In case of composite Show cause Notice in respect of two Assessees, There is no rule or principle that authorizes the apportionment of liability based upon past figures
Modern Industrial Enterprises (MIE) and Florida Electrical Industries Ltd. (FIEL) (collectively referred to as ‘the Assessees’ were subject to independent search operations by the Central Excise Authorities on September 22, 2001, wherein Clandestine removal of excisable goods was ascertained and some material was seized. Therefore, the Revenue vide Show Cause Notice (the SCN) dated March 25, 2003 sought duty on such clandestine removal and also imposed penalty.
The Assessees contended that the SCN issued by the Ld. Commissioner lacked the jurisdiction. Further, without attributing
the extent of clandestine removal alleged in respect of each unit specifically, duty liability could not be imposed. However, the Ld. Commissioner vide Order dated June 30, 2004 confirmed the demand raised in the SCN.
Being aggrieved, the Assessees preferred an appeal before the Hon’ble Tribunal. The Hon’ble Tribunal upheld the contentions of the Assessees and set aside the demand raised in the Order of the Ld. Commissioner. It was held by the Hon’ble Tribunal that the Commissioner of Central Excise, Delhi-I could not issue the SCN against FEIL as FEIL falls within the jurisdiction of the Central Excise Commissioner, Delhi-II. Further, without attributing the actual removals and working out the duty liability on the basis of the past production of goods is untenable. In other words, since it was not possible to arrive at the value of clearances separately between MIE and FEIL, duty demanded could not be confirmed.
Being aggrieved, the Revenue preferred an appeal before Hon’ble High Court of Delhi. The Hon’ble High Court allowed the appeal in favour of the Respondents in regard to the duty demanded on clandestine removal by remanding the same on merits and decided the jurisdiction issue involved in favour of the Revenue along with the following observations:
- Issuing of the SCN in a composite manner to two parties ipso facto did not vitiate the proceedings. However, if at the stage of determination of liability or at the final stage, it was open to the Commissioner to ascribe one figure or the other, to each of the parties, that course ought to have been adopted;
- There is no rule or principle that authorizes the apportionment of liability based upon the past figures;
- As regards the issue of jurisdiction, the Assessees’ submission that upon the issuance of Notification No. 14/2002-CE(NT) dated March 8, 2002, legality of investigations stood protected but upon the ceasing of such proceedings, the appropriate Commissioner necessarily had to exercise jurisdiction is textual and narrow. In tax proceedings, such as the present one, there is certain seamlessness to the entire process, and splitting up that into different stages, i.e., investigation, adjudication, etc., and the spelling up of the process would defeat the underlying object of Section 38A of the Central Excise Act, 1944 (“Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not—(a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect, and lead to startling as well as anomalous results…”) and would lead to startling as well as anomalous results.
Accordingly, the Hon’ble High Court held that the matter requires to be re-examined on the merits of the clandestine removal and directed that the Tribunal may, depending upon the submissions made and the extent of materials available with it, take such course, as is available in law, for this purpose, after giving due opportunity to both the parties.