Supreme Court of India
COMMISSIONER OF CENTRAL EXCISE, HALDIAversusM/S. KRISHNA WAX (P) LTD.
- Citation
- 2019 INSC 1246
- Decided
- 14 November 2019
- Disposal
- Appeal(s) allowed
- Bench
- UDAY UMESH LALIT
Holding
The Internal Order was not a decision under s.11A(10) and therefore not appealable; the appeal was premature and the proceedings under the show‑cause notice must continue.
Summary
The Central Excise Department conducted a search at the premises of M/s Krishna Wax (P) Ltd., alleging unauthorised manufacture of foots oil and wax without payment of excise duty. The respondent, not registered under the Act, challenged the Department's jurisdiction and the issuance of a show‑cause notice, leading the High Court to direct a preliminary determination of jurisdiction. The Department issued an Internal Order on 15‑03‑2006 recording a prima facie view of jurisdiction, which the respondent appealed as premature. The Appellate Authority allowed the appeal and the Tribunal dismissed it, but the Supreme Court held that the Internal Order was not a decision under s.11A(10) and therefore not appealable; the appeal was premature and the matter must proceed under the show‑cause notice. Consequently, the Court set aside the appellate order, directed the respondent to file its response to the show‑cause notice within three weeks, and allowed the appeal.
Issues considered
- The Internal Order dated 15‑03‑2006 is a decision under s.11A(10) of the Central Excise Act and thus appealable under s.35/35L.
- Whether the Department had jurisdiction to proceed against a respondent not registered and allegedly not manufacturing.
- Whether a writ petition under Art.226 is maintainable against a mere show‑cause notice or a preliminary determination.
- Whether the appeal filed before the Commissioner (Appeals) was premature.
Legislation cited
- Central Excise Act, 1944s. 11A, s. 3, s. 35, s. 35L, s. 35R, s. 4, s. 6
Subjects
central exciseshow cause noticejurisdictionappealabilityinternal orderSection 11AArticle 226writ petitionmanufacturingregistration
Judgment
[2019] 14 S.C.R. 579 579
COMMISSIONER OF CENTRAL EXCISE, HALDIA A
v.
M/S. KRISHNA WAX (P) LTD.
(Civil Appeal No. 8609 of 2019)
NOVEMBER 14, 2019 B
[UDAY UMESH LALIT AND VINEET SARAN, JJ.]
Central Excise Act, 1944 – ss.3, 4, 6, 11A and 35L – Search
conducted at the registered office and the factory premises of the
Respondent by the officers of the Central Excise Commissionerate C
on the basis that the Respondent manufactured Foots Oil, Pressed
Wax etc. without observing the mandatory procedure and clearing
excise duty – Writ petition filed by the Respondent inter alia objecting
that the department had no authority to proceed in the matter as
no manufacturing activity was undertaken – Direction to decide
the preliminary objection first – Show Cause Notice issued by the D
office of the Commissioner of Central Excise, Haldia, inter alia
stating that after considering the preliminary objection, the
Assistant Commissioner of Central Excise decided to proceed in
the matter and called upon the respondent to show cause as to why
inter alia the amount specified in the notice be not demanded – E
Respondent filed writ petition stating that the notice was issued
without deciding the preliminary objection – Direction to furnish
copy of the Internal Order dated. 15.03.2006 to the respondent
by which the preliminary objection was decided – Furnished –
Respondent filed appeal challenging the said Order – Appeal
allowed – Appellant filed appeal before the Tribunal – Dismissed F
– Held: Respondent had not registered itself and was not paying
any excise duty on the products that it was manufacturing – Search
conducted led to the recovery of certain material on the basis of
which the Department was considering the matter – At that stage,
in the writ petition the order was passed directing the appellant to G
decide the preliminary objection whether the Department had
jurisdiction to proceed in the matter before deciding any other issue
on merits – Provisions of the Act do not contemplate any such prima
facie determination to be arrived at and requiring that copy of such
determination be submitted to the concerned person and only
H
579
580 SUPREME COURT REPORTS [2019] 14 S.C.R.
A thereafter to proceed in the matter – Merely because the Internal
Order was communicated to the respondent, it would not afford it
a cause of action to file appeal against said Order –
Communication of Internal Order was only in obedience of the
directions issued by the High Court –Department justified in not
B communicating the Internal Order on its own – It was not a decision
or determination which was arrived at in terms of s.11A(10) –
Respondent therefore could not have preferred any appeal against
said Order – Appellate Authority and the Tribunal failed to
appreciate this basic distinction – Appellate order and the order
under appeal, set aside – Proceedings pursuant to show cause
C notice be taken to logical conclusion – Respondent entitled to put
in its response to said show cause notice within three weeks from
the date of this judgment and also entitled to place such material
on which it seeks to place reliance, in support of its case – Matter
shall thereafter be proceeded in accordance with law – Constitution
D of India – Art.226 – Excise Duty.
