TaxTMI 
TaxTMI 
2009 (10) TMI 43
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....sion Benches of this court taking diametrically opposite views with respect to the issue as to whether a show cause notice, under the provisions of Section 11A of the Act could be issued, pending final assessment of a show cause notice, issued prior in point of time. 2.1 In the case of International Computers Indian Manufacturers Ltd vs. Union of India 1981 ELT 632 (Del); the Division Bench held that a show cause notice under Section 28 of the Customs Act, 1962, (which is analogous to Section 11A of the Act), could not be issued, while a provisional assessment was pending finalisation. However, in Duncans Agro Industries vs. Union of India 1989 (39) ELT 511, another Division Bench held to the contrary. Fortuitously, the evidently disparate views stand reconciled by virtue of a judgment of the Supreme Court in the writ petitioner's own case, i.e., Commissioner of Central Excise, Mumbai vs. ITC Ltd 2006 (203) ELT 532. 3. The issue in principle is no longer res integra. A show cause notice under Section 11A of the Act cannot be issued during the pendency of assessment proceedings. This is quite clear from the poser of the Supreme Court in the very opening paragraph of its judgme....
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....It was his submission that the final assessment proceedings culminated with the passing of the adjudication order dated 10.04.1986. 5. Therefore, the only issue which survives for our consideration is: whether order dated 10.04.1986 was a final assessment order. Because if it was not so, then the writ petition would have to be allowed without more, in view of the ratio of the Supreme Court judgment in the case of ITC Ltd (supra). 6. Mr. Ravinder Narain, Advocate who appeared for the writ petitioner submitted that even though the challenge to the impugned show cause notice was on several grounds, the only ground he wished to press was that: the impugned show cause notice dated 27.01.1988 could not have been issued during pendency of the assessment proceedings. 6.1 In order to establish that show cause notice dated 10.04.1986 was not a final assessment order, he drew our attention to the following:- (i) Paragraph 13.1 (K) (at page 125 of the paper book) of the impugned show cause notice dated 27.01.1988. (ii) The operative part of the order dated10.04.1986. (iii) Paragraph 5 (at page 134 of the paper book) of the order dated 28.04.1988 - which according to the writ ....
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....he writ petitioner. It is not disputed that in respect of Saharanpur factory of the writ petitioner, the Collector, at Kanpur had issued a show cause notice on 08.12.1978. This was followed by a supplementary show-cause notice dated 29.01.1979. The department, in order to avoid multiplicity of proceedings, got the Central Board of Excise and Customs to issue an order dated 10.09.1984, whereby the adjudication of show-cause notices, issued to the writ petitioner by various Collectors, was centralized for the purposes of adjudication with the Director General (Inspection) in the office of the Directorate-General of Inspection and Audit (Customs and Central Excise), New Delhi. For the purposes of adjudication, he was to act as the Collector of Central Excise. 8.3 On 13.09.1985, a corrigendum to the show cause notices dated 08.12.1978 and 29.01.1979, as mentioned above, was issued by the Collector, at Kanpur to the writ petitioner. The corrigendum, inter alia, was issued primarily on account of the fact that on 07.10.1983, the Supreme Court had pronounced its judgment in the case of UOI vs Bombay Tyre International (1984) 1 SCC 467, wherein several issues with respect to post-manufa....
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.... as aforesaid; and (b) penalty of Rs 1,00,00,000.00 (rupees one crore only) is imposed on the company under rule 173-Q of the Central Excise Rules, 1944. However, I do not propose to order confiscation of land, building, plant, machinery, materials, etc." 9. On 27.01.1988, the impugned show cause notices were issued for the period 27.06.1980 to 28.02.1983. According to the respondent, the said show cause notice came to be issued as they had gathered intelligence that the writ petitioner was evading the payment of appropriate excise duty by resorting to fraudulent undervaluation. On the basis of this intelligence, raids were conducted by the Director of Anti-Evasion, at various offices and factories of the writ petitioner, as well as some of its, wholesale dealers. The said raids revealed several incriminating documents. The scrutiny of the seized documents and the investigations conducted thereafter, resulted in issuance of the aforementioned impugned show-cause notice. By this show cause notice, dated 27.01.1988, a sum of Rs 26,43,02,733.49/- was sought to be recovered from the writ petitioner towards central excise. 10. On 28.04.1988, the Assistant Collector of Central E....
