1995 (1) TMI 70 - SC - Central Excise

Supreme Court clarifies requirements for invoking proviso to Section 11A(1) of Central Excises and Salt Act.

COLLECTOR OF CENTRAL EXCISE Versus H.M.M. LIMITED

The Supreme Court ruled that to invoke the proviso to Section 11A(1) of the Central Excises and Salt Act, specific allegations of intentional duty evasion ... Whether the show cause notice was time barred under the main part of Section 11A? - Held that:- Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the excise department places reliance on the proviso it must be specifically stated in the show cause notice which is the allegation against the assessee falling within the four corners of the said proviso. In the instant case that having not been specifically stated the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the payment of duty. The Additional Collector did not specifically deal with this contention of the assessee but merely drew the inference that since the classification list did not make any mention in regard to this waste product it could be inferred that the assessee had apparently tried to evade the payment of excise duty. Appeal dismissed. Issues:1. Interpretation of Section 11A of the Central Excises and Salt Act, 1944 regarding the issuance of show cause notices for duty payment.2. Determining the applicability of the proviso to Section 11A(1) in cases of alleged duty evasion.3. Assessment of whether the show cause notice adequately alleged fraud, collusion, or wilful mis-statement to invoke the proviso.4. Examination of whether the failure to declare waste or by-product in the classification list constitutes an intention to evade duty.Analysis:1. The case involved the issuance of three show cause notices to the respondent for alleged failure to pay duty on coal cinders under Tariff Item No. 68. The notices were issued beyond the six-month limitation period under Section 11A but within the extended five-year period provided in the proviso to the section. The key issue was whether the proviso could be invoked without specific allegations of fraud, collusion, or wilful mis-statement in the show cause notice.2. The respondent contended that the show cause notice was time-barred under Section 11A but was sustained by the Additional Collector based on the proviso. However, the Supreme Court emphasized that to invoke the proviso, the notice must allege intentional evasion of duty or fraud by the assessee. Without such averments, the notice cannot be sustained under the proviso, and the assessee must be adequately informed of the allegations to defend against them.3. The Court highlighted that the mere omission of declaring waste or by-product in the classification list does not automatically imply an intention to evade duty. The absence of specific allegations in the show cause notice regarding fraud or collusion makes it unjustified to infer evasion based solely on non-declaration. The Department must explicitly state the grounds for invoking the proviso, allowing the assessee a fair opportunity to respond to the allegations.4. Ultimately, the Court found no merit in the appeal, emphasizing the necessity for show cause notices to clearly outline the basis for invoking the proviso to Section 11A(1) and provide the assessee with a chance to address the specific allegations. The dismissal of the appeal was made with no order as to costs, affirming the importance of procedural fairness in excise duty matters.