Central Excise Act, 1944 – s.11A – Scheme of – Discussed.
Constitution of India – Art.226 – Jurisdiction under, in
matters relating to excise law – Held: Excise law is a complete code
in itself and writ petition should normally not be entertained
E against mere issuance of show cause notice – Concerned person
must first raise all the objections before the authority who issued
show cause notice and the redressal in terms of the existing
provisions of the law could be taken resort to if an adverse order
was passed against such person – Excise Duty.
F Allowing the appeal, the Court
HELD: 1. In the present case, the respondent had not
registered itself and was not paying any excise duty on the
products that it was manufacturing. The search conducted by
the Department at the registered office and the factory premises
G of the respondent led to the recovery of certain material on the
basis of which the Department was considering the matter. At
that stage, a writ petition was filed in which an order was passed
by the High Court on 28.11.2005 directing the appellant to
decide whether the Department had jurisdiction to proceed in
H the matter before deciding any other issues on merits. The
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 581
M/S. KRISHNA WAX (P) LTD.
provisions of the Act do not contemplate any such prima facie A
determination to be arrived at and requiring that a copy of such
determination to be submitted to the concerned person and only
thereafter to proceed in the matter. Nonetheless, since a
direction was issued by the High Court, the Department in
deference to such direction did consider the matter and by an B
Internal Order dated 15.03.2006 prima facie recorded an opinion
that the authorities under the Act had jurisdiction to proceed in
the matter. Since the provisions of the Act do not contemplate
any prima facie determination which must be communicated to
the concerned person, the Department was justified in not
communicating the Internal Order on its own. The matter was C
correctly assessed by the High Court on the next occasion when
in spite of having directed that a copy of the Internal Order be
supplied, it acknowledged that the remedy of the respondent lied
in submitting reply to the show cause notice, in which reply it
would be open to the respondent to take objections to the D
jurisdiction of the appellant to proceed against the respondent
under the provisions of the Act. Merely because the Internal
Order was communicated to the respondent, it would not afford
the respondent a cause of action to file an appeal against said
Internal Order. The communication of said Internal Order was
only in obedience of the directions issued by the High Court. It E
was not a decision or determination which was arrived at in terms
of sub-section 10 of Section 11A. The respondent therefore could
not have preferred any appeal against said Internal Order dated
15.03.2006. The Appellate Authority as well as the Tribunal
completely failed to appreciate this basic distinction. While F
issuing a show cause notice under Section 11A of the Act, what
is entertained by the Department is only a prima facie view, on
the basis of which the show cause notice is issued. The
determination comes only after a response or representation is
preferred by the person to whom the show cause notice is
G
addressed. As a part of his response, the concerned person may
present his view point on all possible issues and only thereafter
the determination or decision is arrived at. In the present case
even before the response could be made by the respondent and
the determination could be arrived at, the matter was carried in
appeal against said Internal Order. The appellant was therefore, H
582 SUPREME COURT REPORTS [2019] 14 S.C.R.
A justified in submitting that the appeal itself was pre-mature.
[Paras 9-11] [594-G-H; 595-A-H; 596-A]
1.2 The excise law is a complete code in itself and it would
normally not be appropriate for a Writ Court to entertain a
petition under Article 226 of the Constitution and that the
B concerned person must first raise all the objections before the
authority who had issued a show cause notice and the redressal
in terms of the existing provisions of the law could be taken
resort to if an adverse order was passed against such person.
Writ petition should normally not be entertained against mere
issuance of show cause notice. In the present case no show cause
C
notice was even issued when the High Court had initially
entertained the petition and directed the Department to prima
facie consider whether there was material to proceed with the
matter. [Para 12] [596-B-C-F]
1.3 In the present case, there was no assessment and
D
computation of any duty element. The matter had not gone
beyond the Show Cause Notice. The questions in the matter
pertained to the correctness of the view whether there was any
adjudication in the matter and whether the appeal at the instance
of the Respondent was maintainable. The issues involved in the
E matter do not strictly come within the confines of the Circular
issued by Ministry of Finance, Department of Revenue, Central
Board of Indirect Taxes and Customs (Judicial Cell). The
appellate order dated 10.01.2007 and the order under appeal is
set aside and it is directed that the proceedings pursuant to show
cause notice dated 21.03.2006 be taken to logical conclusion.
F The respondent shall be entitled to put in its response to said
show cause notice within three weeks from the date of this
judgment and shall also be entitled to place such material on
which it seeks to place reliance, in support of its case. The
matter shall thereafter be proceeded with in accordance with law.
G [Paras 15, 16] [598-E-G]
GKN Driveshafts (India) Ltd. v. Income Tax Officers
and Others (2003) 1 SCC 72 : [2002] 4 Suppl. SCR
359 ; Reliance Industries Ltd. v. Collector of Central
Excise 1987 (11) ECR 287 (Tri.-Mumbai) –
H distinguished.
