The High Court held that issuing a second show cause notice for the same penalty demand while the matter is pending appeal before the Tribunal is illegal. The court allowed the writ petition and quashed the notice.
Show cause notice Annexure P-8 is quashed with no order as to cost.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Civil Writ Petition No. 1991 of 2009 [1]
IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH
Date of Decision: March 17, 2009
M/s Twenty First Century Steels (P) Ltd .......... Petitioner
versus
Commissioner, Central Excise, Chandigarh ........... Respondent
CORAM: HON'BLE MR. JUSTICE T.S.THAKUR,CHIEF JUSTICE HON'BLE MR. JUSTICE HEMANT GUPTA
Present : Mr. Gaurav Aggarwal, Advocate for the petitioner.
Mr. Gurpreet Singh, Sr. Standing Counsel (Indirect Taxation) for the respondent.
HEMANT GUPTA, J.
The challenge in the present writ petition is to a notice dated 06.12.2006, Annexure P-8, calling upon the petitioner to show cause as to why penal action under Rule 96ZO(3) of the Central Excise Rules, 1944 (hereinafter to be referred as “the Rules”) read with Section 3A and 38A of the Central Excise Act, 1944 (hereinafter to be referred as “the Act”) be not taken against it for violations of the Rules.
The petitioner was chargeable to duty of excise in terms of Section 3 of the Act on ad valorem basis i.e., duty on value of goods.
Civil Writ Petition No. 1991 of 2009
[2]
However, section 3A was inserted vide Central Act No. 26 of 1997 w.e.f. 14.05.1997 to charge excise duty on the basis of capacity of production in respect of the notified goods. The product manufactured by the petitioner was the one which was chargeable on the basis of annual production capacity in terms of notification dated 25.07.1997 issued in terms of Section 3A of the Act.
On 11.03.2003, the Superintendent, Central Excise, Range V, Mandi Gobindgarh, called upon the petitioner for payment of penalty on failure to discharge duty liability within the prescribed limit under the Rules framed under Section 3A of the Act. The reason to call upon the petitioner was that during September 1997 to March 2000, the petitioner was to discharge duty liability on annual production basis before 15th of the month. It was alleged that since the petitioner has failed to discharge duty liability within the prescribed time limit, therefore, the petitioner is liable to pay penalty amounting to Rs.1,25,00,004/-. The petitioner challenged the said demand by way of appeal before the Commissioner (Appeals), Central Excise, Chandigarh. The said appeal was allowed on 5.8.2003 relying upon a order passed by the CEGAT in another case. However, the appeal against the said order at the instance of Revenue was allowed by the Custom Excise & Service Tax Appellate Tribunal (CESTAT) on 07.05.2004. The order passed by the Commissioner (Appeals) was set aside and the matter remitted to the Commissioner (Appeals) for deciding the same on merit in accordance with law. The Commissioner (Appeals) after remand by CESTAT allowed the appeal on 30.07.2004 and found that the demand of duty raised by the Superintendent vide letter dated 11.03.2003 is not sustainable. Admittedly, Revenue is in appeal before CESTAT and the said
Civil Writ Petition No. 1991 of 2009
[3]
appeal is pending final disposal.
A show cause notice dated 06.12.2006, Annexure P-8, had been issued to the petitioner on the premise that the petitioner has opted to discharge duty liability under Rule 96ZO(3) of erstwhile Central Excise Rules, 1944 read with Section 3A of the Act; that still the petitioner has not deposited the duty and penalty within the prescribed time. The petitioner was, thus, called upon to explain as to why penal action should not be taken against the petitioner.
The petitioner has challenged the said show cause notice before this Court primarily on the ground that the demand on account of late payment of duty amount has been set aside by the Commissioner (Appeals). The matter is pending before the Tribunal at the instance of the Revenue, therefore, the Revenue cannot issue a second show cause notice on the same issue which led to raising of earlier demand against the petitioner. Thus, the show cause notice was said to be illegal, without jurisdiction and an abuse of the process of law.
Mr. Gurpreet Singh, learned Central Government Counsel appearing for the Central Government, during the course of hearing, made a statement that the department shall not take action on the basis of show cause notice Annexure P-8 till such time the matter is pending before the Tribunal.
Having heard learned counsel for the parties at some length, we are of the opinion that issuance of show cause notice Annexure P-8, when the issue regarding payment of penalty on account of late payment of levy in terms of Compounded Levy Scheme is pending consideration before CESTAT, is not sustainable in law. The Commissioner (Appeals) has found
[4]
Civil Writ Petition No. 1991 of 2009
the demand illegal. Till such time the said order of the Commissioner (Appeals) is not modified or reversed by a competent authority, the Revenue cannot be permitted to serve another show cause notice for the same amount and for the same period. Since the basis of the show cause notice is identical to that of an issue pending before the Tribunal, the show cause notice, Annexure P-8, issued by the Revenue is wholly illegal, unwarranted and unjustified. The initiation of proceedings by way of a subsequent show cause notice cannot be sustained in law before the final adjudication by the Tribunal.
Consequently, we allow the present writ petition, quash show cause notice Annexure P-8 with no order as to cost.
( T.S. THAKUR ) ( HEMANT GUPTA ) CHIEF JUSTICE JUDGE
March 17, 2009 khushbir
3 issues framed by the court
Whether the Revenue can issue a second show cause notice for the same penalty demand while the matter is pending final disposal before the Tribunal.
Whether a subsequent show cause notice issued for the same amount and period as an issue pending adjudication is sustainable in law.
Whether the issuance of a show cause notice charging penalty for late payment of compounded levy is legal when the underlying duty demand was set aside by the Commissioner (Appeals).
2 provisions across 2 enactments
M/s Twenty First Century Steels (P) Ltd
Commissioner, Central Excise, Chandigarh
Hemant Gupta
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
