1998 (11) TMI 275 - AT - Central Excise

Demand without show cause notice for certain period deemed unsustainable. Due process required. Appeal allowed.

The Tribunal held that the demand made without a show cause notice for the period January 1985 to January 1988 was unsustainable. The appellant's ... Demand - Show cause notice Issues:1. Whether the demand made vide addendum to the adjudication order was sustainable without a show cause notice for the period January 1985 to January 1988.Analysis:1. The main issue in this appeal was whether the demand made through an addendum to the adjudication order without a show cause notice for the period January 1985 to January 1988 was sustainable. The appellant argued that the principles of natural justice were not followed as no show cause notice was issued for this period. The demand was confirmed without any show cause notice, which the appellant contended was a violation of due process.2. The respondent, on the other hand, argued that the appellant's communications had indicated their understanding that the decisions regarding charges and freight for the period prior to January 1985 would also apply to the subsequent period. Based on this understanding, the show cause notice was not issued for the period in question, and the demand was made in continuation of the earlier period.3. Upon careful consideration, the Tribunal observed that the demand for the period January 1985 to January 1988 was not a part of the original adjudication order dated 31-12-1988. The addendum issued on 7-3-1989 demanded duty on distribution charges for this period without issuing a show cause notice. The Tribunal noted that the communication from the appellant admitting liability and agreeing to pay did not absolve the revenue from following due process as per Section 11A of the Act.4. The Tribunal referred to the Supreme Court's judgment in the case of Kosan Metal Products Ltd., emphasizing the necessity of issuing show cause notices for raising demands. It was noted that the department had not raised any demand for the period in question, and the Assistant Collector's letter demanding the amount did not indicate provisional assessment. Therefore, the Tribunal concluded that the demand for the period January 1985 to January 1988 was not supported by a show cause notice and was unsustainable. The Commissioner's finding that the appellant had admitted liability was deemed insufficient to confirm the demands without a proper show cause notice. As a result, the impugned order was set aside, and the appeal was allowed.