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 583
M/S. KRISHNA WAX (P) LTD.
Union of India and Another v. Guwahati Carbon A
Limited (2012) 11 SCC 651 ; Malladi Drugs and
Pharma Ltd. v. Union of India 2004 (166) ELT 153
(S.C.) – relied on.
Case Law Reference
[2002] 4 Suppl. SCR 359 distinguished Para 3 B
(2012) 11 SCC 651 relied on Para 12
2004 (166) ELT 153 (S.C.) relied on Para 13
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8609
of 2019. C
From the Judgment and Order dated 31.05.2017 of the Customs,
Excise & Service Tax Appellate Tribunal, Principal Bench at Kolkata
in Order No. FO/A/75961/2017 in Appeal No. E/211/07
Ms. Nisha Bagchi, Ms. B. Sunita Rao, Ms. Pooja Sharma,
D
B. Krishna Prasad, Advs. for the Appellant.
Ms. Christi Jain, Puneet Jain, Harshit Khanduja, Harsh Jain (for
Ms. Pratibha Jain), for the Respondent.
The Judgment of the Court was delivered by
UDAY UMESH LALIT, J. E
1. This Appeal under Section 35L of the Central Excise Act, 1944
(‘the Act’, for short) arises out of Order dated 31.05.2017 passed by
the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (‘the
Tribunal’, for short) dismissing Appeal No. E/211/07 preferred by the
Appellant herein. F
2. The facts leading to the filing of this Appeal, in brief, are as
under:-
(a) On 23.09.2005 a search was conducted at the registered
office as well as the factory premises of the Respondent
G
herein by the officers of the Central Excise
Commissionerate on the basis that the Respondent
manufactured Foots Oil, Pressed Wax, Pressed Paraffin
Wax without observing the mandatory procedure and
clearing Excise Duty. Soon thereafter, Writ Petition No.
2073 of 2005 was filed by the Respondent before the H
584 SUPREME COURT REPORTS [2019] 14 S.C.R.
A High Court1 submitting inter alia that the Assistant
Commissioner of Central Excise had no authority to
proceed in the matter as no manufacturing activity was
undertaken by the Respondent. The High Court by Order
dated 28.11.2005 directed as under:-
B “Having heard the Learned Advocates appearing for
the parties and considering the facts and circumstances
of the case, I dispose of this petition by directing the
respondent No.1 to decide the preliminary objection
raised on behalf of the petitioners regarding the
jurisdiction of the respondents to proceed in the matter
C under Central Excise Act before deciding any other
issues in this matter on merit.
Since no affidavit in opposition has been used on behalf
of the respondents, all allegations levelled against the
said respondents in this writ petition should not be
D deemed to be admitted.”
(b) On 21.03.2006 a Show Cause Notice was issued by the
office of the Commissioner of Central Excise, Haldia,
which stated inter alia that in terms of the aforesaid
directions of the High Court, the Assistant Commissioner
E of Central Excise had considered the preliminary
objection and decided to proceed in the matter. It further
recited that from the facts available on record it
appeared that manufacturing activity was being
undertaken by the Respondent without following due
F procedure and without paying any Excise Duty. It was
observed:-
“Whereas M/s. Krishna Wax (Pvt.) Ltd., having their
Registered Office at Classic Tower, 10A & 11A Floor,
56 Gariahat Road, Kolkata, had filed a writ petition
G (No.2073 of 2005) in High Court at Calcutta and
obtained an order, whereby the respondent, namely,
Assistant Commissioner of Central Excise, was to
decide preliminary objection regarding jurisdiction to
proceed in the matter under Central Excise Act on
1
H High Court of Judicature at Calcutta
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 585
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
merit and it appears to the respondent that the matter A
can be proceeded with under Central Excise Act and
whereas it appears from the facts mentioned below that
M/s. Krishna Was Private Ltd. having their
manufacturing unit at…..”
After the aforesaid opening recitals, the facts were considered B
and finally the Respondent was called upon to show cause :-
“i) Why the Central Excise Duty of Rs.1,56,31,712.00 (rupees
one crore fifty six lakhs thirty one thousand seven hundred and
twelve only) Education Cess of Rs.2,11,007.00 (rupees two lakhs
eleven thousand and seven only as detailed in Annexure-A) C
should not be demanded and recovered under the extended
proviso to Section 11A of the said Act?
ii) Why interest as applicable at the appropriate rate should not
charged under Section 11 AB of the said Act?
D
3.6. The “said party” is directed to produce all the evidence upon
which they intend to rely in support of his defense, when the case
will be heard before the Adjudicating Authority.
3.7 The “said party” should also inform whether they wish to
be heard in person or through authorized representative when
E
the case will be posted for hearing.”
