larger Bench decision of the Tribunal in the case of Mahindra and Mahindra (2005 (11) TMI 103 - CESTAT, NEW DELHI). The contentions raised by both sides require consideration and debate. The exact nature of activities undertaken and the method and technique involved in the “assembly/manufacture” has to be examined. This necessarily also involves the factual aspect. Thus as in the circumstances it will not be proper to step in and quash the show cause notices at the initial stage. Justification and reason for examination of the case/issue has been indicated in the counter affidavit. Issues: Challenge to show cause notices under Section 11A of the Central Excise Act, 1944 regarding the classification of manufactured items under the Central Excise Tariff Act, 1985.Analysis:1. The petitioner, engaged in manufacturing aluminum products, disputed the dutiability of their products under the Central Excise Act. They argued that their activities involved structural glazing and cladding, not manufacturing, hence no excisable goods were produced.2. The petitioner cited a previous decision by the Central Excise and Service Tax Appellate Tribunal in their favor, but the respondent relied on a Larger Bench decision in a different case. The court noted that each assessment period is distinct, but consistency in decisions is crucial unless circumstances justify a change.3. While the court acknowledged that tax proceedings are not bound by res judicata, they emphasized the importance of justification and consistency in revenue authorities' decisions. The court refused to quash the show cause notices at the initial stage, highlighting the need for examination and debate on the activities in question.4. The court referenced the Supreme Court's stance on interference in tax matters at the stage of show cause notices, emphasizing the availability of alternative remedies like filing replies or appeals. They cited cases where the High Court declined interference at this stage unless jurisdictional issues were present.5. Acknowledging exceptions where interference at the show cause notice stage may be warranted, the court noted that factual adjudication is necessary in such cases. As the respondent had not made a final determination, the court upheld the Commissioner's jurisdiction to decide the objections raised by the petitioner.6. The court directed the petitioner to file a reply to the show cause notices within three weeks, including relevant citations. The Commissioner was tasked with examining the contentions, addressing the issue of dual taxation on the same activity, and providing a reasoned order. The petitioner was granted the right to challenge the decision and seek stay or protection from the Court if needed. The court clarified that its observations were specific to the disposal of the writ petitions and not binding findings on the merits.