2011 (3) TMI 1269 - HC - Central Excise

Court upholds legality of duty demand on chemical preparation for film; petitioner can challenge during adjudication.

The court upheld the legality of the show cause notices demanding duty on chemical preparation for cinematography film, based on the 2009 order confirming ... Validity of show cause notice issued during pendency of appeal - adjudicating authority's power to act on a fresh order-in-original - binding effect of appellate orders on subordinate authorities - effect of remand and scope of fresh adjudication - judicial disciplineValidity of show cause notice issued during pendency of appeal - adjudicating authority's power to act on a fresh order-in-original - Whether the show cause notices issued on the basis of the order-in-original dated 25-8-2009 (demanding duty, penalty and interest for specified clearance periods) were legally maintainable while the appeal against that order was pending before the CESTAT. - HELD THAT: - The Court held that in compliance with the Tribunal's remand order the adjudicating authority passed a fresh order on 25-8-2009 holding that the activity amounted to manufacture. On the basis of that order the competent officer was justified in issuing show cause notices demanding duty in respect of the clearances made during the periods specified in the notices even though the assessee's appeal against the 25-8-2009 order was pending before the CESTAT. The Court observed that it is open to the petitioner to contest the merits in the adjudication proceedings, and that issuance of show cause notices pending appeal did not render them void ab initio. [Paras 11, 14]The show cause notices issued on the basis of the order-in-original dated 25-8-2009 are maintainable and need not be quashed prior to adjudication.Effect of remand and scope of fresh adjudication - binding effect of appellate orders on subordinate authorities - judicial discipline - Whether the Tribunal's order dated 11-7-2008 or this Court's subsequent orders had set aside the earlier order dated 31-5-2000 in favour of the assessee so as to prevent the adjudicating authority from taking a contrary view. - HELD THAT: - The Court found that the Tribunal set aside the order-in-original dated 24-4-2007 and remanded the matter for fresh consideration; it did not set aside the earlier order dated 31-5-2000. This Court likewise declined to go into the validity of the earlier order dated 31-5-2000 and disposed of the Revenue's appeal leaving all contentions open for fresh adjudication on remand. Consequently, the contention that the order dated 31-5-2000 had been set aside by the Tribunal or this Court was incorrect. Further, the impugned show cause notices were issued on the basis of the later order dated 25-8-2009 (which took a contrary view to the 31-5-2000 order), and mere reference to the earlier order in the notices did not mean they were founded upon it. [Paras 5, 6, 12, 13]The Tribunal did not set aside the order dated 31-5-2000 and this Court left the earlier finding open; therefore the adjudicating authority was not precluded from passing the fresh order dated 25-8-2009 or issuing show cause notices thereon.Final Conclusion: Writ petitions challenging the impugned show cause notices are dismissed; the petitioner may contest the merits of the duty demand, penalty and interest in the adjudication and appellate proceedings. Issues:Challenge to show cause notices regarding duty recovery on chemical preparation for cinematography film, dispute over whether the activity amounts to manufacture, compliance with previous tribunal and court orders, legality of impugned show cause notices.Analysis:The petitioner challenged show cause notices demanding duty on the chemical preparation for cinematography film, arguing that the activity does not amount to manufacture based on a previous CESTAT decision upheld by the court. The Excise Authorities had previously dropped similar show cause notices in 2000, but later held the activity as manufacture in 2007. The Tribunal set aside the 2007 order and remanded the matter, which was upheld by the court. Subsequently, the adjudicating authority confirmed duty demand in 2009, leading to pending appeals before the CESTAT.The petitioner contended that the impugned show cause notices disregarded the tribunal and court orders, citing judicial discipline to follow higher authorities' decisions. However, the court found no merit in these arguments, noting that the adjudicating authority's 2009 order, based on which the show cause notices were issued, was compliant with the tribunal and court orders. The court emphasized that the pending appeal did not prevent the competent officer from issuing the notices based on the 2009 order.Regarding the petitioner's argument that the notices contradicted the tribunal and court decisions, the court clarified that the 2008 tribunal order set aside the 2007 order, not the 2000 order, and the court did not address the validity of the 2000 order. The impugned notices were based on the 2009 order, not the 2000 order, to follow the latest decision. Therefore, the court rejected the petitioner's claim that the 2000 order was set aside.Ultimately, the court concluded that the impugned show cause notices were issued based on the 2009 order and not the 2000 order, allowing the petitioner to contest the duty demand during adjudication. As a result, the court dismissed both petitions, finding no grounds to quash the notices before adjudication.