(c) The Respondent again approached the High Court by
filing Writ Petition No. 1719 of 2006, which was disposed
of on 27.11.2006 by the High Court with following
observations:-
F
“The show cause notice has mainly been challenged
on the ground that notwithstanding an order dated
28.11.2005 of this Court (P.K. Chattopadhyay, J.)
directing the respondent, Commissioner of Central
Excise, Anti-Evasion Unit to decide the preliminary
objection raised by the petitioners regarding jurisdiction G
of the respondents to proceed against the petitioners
under the Central Excise Act, 1944, he said respondent
had not done so. It was alleged that the Show Cause
Notice had been issued without deciding the preliminary
objection of the petitioner. H
586 SUPREME COURT REPORTS [2019] 14 S.C.R.
A Mr. Tarafdar has produced the records pertaining to
the case. It appears that the preliminary objection of
the petitioners was decided by an order dated 15th
March, 2006. A copy of the said order shall
immediately be furnished to the petitioner and in any
case within a week from date.
B
… … …
The petitioners shall submit their reply to the Show
Cause Notice impugned within four weeks from date.
It will be open to the petitioners to take objection to
C the jurisdiction of the concerned Respondents to
proceed against the petitioner under the Central Excise
Act, 1944. The adjudication proceedings shall be
conducted strictly in accordance with law and in
compliance with principles of natural justice.
D The writ application is disposed of accordingly.”
(d) Consequently, a copy of the Internal Order dated
15.03.2006 was furnished to the Respondent. Without
filing any reply to the Show Cause Notice and, adopting
the course in tune with the observations of the High Court
E in its Order dated 27.11.2006, the Respondent chose to
file Appeal No.01/HAL/07 before the Commissioner of
Central Excise (Appeals-I) Kolkata challenging the
aforementioned Internal Order dated 15.03.2006. It was
submitted that no manufacturing process was being
F undertaken by the Respondent. An objection was taken
on behalf of the Appellant that the Appeal was
completely premature as the matter was not yet gone
into; no reply to the Show Cause Notice was filed by the
Respondent and there was, as a matter of fact, no
adjudication by the concerned authority. The objections
G were rejected by the Appellate Authority observing that
an appeal could lie against any order passed under the
Act by a Central Excise Officer lower in rank to the
Commissioner. It was further concluded that the process
undertaken by the Respondent did not amount to
H manufacture as under:-
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 587
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
“I, therefore, find that no new produce has emerged. A
The names are used interchangeably in literature,
character is not changed; only by a mechanical process
oil has been separated, but still a high oil content has
remained in the wax. Both the raw materials and end
products are sold to grease manufacturers and
B
lubricant manufacturers. From tariff also no new entry
can be cited for the product. The process involved as
such cannot be called incidental to manufacture.
Department has failed to discharge the burden to prove
manufacture.”
C
The appeal was thus allowed by the Appellate Authority vide
order dated 10.01.2007.
(e) The Appellant, being aggrieved, filed Appeal No. E/211/
07 before the Tribunal, which came to be dismissed by
order dated 31.05.2017. The Tribunal concluded that the
decision dated 15.03.2006 was appealable before the D
Commissioner (Appeals) under Section 35 of the Act as
it entailed civil consequences. It observed:-
“12. On perusal of the process as stated hereinabove,
we find that the Respondent imported the materials
under CTH 27129090 & 27129090 amongst others and E
the Revenue also classified the processed material
under the same tariff item. We find that the entire
process undertaken by the Respondent-assessee is
mainly a manual process and there is a marginal use
of hydraulic pressure in the process. F
… … …
15. In the present case, we find that the imported Slack
Wax, Residue Wax is in semi-solid form in drums.
Foots Oil is part of Residue Wax or Slack Wax being
lighter comes up on surface and siphoned by tilting the G
drums. The thinner Slack Wax called Foots Oil is thus
separated. The pressure created by liquid through
orifice for the purpose of exit is known as the hydraulic
pressure. Basically, processed materials are emerging
from the imported materials and the Revenue classified H
588 SUPREME COURT REPORTS [2019] 14 S.C.R.
A the processed material under the same Tariff Heading
& CTH. The Hon’ble Supreme Court and the Tribunal
in various decisions held that such process cannot be
treated as manufacture under Section 2(f) of the
Central Excise Act, 1944. Thus, we find force in the
findings of the ld. Commissioner (Appeals).”
B
3. We heard Ms. Nisha Bagchi, learned Advocate, in support of
this Appeal and Ms. Christi Jain, learned Advocate, for the Respondent.
Ms. Bagchi, learned Advocate submitted that the process of
adjudication had never taken place in the matter; there was no response
C to the Show Cause Notice; nothing was submitted by the Respondent
denying or disputing the assertions made in the Show Cause Notice
and the matter was considered by the Appellate Authority and the
Tribunal from completely incorrect perspective. According to her, in
cases such as the present one, where the manufacturing process was
D undertaken and the goods were cleared without payment of any Excise
Duty, the Show Cause Notice itself would cover not only the basic issue
whether the process so undertaken amounted to manufacture or not
but also the resultant liability, in case the process in question amounted
to manufacture; and it would always be open to the assessee to make
such submissions touching upon both the issues; and the proper course
E was to let the proceedings pursuant to the Show Cause Notice, be taken
to a logical conclusion.
