COMMISSIONER OF CENTRAL EXCISE, HALDIA versus M/S. KRISHNA WAX (P) LTD. on 14 November 2019

[2019] 14 S.C.R. 579

COMMISSIONER OF CENTRAL EXCISE, HALDIA

v.

M/S. KRISHNA WAX (P) LTD.

(Civil Appeal No. 8609 of 2019)

NOVEMBER 14, 2019

[UDAY UMESH LALIT AND VINEET SARAN, JJ.]

Central Excise Act, 1944 – ss.3, 4, 6, 11A and 35L – Searchconducted at the registered office and the factory premises of theRespondent by the officers of the Central Excise Commissionerateon the basis that the Respondent manufactured Foots Oil, PressedWax etc. without observing the mandatory procedure and clearingexcise duty – Writ petition filed by the Respondent inter alia objectingthat the department had no authority to proceed in the matter asno manufacturing activity was undertaken – Direction to decidethe preliminary objection first – Show Cause Notice issued by theoffice of the Commissioner of Central Excise, Haldia, inter aliastating that after considering the preliminary objection, theAssistant Commissioner of Central Excise decided to proceed inthe matter and called upon the respondent to show cause as to whyinter alia the amount specified in the notice be not demanded –Respondent filed writ petition stating that the notice was issuedwithout deciding the preliminary objection – Direction to furnishcopy of the Internal Order dated. 15.03.2006 to the respondentby which the preliminary objection was decided – Furnished –Respondent filed appeal challenging the said Order – Appealallowed – Appellant filed appeal before the Tribunal – Dismissed– Held: Respondent had not registered itself and was not payingany excise duty on the products that it was manufacturing – Searchconducted led to the recovery of certain material on the basis ofwhich the Department was considering the matter – At that stage,in the writ petition the order was passed directing the appellant todecide the preliminary objection whether the Department hadjurisdiction to proceed in the matter before deciding any other issueon merits – Provisions of the Act do not contemplate any such primafacie determination to be arrived at and requiring that copy of suchdetermination be submitted to the concerned person and only

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580SUPREME COURT REPORTS

Athereafter to proceed in the matter – Merely because the InternalOrder was communicated to the respondent, it would not afford ita cause of action to file appeal against said Order –Communication of Internal Order was only in obedience of thedirections issued by the High Court –Department justified in notcommunicating the Internal Order on its own – It was not a decisionBor determination which was arrived at in terms of s.11A(10) –Respondent therefore could not have preferred any appeal againstsaid Order – Appellate Authority and the Tribunal failed toappreciate this basic distinction – Appellate order and the orderunder appeal, set aside – Proceedings pursuant to show causeCnotice be taken to logical conclusion – Respondent entitled to putin its response to said show cause notice within three weeks fromthe date of this judgment and also entitled to place such materialon which it seeks to place reliance, in support of its case – Mattershall thereafter be proceeded in accordance with law – ConstitutionDof India – Art.226 – Excise Duty.

Central Excise Act, 1944 – s.11A – Scheme of – Discussed.

Constitution of India – Art.226 – Jurisdiction under, inmatters relating to excise law – Held: Excise law is a complete codein itself and writ petition should normally not be entertainedEagainst mere issuance of show cause notice – Concerned personmust first raise all the objections before the authority who issuedshow cause notice and the redressal in terms of the existingprovisions of the law could be taken resort to if an adverse orderwas passed against such person – Excise Duty.FAllowing the appeal, the Court

Conclusion

HELD: 1. In the present case, the respondent had notregistered itself and was not paying any excise duty on theproducts that it was manufacturing. The search conducted bythe Department at the registered office and the factory premisesGof the respondent led to the recovery of certain material on thebasis of which the Department was considering the matter. Atthat stage, a writ petition was filed in which an order was passedby the High Court on 28.11.2005 directing the appellant todecide whether the Department had jurisdiction to proceed inHthe matter before deciding any other issues on merits. The provisions of the Act do not contemplate any such prima faciedetermination to be arrived at and requiring that a copy of suchdetermination to be submitted to the concerned person and onlythereafter to proceed in the matter. Nonetheless, since adirection was issued by the High Court, the Department indeference to such direction did consider the matter and by anInternal Order dated 15.03.2006 prima facie recorded an opinionthat the authorities under the Act had jurisdiction to proceed inthe matter. Since the provisions of the Act do not contemplateany prima facie determination which must be communicated tothe concerned person, the Department was justified in notcommunicating the Internal Order on its own. The matter wascorrectly assessed by the High Court on the next occasion whenin spite of having directed that a copy of the Internal Order besupplied, it acknowledged that the remedy of the respondent liedin submitting reply to the show cause notice, in which reply itwould be open to the respondent to take objections to thejurisdiction of the appellant to proceed against the respondentunder the provisions of the Act. Merely because the InternalOrder was communicated to the respondent, it would not affordthe respondent a cause of action to file an appeal against saidInternal Order. The communication of said Internal Order wasonly in obedience of the directions issued by the High Court. Itwas not a decision or determination which was arrived at in termsof sub-section 10 of Section 11A. The respondent therefore couldnot have preferred any appeal against said Internal Order dated15.03.2006. The Appellate Authority as well as the Tribunalcompletely failed to appreciate this basic distinction. Whileissuing a show cause notice under Section 11A of the Act, whatis entertained by the Department is only a prima facie view, onthe basis of which the show cause notice is issued. Thedetermination comes only after a response or representation ispreferred by the person to whom the show cause notice isaddressed. As a part of his response, the concerned person maypresent his view point on all possible issues and only thereafterthe determination or decision is arrived at. In the present caseeven before the response could be made by the respondent andthe determination could be arrived at, the matter was carried inappeal against said Internal Order. The appellant was therefore, AB

