While the Central Board of Direct Taxes recently got a go -ahead from the Supreme Court for its showcause notice to Vodafone, the Central Board of Excise and Customs (CBEC) has displeased the apex court by providing insufficient details in its showcause notices sent to defaulting assessees. The Supreme Court has dismissed the case.
Taking note of the ruling, CBEC chairman, PC Jha, has now sent a missive to field formations of the excise department, asking them to follow due diligence while sending such notices. Officials have been
directed to examine the process of manufacturing and providing cogent reasons before sending such showcause notices seeking payment of excise duty.
Quoting the apex court’s judgement, the CBEC chairman, in his letter, has instructed field formations that whereever excisability of a product is an issue, they must examine the process of manufacturing and the product itself. Their findings should then be incorporated in the showcause notice to strengthen their stance, the letter said.
The Supreme Court’s decision comes in the wake of Shanmugananda Soapnut Works taking on the commissioner of Central Excise, Bangalore, where the court refused to interfere, “for want of allegations in the show cause notice and for want of specific findings…”
The assessee, a cosmetic company, manufactures Shikhakai powder by crushing shigekai pods. Contending that a herbal material—reeta— was also mixed in the powder and deeming it as a manufacturing process, the Bangalore division of the central excise department served it a showcause notice for payment of excise duty.
But the notice failed to mention the details of the manufacturing process, on the basis of which the department had sought the payment of excise duty. The Court, in its ruling, observed that the adjudicating authority did not insist on examining the process undertaken by the assessee in conversion of pods into powder and asked the department to examine the manufacturing process in future before serving a showcause notice.