Ms. Christi Jain, learned Advocate for the Respondent submitted
that the Internal Order dated 15.03.2006 had taken a view that the
process amounted to manufacture and such assessment was arrived
F at without affording any hearing to the Respondent. Said order affected
the interest of the Respondent adversely and the Respondent was
therefore entitled to challenge the Order dated 15.03.2006. According
to her, after due service of said Order dated 15.03.2006, the Respondent
was well within its rights to challenge said Order. In support of her
G submission, reliance was placed on the decision of this Court in GKN
Driveshafts (India) Ltd. v. Income Tax Officers and others2 and
of the decision of the Tribunal in Reliance Industries Ltd. v. Collector
of Central Excise3.
2
(2003) 1 SCC 72
3
H 1987(11) ECR 287 (Tri.-Mumbai)
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 589
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
4. The Act was enacted to consolidate and amend the law A
relating to Central Duties of Excise. Section 3 of the Act provides that
duty of excise as prescribed shall be levied and collected on all excisable
goods which are produced or manufactured in India as, and at the rates,
set forth in the Fourth Schedule to the Act. Section 4 deals with the
subject of valuation of excisable goods for purposes of charging of duties
B
of excise and Section 6 obliges a person who is engaged inter alia in
the production or manufacture of any specified goods to get himself
registered in such manner as may be prescribed. Section 11A of the
Act deals with recovery of duties not levied or not paid or short-levied
or short-paid or erroneously refunded and is to the following effect:-
“Section 11A. Recovery of duties not levied or not paid C
or short-levied or short-paid or erroneously refunded.-
(1) Where any duty of excise has not been levied or paid or has
been short-levied or short-paid or erroneously refunded, for any
reason, other than the reason of fraud or collusion or any wilful
misstatement or suppression of facts or contravention of any of D
the provisions of this Act or of the rules made thereunder with
intent to evade payment of duty,-
(a) the Central Excise Officer shall, within one year from the
relevant date, serve notice on the person chargeable with
the duty which has not been so levied or paid or which E
has been so short-levied or short-paid or to whom the
refund has erroneously been made, requiring him to show
cause why he should not pay the amount specified in the
notice;
(b) the person chargeable with duty may, before service of F
notice under clause (a), pay on the basis of,-
(i) his own ascertainment of such duty; or
(ii) the duty ascertained by the Central Excise Officer
the amount of duty along with interest payable thereon under G
section 11AA.
(2) The person who has paid the duty under clause (b) of sub-
section (1), shall inform the Central Excise Officer of such
payment in writing, who, on receipt of such information, shall not
serve any notice under clause (a) of that sub-section in respect H
590 SUPREME COURT REPORTS [2019] 14 S.C.R.
A of the duty so paid or any penalty leviable under the provisions
of this Act or the rules made thereunder.
(3) Where the Central Excise Officer is of the opinion that the
amount paid under clause (b) of sub-section (1) falls short of
the amount actually payable, then, he shall proceed to issue the
B notice as provided for in clause (a) of that sub-section in respect
of such amount which falls short of the amount actually payable
in the manner specified under that sub-section and the period of
one year shall be computed from the date of receipt of information
under sub-section (2).
C (4) Where any duty of excise has not been levied or paid or has
been shortlevied or short-paid or erroneously refunded, by the
reason of-
(a) fraud; or
(b) collusion; or
D
(c) any wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Act or of the
rules made thereunder with intent to evade payment of
E duty,
by any person chargeable with the duty, the Central Excise
Officer shall, within five years from the relevant date, serve
notice on such person requiring him to show cause why he should
not pay the amount specified in the notice along with interest
F payable thereon under section 11AA and a penalty equivalent to
the duty specified in the notice.
(5) to (7) Omitted4
(7A) Notwithstanding anything contained in sub-section (1) or
sub-section (3) or sub-section (4), the Central Excise Officer
G may, serve, subsequent to any notice or notices served under any
of those sub-sections, as the case may be, a statement, containing
the details of duty of central excise not levied or paid or short-
levied or short-paid or erroneously refunded for the subsequent
4
H By Act 20 of 2015.
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 591
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
period, on the person chargeable to duty of central excise, then, A
service of such statement shall be deemed to be service of notice
on such person under the aforesaid sub-section (1) or subsection
(3) or sub-section (4) or sub-section (5), subject to the condition
that the grounds relied upon for the subsequent period are the
same as are mentioned in the earlier notice or notices.
B
(8) Where the service of notice is stayed by an order of a court
or tribunal, the period of such stay shall be excluded in computing
the period of one year referred to in clause (a) of sub-section
(1) or five years referred to in sub-section (4), as the case may
be.
