Customs, Excise and Gold Tribunal - Delhi
Jeet Ram Enterprises, Hi-Tech ... vs C.C.E. on 2 December, 2005
Equivalent citations: 2006(104)ECC552, 2006ECR552(TRI.-MUMBAI), 2007(212)ELT463(TRI-MUMBAI)
ORDER M.V. Ravindran, Member (J)
Page 0553
1. These appeals are preferred by the appellants against the Order-in-Appeal No. 890-893-CE/DLH/2001 dated 24.9.2001 and the Revenue has also preferred an appeal against the same order.
2. Relevant facts for our consideration are that the officers of the Central Excise Commissionerate, Delhi-I visited the premises of one of the appellants i.e. M/s Kandhari Radio Corporation and the residential premises of the proprietor of the said firm. The officers on a reasonable belief resumed records and documents and based on further investigation, came to a conclusion that all the appellants i.e. M/s Jeet Enterprises, M/s Hi-Tech and M/s Kandhari Separator Industries were involved in the manufacture of branded goods of M/s "KRC" and were availing ineligible benefit of SSI exemption. Separate show cause notices were issued to all the three units demanding duty and penalty and on adjudication the duty was confirmed Page 0554 and penalties imposed. Penalty was also imposed on the proprietor/constituted attorney of all the three firms. On an appeal, the Appellate authority, came to a conclusion that the above said three appellants are not manufacturers, and hence duty liability imposed on them is liable to be set aside. But the Appellate authority, came to a further finding that M/s Kandhari Radio Corporation is the manufacturer and he is liable to pay the duty, but since the branded goods are of the Kandhari Radio Corporation, they are eligible for the benefit of SSI and confirmed a demand of Rs. 372,769/- after recalculating the duty payable on clearances of all the four units, and imposed a penalty of Rs. 2,25,000/- on all the appellant, to be paid jointly and severally.
3. Learned Advocate Shri Naveen Mullick submits that, the confirmation of duty and imposition of penalty against the appellant M/s Kandhari Radio Corporation is not proper, as the said appellants were not issued a show cause notice. Further he submits that the Commissioner (Appeals) has confirmed the demand without putting the appellant on notice, is in gross violation of the settled law. He further submits that the penalty imposed on the other appellants is also not correct inasmuch as that penalty cannot be imposed on the other appellants under Section 11AC read with Rule 173Q as, they are not manufacturers of the goods. He also submits that the department's appeal against the same Order-in-Appeal in respect of the appellants M/s Jeet Enterprises, M/s Hi-Tech and M/s Kandhari Separator Industries was dismissed by this Tribunal vide its order No. 872-74/05-Ex dated 25.10.05 for default on the part of Revenue to follow the direction of the Hon'ble High Court.
4. The learned SDR on the other hand submits that the appellant M/s Kandhari Radio Corporations, proprietor, Mr. Avtar Singh in his submissions before the Commissioner (Appeals) has accepted to pay the duty. He further submits that, the Commissioner (Appeals) has recalculated the duty amount payable based on such assurance, and hence the appeal of the appellant M/s Kandhari Radio Corporation is to be dismissed and penalty imposed on other appellants is also to be upheld. He also farther submitted that the department's appeal has to be allowed as the Commissioner (Appeals) has confirmed the demand by travelling beyond the show cause notice.
5. Considered the submissions made by both sides and perused the records. The short point to be decided by us is whether the order-in-appeal confirming the duty and imposition of penalty on M/s Kandhari Radio Corporation and others without issuance of show cause notice is correct and legal and whether the said order can be upheld.
