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of <h1>Show-cause notice omitting goods Heading/Sub-heading and rate u/s 3/Fourth Schedule invalid; demand quashed and consequential orders set aside</h1> Dominant issue: Whether a show-cause notice (SCN) that omits the statutory classification of goods is valid. Court reasoned that under Section 3 and the ... Scope of SCN - Validity of demand from the appellant when the SCN does not propose the classification that forms the basis for demanding the excise duty - proceeding initiated with such show cause notice which has culminated with the Tribunal's order is grossly opposed to the respondent’s statutory obligation to provide for the nature of goods and its classification under the Act to justify a demand or not - HELD THAT:- This Court must observe that there is liability to pay the prescribed duty of excise at the rates set forth in the Fourth Schedule as contemplated under Section 3 of the Act on all excisable goods manufactured or produced. It flows from this requirement that every levy and the demand must begin with the identification of excisable goods manufactured/produced in India and the rate at which the duty must be levied and that the rate will depend on the classification under the Fourth Schedule to the Act. The reference to the classification of the goods upon which a demand is raised therefore becomes a jurisdictional fact and unless that fact is stated in the Show-cause notice, the Central Excise authorities cannot assume jurisdiction to levy demand. The controversy over the classification and the rate and even whether the goods are manufactured or produced in India could be facts in issue but an assertion that the goods are manufactured/produced in India and are subject to duty of excise at a particular rate based on certain classification would be a jurisdictional fact, and in the absence of this jurisdictional fact, the authority cannot assume jurisdiction. This Court may refer to the decision of the Apex Court in Arun Kumar and Others v. Union of India and Others [2006 (9) TMI 115 - SUPREME COURT]. As is obvious from the extracted portion of the Show-cause notice, there is no reference to the classification and the only reference is to what the law contemplates under Section 3 of the Act viz., the duty of excise would be leviable at a rate specified under the Fourth Schedule depending on the classification under the Heading/Sub-heading without mentioning the classification. Therefore, this Court is of the considered view that the Show-cause notice is defective and all proceedings subsequent thereto will have to fail. The impugned show cause notice, the Order-in-Original passed by the Commissioner and the Tribunal's Order are quashed - Appeal allowed. Issues: (i) Whether the Tribunal was justified in affirming the excise demand when the show-cause notice did not specify the classification (chapter/heading/sub-heading) forming the basis for the demand; (ii) Whether initiation and continuation of proceedings based on a show-cause notice that omits the nature of goods and their classification under the Act is opposed to the respondent's statutory obligation and vitiates the proceedings.Issue (i): Whether the Tribunal was justified in affirming the excise demand when the show-cause notice did not specify the classification (chapter/heading/sub-heading) forming the basis for the demand.Analysis: The levy under the Act depends on identification of excisable goods and the rate determined by classification under the Fourth Schedule. The absence of any specific chapter/heading/sub-heading in the show-cause notice means the jurisdictional fact underpinning the demand is not pleaded. Reliance on Section 3 and the Fourth Schedule shows that classification is determinative of the rate and chargeability and therefore is a prerequisite for assuming jurisdiction to levy duty.Conclusion: The omission of the classification in the show-cause notice renders the notice defective and the Tribunal was not justified in affirming the demand. The conclusion is in favour of the assessee.Issue (ii): Whether initiation and continuation of proceedings based on a show-cause notice that omits the nature of goods and their classification under the Act is opposed to the respondent's statutory obligation and vitiates the proceedings.Analysis: The statutory framework requires that the grounds for levy include identification of the goods and applicable rate, which depends on classification. A defective notice that does not specify classification prevents the authority from discharging the statutory obligation to inform the assessee of the precise basis of the demand, thereby affecting the validity of subsequent orders. The absence of classification in both the notice and the original order indicates the proceedings proceeded without the requisite jurisdictional fact.Conclusion: Proceedings initiated and continued on a show-cause notice omitting classification are vitiated. The conclusion is in favour of the assessee.Final Conclusion: The defective omission of classification in the show-cause notice vitiates the entire chain of proceedings and results in quashing of the notice and subsequent orders, thereby relieving the assessee of the demand.Ratio Decidendi: A show-cause notice initiating excise demand must state the classification (chapter/heading/sub-heading) or equivalent identification of the excisable goods as this is a jurisdictional fact necessary for valid levy of duty.
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