Jurisdictional objection to excise duty must be decided first before any enquiry into alleged duty evasion.

Where excisability and the applicability of the Central Excises & Salt Act were seriously disputed, the excise authority had to decide that jurisdictional objection first and could not proceed on the assumption that the goods were excisable. The authority could, however, call for documents and record statements only to determine in the first instance whether the goods were covered by the statute and liable to duty. Only after an adverse finding on that preliminary issue could it move on to any assessment of alleged duty evasion.

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Issues: Whether the excise authorities were required to first decide the petitioners' preliminary objection regarding the applicability of the Central Excises & Salt Act and the exigibility of the goods to excise duty before proceeding further with the enquiry and any assessment of duty evasion.

Analysis: The notices had not clearly specified the scope and purpose of the enquiry, and the petitioners had raised a preliminary objection that the goods manufactured by them were not excisable. In these circumstances, the enquiry could not proceed on an assumed footing that the goods were covered by the Act. The respondents were, however, not precluded from calling for documents and recording statements in accordance with law for the limited purpose of first determining whether the goods were exigible to duty and covered by the statute.

Conclusion: The respondents were directed to first decide the preliminary objection and determine whether the goods manufactured by the petitioners were covered by the Central Excises & Salt Act and exigible to excise duty, and only thereafter proceed to assess any alleged evasion of duty if the conclusion went against the petitioners.

Ratio Decidendi: Where the applicability of the excise statute itself is seriously disputed, the authority must first determine the jurisdictional objection and cannot proceed to assess evasion on an assumed conclusion that the goods are excisable.

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