2003 (8) TMI 57 - HC - Central Excise

Court rules show cause notice time-barred and lacking foundation, requires positive act of fraud for extension.

The court ruled in favor of the petitioners, holding that the show cause-cum-demand notice was not valid due to being time-barred and lacking a valid ... Demand - Limitation - Writ jurisdiction Issues Involved:1. Jurisdiction of the authority to issue a show cause-cum-demand notice.2. Time-barred nature of the notice.3. Applicability of the proviso to Section 11A for extending the limitation period.4. Allegations of suppression of facts or wilful misstatement.5. Availability and exhaustion of alternative remedies.Issue-wise Detailed Analysis:1. Jurisdiction of the Authority to Issue a Show Cause-cum-Demand Notice:The petitioners challenged the show cause-cum-demand notice under Section 11A(1) of the Central Excises and Salt Act, 1944, issued by the Collector-I, Central Excise, Calcutta-II. The court acknowledged that writ courts typically refrain from interfering with show cause notices, but emphasized that this notice was not a mere show cause but a show cause-cum-demand notice, implying a reason to believe in the necessity of its issuance. The court highlighted that interference by writ courts depends on various circumstances, especially when the jurisdiction of the authority is in question.2. Time-barred Nature of the Notice:The petitioners argued that the notice dated April 3, 1995, was time-barred, as it was issued beyond the six-month period allowed under the Act. The court noted that the six-month period could only be extended to five years in cases involving fraud, collusion, wilful misstatement, or suppression of facts. The court found that the goods in question were disclosed to the authorities, and the classification lists were verified, thus negating the claim of suppression of facts. The court emphasized that fiscal statutes require rigid principles and mathematical precision.3. Applicability of the Proviso to Section 11A for Extending the Limitation Period:The court examined whether the extended period of five years under the proviso to Section 11A could be applied. It concluded that the mere mechanical repetition of the language of the provision in the show cause notice does not confer jurisdiction to issue such a notice beyond the six-month period. The court referred to several judicial pronouncements, including the Supreme Court's rulings, which established that the extended period requires a positive act of fraud, collusion, wilful misstatement, or suppression of facts.4. Allegations of Suppression of Facts or Wilful Misstatement:The court scrutinized the allegations of suppression of facts or wilful misstatement. It found that the classification lists were duly approved by the excise authorities, and there was no evidence of deliberate omission or misstatement by the petitioners. The court reiterated the principle that suppression of facts must be deliberate and not merely an omission. The court cited several judgments, including Pushpam Pharmaceuticals Company v. Collector of C. Ex., Bombay, which clarified that suppression must involve a deliberate act to escape duty payment.5. Availability and Exhaustion of Alternative Remedies:The Union of India argued that the writ petition should not be entertained due to the availability of alternative remedies. However, the court noted that when the foundation of the show cause-cum-demand notice is challenged, the writ petition is maintainable. The court emphasized that if the notice is time-barred and lacks a valid foundation, the argument for alternative remedies is not tenable. The court referred to the Supreme Court's judgment in L. Hirday Narain v. Income-tax Officer, Bareilly, which held that once a writ petition is entertained on merits, it cannot be rejected on the ground of non-exhaustion of statutory remedies.Conclusion:The court concluded that the writ petition should succeed, confirming the interim order and disposing of the petition without costs. The court refused the prayer for stay and directed that xeroxed certified copies of the judgment be supplied to the parties within seven days.Note: The summary maintains the legal terminology and significant phrases from the original text, ensuring a comprehensive and detailed analysis of each issue involved.