1997 (10) TMI 269 - AT - Central Excise

Tribunal overturns duty demand & penalty due to flawed show cause notice, emphasizing statutory compliance

The Tribunal set aside the Additional Collector's decision confirming a duty demand and imposing a penalty on an appellant for alleged deliberate ... Demand - Limitation - Penalty Issues:1. Duty demand and penalty confirmation by the Additional Collector.2. Allegations of deliberate misstatement to evade duty.3. Imposition of penalty without reference in the show cause notice.4. Interpretation of Section 11A of the Central Excise Act.5. Compliance with the proviso to Section 11A in the show cause notice.6. Quasi-judicial nature of the impugned order.7. Necessity of specific allegations in the show cause notice.8. Decision to set aside the impugned order and allow the appeal.Analysis:1. The appeal was against the decision of the Additional Collector confirming a duty demand of Rs. 3,25,688.20 and imposing a penalty of Rs. 2.00 lakhs. The appellant, engaged in manufacturing various chemicals, was alleged to have taken proforma credit based on incorrect declarations regarding certain raw materials. The adjudicating authority found deliberate misstatement with intent to evade duty, leading to the duty demand and penalty.2. The appellant's advocate argued that the show cause notice did not mention the proposed penalty, and the penalty imposition was unjustified. He cited Rule 56A for proforma credit, amendments to notifications, and Supreme Court judgments emphasizing the necessity of allegations of suppression or wilful misstatement in the show cause notice. He contended that the allegations in the notice did not meet the requirements of Section 11A of the Central Excise Act.3. The Department's representative supported the impugned order, while the Tribunal analyzed the show cause notice's contents. The Tribunal noted that the notice lacked specific allegations of misstatement or suppression as required by Section 11A. Referring to Supreme Court judgments, the Tribunal emphasized the importance of clear allegations in the notice for invoking provisions like the proviso to Section 11A.4. The Tribunal concluded that the impugned order was quasi-judicial and required specific allegations in the show cause notice to affect any person with civil consequences. Since the notice did not meet this requirement, the Tribunal set aside the order and allowed the appeal. The decision was based on the absence of necessary allegations in the notice, leading to the reversal of the duty demand and penalty imposed.This detailed analysis highlights the issues related to duty demand, penalty imposition, compliance with legal provisions, and the necessity of specific allegations in a show cause notice for invoking statutory provisions. The Tribunal's decision to set aside the order underscores the importance of procedural fairness and adherence to legal requirements in excise matters.