C
(9) Where any appellate authority or Tribunal or court concludes
that the notice issued under sub-section (4) is not sustainable for
the reason that the charges of fraud or collusion or any wilful
mis-statement or suppression of facts or contravention of any
of the provisions of this Act or of the rules made thereunder with
intent to evade payment of duty has not been established against D
the person to whom the notice was issued, the Central Excise
Officer shall determine the duty of excise payable by such person
for the period of one year, deeming as if the notice were issued
under clause (a) of sub-section (1).
(10) The Central Excise Officer shall, after allowing the E
concerned person an opportunity of being heard, and after
considering the representation, if any, made by such person,
determine the amount of duty of excise due from such person
not being in excess of the amount specified in the notice.
(11) The Central Excise Officer shall determine the amount of F
duty of excise under sub-section (10)-
(a) within six months from the date of notice in respect of
cases falling under subsection (1);
(b) within one year from the date of notice, where it is possible
to do so, in respect of cases falling under sub-section (4) G
(12) Where the appellate authority or tribunal or court modifies
the amount of duty of excise determined by the Central Excise
Officer under sub-section (10), then the amount of penalties and
interest under this section shall stand modified accordingly, taking
into account the amount of duty of excise so modified. H
592 SUPREME COURT REPORTS [2019] 14 S.C.R.
A (13) Where the amount as modified by the appellate authority
or tribunal or court is more than the amount determined under
sub-section (10) by the Central Excise Officer, the time within
which the interest or penalty is payable under this Act shall be
counted from the date of the order of the appellate authority or
tribunal or court in respect of such increased amount.
B
(14) Where an order determining the duty of excise is passed
by the Central Excise Officer under this section, the person liable
to pay the said duty of excise shall pay the amount so determined
along with the interest due on such amount whether or not the
amount of interest is specified separately.
C
(15) The provisions of sub-section (1) to 14 shall apply, mutatis
mutandis, to the recovery of interest where interest payable has
not been paid or part paid or erroneously refunded.
(16) The provisions of this section shall not apply to a case where
the liability of duty not paid or short-paid is self-assessed and
D declared as duty payable by the assessee in the periodic returns
filed by him, and in such case, recovery of non-payment or short-
payment of duty shall be made in such manner as may be
prescribed.
Explanation 1.-For the purposes of this section and section
E 11AC,-
(a) “refund” includes rebate of duty of excise on excisable
goods exported out of India or on excisable materials used
in the manufacture of goods which are exported out of
India;
F
(b) “relevant date” means,-
(i) in the case of excisable goods on which duty of excise
has not been levied or paid or has been short-levied or
short-paid, and no periodical return as required by the
provisions of this Act has been filed, the last date on
G which such return is required to be filed under this Act
and the rules made thereunder;
(ii) in the case of excisable goods on which duty of excise
has not been levied or paid or has been short-levied or
short-paid and the return has been filed, the date on
H which such return has been filed;
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 593
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
(iii) in any other case, the date on which duty of excise is A
required to be paid under this Act or the rules made
thereunder;
(iv) in a case where duty of excise is provisionally assessed
under this Act or the rules made thereunder, the date
of adjustment of duty after the final assessment thereof; B
(v) in the case of excisable goods on which duty of excise
has been erroneously refunded, the date of such refund;
(vi) in the case where only interest is to be recovered, the
date of payment of duty to which such interest relates.
C
(c) Omitted.
Explanation 2:- For the removal of doubts, it is hereby declared
that any non-levy, short levy, non-payment, short-payment or
erroneous refund where no show cause notice has been issued
before the date on which the Finance Bill, 2015 receives the
assent of the President, shall be governed by the provisions of D
section 11A as amended by the Finance Act, 2015.”
5. Section 11A thus deals with various facets including non-levy
and non-payment of excise duty and contemplates issuance of a show
cause notice by the Central Excise Officer requiring the “person
chargeable with duty” to show cause why “he should not pay the amount E
specified in the notice.” In terms of sub-section 10 of said Section 11A,
the concerned person has to be afforded opportunity of being heard
and after considering his representation, if any, the amount of duty of
excise due from such person has to be determined by the Central Excise
Officer. Without going into other details regarding the period of F
limitations and the circumstances under which show cause notice can
be issued, the crux of the matter is that such determination is after the
issuance of show cause notice followed by affording of opportunity and
consideration of representation, if any, made by the concerned person.
6. If the process or activity undertaken does not amount to
G
manufacture or if no duty is payable for any reason including the benefit
under any scheme of exemption holding the field, it shall always be open
to the concerned person to project such view point while making any
representation in response to the show cause notice. There can be
variety of cases namely that the process in question does not amount
to manufacture; and if it does, the goods would be entitled to avail H
594 SUPREME COURT REPORTS [2019] 14 S.C.R.
A benefit of any prevalent exemption; or that the duty would be chargeable
at a rate lesser than the rate at which it was set out in the show cause
notice or that the quantity of goods manufactured by the concerned
person was in any way lesser than what was attributed in the show
cause notice, or that the benefit of any remission has to be made
available etc. All such possible submissions can always be advanced
B and considered during the course of hearing pursuant to issuance of
show cause notice.
