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Issues: (i) Whether the show cause notices issued by the Superintendent of Central Excise were valid when the Board's circular authorised a different officer to issue notices answerable to the higher authorities. (ii) Whether penalty and interest could be imposed under Rule 96ZP(1A) when the duty demand was raised under Rule 96ZP(3).
Issue (i): Whether the show cause notices issued by the Superintendent of Central Excise were valid when the Board's circular authorised a different officer to issue notices answerable to the higher authorities.
Analysis: The Board's circular was treated as binding on the department. On the facts, the notices were required to be issued by the officer authorised under the circular, but they were issued by the Superintendent even though they were made answerable to the Additional Commissioner and the Joint Commissioner. Since the issuing officer lacked the prescribed authority, the notices were held to be incompetent and the proceedings founded on them were vitiated.
Conclusion: The show cause notices were invalid and the demand based on them could not survive, in favour of the assessee.
Issue (ii): Whether penalty and interest could be imposed under Rule 96ZP(1A) when the duty demand was raised under Rule 96ZP(3).
Analysis: The demand of differential duty had been raised under Rule 96ZP(3), but the adjudicating authority imposed penalty under Rule 96ZP(1A). The Court held that penalty, if any, had to be imposed under the very provision under which the demand was raised. Imposition under a different sub-rule not invoked for the duty demand was not legally sustainable, and the same reasoning applied to interest.
Conclusion: Penalty and interest under Rule 96ZP(1A) were unsustainable and liable to be set aside, in favour of the assessee.
Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief available in law.
Ratio Decidendi: Where a binding departmental circular prescribes the competent authority to issue a show cause notice, a notice issued by an unauthorised officer is invalid; likewise, penalty cannot be sustained under a provision different from the one under which the duty demand is made.
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