6. We find from the records that the appellant M/s Kandhari Radio Corporation was not put on notice by the lower authorities. Since the lower authorities did not issue a show cause notice to M/s Kandhari Radio Corporation, it would be fixing a liability on a person without divulging the commission and omission done by the assessee . It is also not disputed by the Revenue that the appellant M/s KRC was not issued Page 0555 a show cause. It is a settled law that the issuance of show cause notice to a person is not a mere formality. The show cause notice intimates the recipient about the allegations against him, and Seeks his defence against the allegations. If the issuance of the show cause would have been a mere formality, then the provisions of Section 11A of CEA, 1944, would be redundant. The Central Excise Act, being are all encompassing Act, in itself, has provided the mechanism for dealing of the violations of the provisions of the Act. If the Central Excise Act, 1944 provides for the initiation of proceedings against an assessee by issuance of the show cause notice, it is the primary requirement of the law that has to be adhered to by the authorities. In the absence of any show cause notice, the proceedings initiated against an assessee would be vitiated and would be a serious violation of the principles of natural justice. The purpose of the principles of natural justice is to prevent miscarriage of justice.
7. We find that the Hon'ble High Court of Calcutta in the case of Pradeep & Co. v. Collector of Customs reported in 2003 (152) ELT 294 (Cal) has held as follows:
Having regard to the mandatory provision of Section 124 even if the petitioner was aware of such proceedings the duty to serve notice upon the petitioner and to adjudicate the question of confiscation and penalty in the manner indicated under Section 124 could not be shaken off. A mere plea of constructive notice is not a sufficient answer either to such non-compliance with statutory duty. Be that as it may, the fact remains that before the conclusion of the adjudication proceeding culminating in the impugned order of confiscation and penalty they had the knowledge that the respondent No. 5 was a hirer of the car under a Hire & Purchase Agreement with the petitioner as owner of the car and that agreement was sought to be terminated for breach of certain terms. In spite of these facts, failure to issue a show cause notice against the petitioner constituted undoubtedly a breach of statutory duty of Customs Authorities and this has vitiated the entire adjudication proceedings & resultant order of confiscation and imposition of penalty.
8. This Hon'ble Tribunal in the case of (i) Unitech Metals Ltd v. Commissioner of Central Excise, Jaipur - 2004 (177) ELT 225 (Tri) has held that -
Demand - Show cause notice - Waiver of - Duty not demandable without issuing a show cause notice - Waiver of show cause notice of demand not permissible under Central Excise law - No evidence of waiver of show cause notice by appellants - Letter proposing to raise a demand cannot be a substitute of show cause notice under Rule 9(2) of erstwhile Central Excise Rules, 1944-Demand set aside - Section 11A of Central Excise Act, 1944.
(ii) Gaba Electronics Private Ltd. v. C.C.E., Indore - 1999 (113) ELT 528 (Tri) has held that - "Natural justice - Show cause notice - Waiver of - It is the Page 0556 bounden duty of the officer to issue show cause notice is mandatory under the provision of Central Excise Act, 1944 - Section 11A ibid - Rule 233A of Central Excise Rules, 1944."
(iii) Pendium Computer Academy v. C.C.E., Coimbator - 2001 (137) ELT 1020 (Tri) has held that -
Demand for short levy under Section 11A of Central Excise Act, 1944 read with Rules 9 and 49 of Central Excise Rules, 1944 - Show cause notice - Non-issuance of show cause notice is a fundamental and non-curable error, hence, demand not to be confirmed.
10. We find from the above decisions that, it is a settled law, that, under Central Excise Act, 1944, a demand can be confirmed only on issuance of a show cause notice. Failure to issue a show cause notice is against the provisions of the law and saddling the assessee with a liability not known to him. It is also to be noticed, that, there are no provisions in the Central Excise Act 1944 for the waiver of show cause notice; unlike the provisions in Customs Act.
11. The re-calculation of the duty and confirmation thereof & imposition of penalty on all appellants by the Commissioner (Appeals), in his order, has been passed without regard to the provisions of the Act and settled law and has saddled the appellant with a liability not known to him. Such order cannot be sustained. It is accordingly set aside and the appellants' appeal are allowed and department's appeal is dismissed.
(Pronounced in open Court on 02.12.05)