7. However, the scheme of Section 11A does not contemplate
that before issuance of any show cause notice, there must, prima facie,
be: (a) a preliminary determination that the process or activity
C undertaken in the matter amounts to manufacture; and (b) before
arriving at such preliminary determination, any hearing to the concerned
person is contemplated. In other words, there is no segregation of the
matter at different stages and all the possible contours of the matter
including whether the process in question amounts to manufacture or
not are to be gone into while considering the response to the show cause
D
notice itself. It is only after considering all the relevant aspects of the
matter that the final determination under sub-section 10 of Section 11A
is to be arrived at.
8. The issuance of show cause notice under Section 11A also
has some significance in the eyes of law. The day the show cause notice
E is issued, becomes the reckoning date for various issues including the
issue of limitation. If we accept the submission of the respondent that
a prima facie view entertained by the department whether the matter
requires to be proceeded with or not is to be taken as a decision or
determination, it will create an imbalance in the working of various
F provisions of Section 11A of the Act including periods of limitation. It
will be difficult to reckon as to from which date the limitation has to be
counted.
9. In the present case, the respondent had not registered itself
and was not paying any excise duty on the products that it was
manufacturing. The search conducted by the Department at the
G registered office and the factory premises of the respondent led to the
recovery of certain material on the basis of which the Department was
considering the matter. At that stage, a writ petition was filed in which
an order was passed by the High Court on 28.11.2005 directing the
appellant to decide whether the Department had jurisdiction to proceed
H in the matter before deciding any other issues on merits. As stated
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 595
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
above, the provisions of the Act do not contemplate any such prima A
facie determination to be arrived at and requiring that a copy of such
determination to be submitted to the concerned person and only
thereafter to proceed in the matter. Nonetheless, since a direction was
issued by the High Court, the Department in deference to such direction
did consider the matter and by an Internal Order dated 15.03.2006
prima facie recorded an opinion that the authorities under the Act had B
jurisdiction to proceed in the matter. Since the provisions of the Act do
not contemplate any prima facie determination which must be
communicated to the concerned person, the Department was justified
in not communicating the Internal Order on its own. The matter was
correctly assessed by the High Court on the next occasion when in C
spite of having directed that a copy of the Internal Order be supplied,
it acknowledged that the remedy of the respondent lied in submitting
reply to the show cause notice, in which reply it would be open to the
respondent to take objections to the jurisdiction of the appellant to
proceed against the respondent under the provisions of the Act.
D
10. The communication of the Internal Order dated 15.03.2006
was only in deference to the order passed by the High Court. At the
cost of repetition, it must be stated that neither the Act contemplates
any such prima facie determination which must be communicated only
whereafter the proceedings could be initiated nor was such course
undertaken by the Department on its own. Therefore, merely because E
the Internal Order was communicated to the respondent, it would not
afford the respondent a cause of action to file an appeal against said
Internal Order. The communication of said Internal Order was only in
obedience of the directions issued by the High Court. It was not a
decision or determination which was arrived at in terms of sub-section
10 of Section 11A. The respondent therefore could not have preferred F
any appeal against said Internal Order dated 15.03.2006. The Appellate
Authority as well as the Tribunal, in our view, completely failed to
appreciate this basic distinction.
11. It must be noted that while issuing a show cause notice under
Section 11A of the Act, what is entertained by the Department is only G
a prima facie view, on the basis of which the show cause notice is
issued. The determination comes only after a response or representation
is preferred by the person to whom the show cause notice is addressed.
As a part of his response, the concerned person may present his view
point on all possible issues and only thereafter the determination or H
596 SUPREME COURT REPORTS [2019] 14 S.C.R.
A decision is arrived at. In the present case even before the response
could be made by the respondent and the determination could be arrived
at, the matter was carried in appeal against said Internal Order. The
appellant was therefore, justified in submitting that the appeal itself was
pre-mature.
B 12. It has been laid down by this Court that the excise law is a
complete code in itself and it would normally not be appropriate for a
Writ Court to entertain a petition under Article 226 of the Constitution
and that the concerned person must first raise all the objections before
the authority who had issued a show cause notice and the redressal in
terms of the existing provisions of the law could be taken resort to if
C an adverse order was passed against such person. For example in
Union of India and another vs. Guwahati Carbon Limited5, it was
concluded; “The Excise Law is a complete code in order to seek
redress in excise matters and hence may not be appropriate for the
writ court to entertain a petition under Article 226 of the Constitution”,
D while in Malladi Drugs and Pharma Ltd. vs. Union of India 6, it was
observed:-
“…The High Court, has, by the impugned judgment held that the
Appellant should first raise all the objections before the Authority
who have issued the show cause notice and in case any adverse
E order is passed against the Appellant, then liberty has been granted
to approach the High Court…
…in our view, the High Court was absolutely right in dismissing
the writ petition against a mere show cause notice.”