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....ase reported in 1994 (72) ELT 315, directed the representative of the Central Excise Department, Saharanpur to recalculate the demand. 11.1 On 11.02.1988, the Commissioner of Central Excise enclosed a copy of letter dated 06.02.1988 addressed by Assistant Commissioner to him enclosing a chart showing the recalculated differential duty. By this letter, the writ petitioner was called upon to submit its reply or submissions within 15 days of the letter. The writ petitioner has averred that by virtue of the recalculation, carried out by the Assistant Commissioner, the demand, in respect of the impugned show cause notice dated 27.01.1988, stood reduced from Rs 26 crores (approximately) to Rs 4,28,85,544.42 (approximately). On 23.03.1998, the writ petitioner had issued a communication to the Commissioner of Central Excise, Delhi, inter alia, pointing out that in view of the lack of jurisdiction in the issuance of the said show cause notice, further proceedings with regard to examination and cross-examination of witnesses need not be continued with. A reference was also made in respect of the fact that based on this preliminary issue, the predecessor of the Commissioner of Central Exci....
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....umstances, set out hereinabove, it is without doubt established that order dated 10.04.1986 is not an assessment order, much less a final assessment order. Our reasons for coming to this conclusion are as follows: 12.3 The order dated 10.04.1986 categorically refers to the fact that after the said show-cause notices were issued for the period 01.10.1975 to 28.02.1983, and the total excise duty, which, according to the department was payable by the writ petitioner, was in the sum of Rs 5,24,31,23,735.87/-. Against this, on the department's own showing, the writ petitioner had paid a sum of Rs 4,21,01,94,370.44/-. Therefore, vide show cause notice dated 08.12.1978 and supplementary show-cause notice dated 29.01.1979, as corrected by show cause notice dated 13.09.1985, the differential duty, which the writ petitioner was called upon to pay, was in the sum of Rs 1,03,29,29,365.43/-. The said show-cause notices were obviously issued in response to the deductions claimed by the writ petitioner in their price list filed for the period 01.10.1975 to 28.02.1983. The department had obviously come to a provisional figure of duty in the sum of Rs 1,03,29,29,365.43/-, based on stand that the....
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....quently, a final demand only by virtue of order dated 28.04.1988. In the show cause notice a provisional demand in the sum of Rs 103 crores (approximately) was made, which, upon finalisation of the assessment, got reduced to Rs 80.30 crores (approximately). 12.4 The submission of the learned ASG that the order of the Director General (Inspection) dated 10.04.1986 was itself an order of final assessment, is thus, in our view, without merit. 12.5 Great stress was laid by the learned ASG on paragraph 46 of the order dated 10.04.1986 in which the following extract of the show cause notice is found: "……accordingly ITC Ltd., Saharanpur are required to show cause as to why central excise duty, amounting to Rs 1,03,29,29,365.43/-, short-paid by them during the period from 01.10.1975 to 28.02.1983 should not be demanded from them (by finalizing the provisional assessments on the principles discussed above) under Section 11-A of the Central Excise and Salt Act, 1944…." 12.6 Based on the above extract, it was submitted by the learned ASG that the assessments had already been finalized and what was done thereafter was only a mathematical computation. In our view, this submission....
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....s crucial for the assessee as the former…… If, therefore, the income tax officer first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialed by the income tax officer that the process described in Section 143(3) will be complete." The concept of „assessment‟ for the purposes of excise has also to be understood likewise. (v)(b) A perusal of sub-paragraphs (c), (d) & (e) of paragraph 18.1 of order dated 10.04.1986 (extracted in an earlier part of our judgment) clearly demonstrates the point - various elements of cost had to be added or subtracted in order to arrive at the assessable value of cigarettes. To cite an instance the said paragraph alludes to the fact that the advertisement and sales promotion expenses incurred by wholesale dealers, which were to be added, were not known at that stage. (vi) The provisions of Rule 9B(5) of the Central Excise Rules, 1984 make the position quite clear. The s....
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....ause notice dated 27.01.1988 was issued the assessment proceedings were undoubtedly incomplete. They were provisional. The final assessment proceedings got finalized only on 28.04.1988. The order of the Director General (Inspection) dated 10.04.1986, in our view, was not a final assessment order, as contended by the respondent. 14. The other issue posed to us is with regard to applicability of the judgment of the Supreme Court in the case of Serai Kella (supra). The issue, which arose in Serai Kella (supra) was whether the order of the Tribunal passed pursuant to the directions of the High Court, whereby it had quashed the provisional assessment made by the Revenue, with a direction that a fresh assessment be made in terms of the guidelines given by it, was erroneous, in view of absence of a show-cause notice under Section 11A of the Act. The Supreme Court came to the conclusion that where the assessee was clearing the goods on the basis of self-assessment procedure, the assessment was only provisional, which would have to be set off against duty finally assessed by a proper officer. In both instances, where duty was payable, or a credit was available to the assessee; a result c....