It is thus well settled that writ petition should normally not be
F entertained against mere issuance of show cause notice. In the present
case no show cause notice was even issued when the High Court had
initially entertained the petition and directed the Department to prima
facie consider whether there was material to proceed with the matter.
13. We now deal with the decisions relied upon by Ms. Jain,
G learned counsel for the appellant. The decision of this Court in GKN
Driveshafts (India) Ltd.2 was in the context of Section 148 of the
Income Tax Act. Said Section 148 itself contemplates that the Assessing
Officer shall, before issuing any notice under said Section 148, record
5
(2012) 11 SCC 651
H 6
2004 (166) ELT 153 (S.C.)
COMMISSIONER OF CENTRAL EXCISE, HALDIA v. 597
M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]
his reasons for issuing such notice. In the backdrop of such requirement, A
this Court had observed:-
“5. We see no justifiable reason to interfere with the order under
challenge. However, we clarify that when a notice under Section
148 of the Income Tax Act is issued, the proper course of action
for the noticee is to file return and if he so desires, to seek reasons B
for issuing notices. The assessing officer is bound to furnish
reasons within a reasonable time. On receipt of reasons, the
noticee is entitled to file objections to issuance of notice and the
assessing officer is bound to dispose of the same by passing a
speaking order. In the instant case, as the reasons have been
disclosed in these proceedings, the assessing officer has to C
dispose of the objections, if filed, by passing a speaking order,
before proceeding with the assessment in respect of the
abovesaid five assessment years.”
The decision of the Tribunal in the case of Reliance Industries
Ltd.3 was also in a completely different context. The order of the D
Collector dated 03.03.1986 which was subject matter of appeal in that
case, was a record of a personal hearing in the course of the
adjudication proceeding that was communicated to the assessee. It was
therefore concluded that an appeal against such order would be
maintainable. The point of distinction is that it was communicated by E
the Department during the course of adjudication proceedings whereas
in the present matter there was no such communication by the
Department on its own and the order dated 19.03.2016 was not a part
of any adjudication proceedings. The proceedings would have begun
only after the issuance of show cause notice under Section 11A of the
Act. F
14. We must at this stage refer to an aspect which was projected
after the judgment was reserved in the matter. By filing an application
for directions, attention of the Court was invited to Circular dated
22.08.2019 issued by Ministry of Finance, Department of Revenue,
Central Board of Indirect Taxes and Customs (Judicial Cell), the relevant G
portion of which is to the following effect:-
“In exercise of the powers conferred by Section 35R of the
Central Excise Act, 1944 and made applicable to Service Tax
vide Section 83 of the Finance Act, 1994, the Central Board of
indirect Taxes and Customs fixes the following monetary limits H
598 SUPREME COURT REPORTS [2019] 14 S.C.R.
A below which appeal shall not be filed in the CESTAT, High Courts
and Supreme Court.
S. No. Appellate Forum Monetary Limit
1. CESTAT Rs.50,00,000/-
2. High Courts Rs.1,00,00,000/-
B 3. Supreme Court Rs.2,00,00,000/-
2. This instruction applies only to legacy issues i.e. matters
relating to Central Excise and Service Tax, and will apply to
pending cases as well.
3. Withdrawal process in respect of pending cases in above
C forums, as per the above revised limits, will follow the current
practice that is being followed for the withdrawal of cases from
the Supreme Court, High Courts and CESTAT. All other terms
and conditions of concerned earlier instructions will continue to
apply.
D 4. It may be noted that issues involving substantial questions of
law as described in para1.3 of the instruction dt 17.08.2011 from
F.No.390/Misc/163/2010-JC would be contested irrespective of
the prescribed monetary limits.”
15. In the present case, there was no assessment and computation
E of any duty element. The matter had not gone beyond the Show Cause
Notice. The questions in the matter pertained to the correctness of the
view whether there was any adjudication in the matter and whether
the appeal at the instance of the Respondent was maintainable. In our
view the issues involved in the matter do not strictly come within the
confines of the aforesaid Circular.
F 16. We therefore allow this appeal, set aside the appellate order
dated 10.01.2007 and the order under appeal and direct that the
proceedings pursuant to show cause notice dated 21.03.2006 be taken
to logical conclusion. The respondent shall be entitled to put in its
response to said show cause notice within three weeks from the date
G of this judgment and shall also be entitled to place such material on
which it seeks to place reliance, in support of its case. The matter shall
thereafter be proceeded with in accordance with law.
17. The appeal stands allowed in aforesaid items. No costs.
H Divya Pandey Appeal allowed.
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