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Ajustified 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 wouldnormally not be appropriate for a Writ Court to entertain apetition under Article 226 of the Constitution and that theBconcerned person must first raise all the objections before theauthority who had issued a show cause notice and the redressalin terms of the existing provisions of the law could be takenresort to if an adverse order was passed against such person.Writ petition should normally not be entertained against mereissuance of show cause notice. In the present case no show causeCnotice was even issued when the High Court had initiallyentertained the petition and directed the Department to primafacie consider whether there was material to proceed with thematter. [Para 12] [596-B-C-F]

1.3 In the present case, there was no assessment andDcomputation of any duty element. The matter had not gonebeyond the Show Cause Notice. The questions in the matterpertained to the correctness of the view whether there was anyadjudication in the matter and whether the appeal at the instanceof the Respondent was maintainable. The issues involved in theEmatter do not strictly come within the confines of the Circularissued by Ministry of Finance, Department of Revenue, CentralBoard of Indirect Taxes and Customs (Judicial Cell). Theappellate order dated 10.01.2007 and the order under appeal isset aside and it is directed that the proceedings pursuant to showcause notice dated 21.03.2006 be taken to logical conclusion.FThe respondent shall be entitled to put in its response to saidshow cause notice within three weeks from the date of thisjudgment and shall also be entitled to place such material onwhich it seeks to place reliance, in support of its case. Thematter shall thereafter be proceeded with in accordance with law.G[Paras 15, 16] [598-E-G]

GKN Driveshafts (India) Ltd. v. Income Tax Officersand Others (2003) 1 SCC 72 : [2002] 4 Suppl. SCR359 ; Reliance Industries Ltd. v. Collector of CentralExcise 1987 (11) ECR 287 (Tri.-Mumbai) –Hdistinguished.

COMMISSIONER OF CENTRAL EXCISE, HALDIA v.M/S. KRISHNA WAX (P) LTD.

Union of India and Another v. Guwahati CarbonLimited (2012) 11 SCC 651 ; Malladi Drugs andPharma Ltd. v. Union of India 2004 (166) ELT 153(S.C.) – relied on.

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8609of 2019.

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From the Judgment and Order dated 31.05.2017 of the Customs,Excise & Service Tax Appellate Tribunal, Principal Bench at Kolkatain Order No. FO/A/75961/2017 in Appeal No. E/211/07

Ms. Nisha Bagchi, Ms. B. Sunita Rao, Ms. Pooja Sharma,DB. Krishna Prasad, Advs. for the Appellant.

Ms. Christi Jain, Puneet Jain, Harshit Khanduja, Harsh Jain (forMs. Pratibha Jain), for the Respondent.

The Judgment of the Court was delivered by E

UDAY UMESH LALIT, J.

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 bythe Customs, Excise and Service Tax Appellate Tribunal, Kolkata (‘theTribunal’, for short) dismissing Appeal No. E/211/07 preferred by theAppellant herein.

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2. The facts leading to the filing of this Appeal, in brief, are asunder:- (a) On 23.09.2005 a search was conducted at the registeredoffice as well as the factory premises of the RespondentGherein by the officers of the Central ExciseCommissionerate on the basis that the Respondentmanufactured Foots Oil, Pressed Wax, Pressed ParaffinWax without observing the mandatory procedure andclearing Excise Duty. Soon thereafter, Writ Petition No.2073 of 2005 was filed by the Respondent before theH

High Court[1] submitting inter alia that the AssistantCommissioner of Central Excise had no authority toproceed in the matter as no manufacturing activity wasundertaken by the Respondent. The High Court by Orderdated 28.11.2005 directed as under:- A

“Having heard the Learned Advocates appearing forthe parties and considering the facts and circumstancesof the case, I dispose of this petition by directing therespondent No.1 to decide the preliminary objectionraised on behalf of the petitioners regarding thejurisdiction of the respondents to proceed in the matterunder Central Excise Act before deciding any otherissues in this matter on merit.

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Since no affidavit in opposition has been used on behalfof the respondents, all allegations levelled against thesaid respondents in this writ petition should not beDdeemed to be admitted.”

(b) On 21.03.2006 a Show Cause Notice was issued by theoffice of the Commissioner of Central Excise, Haldia,which stated inter alia that in terms of the aforesaiddirections of the High Court, the Assistant CommissionerEof Central Excise had considered the preliminaryobjection and decided to proceed in the matter. It furtherrecited that from the facts available on record itappeared that manufacturing activity was beingundertaken by the Respondent without following dueFprocedure and without paying any Excise Duty. It wasobserved:- E

“Whereas M/s. Krishna Wax (Pvt.) Ltd., having theirRegistered Office at Classic Tower, 10A & 11A Floor,56 Gariahat Road, Kolkata, had filed a writ petition(No.2073 of 2005) in High Court at Calcutta andobtained an order, whereby the respondent, namely,Assistant Commissioner of Central Excise, was todecide preliminary objection regarding jurisdiction toproceed in the matter under Central Excise Act on G

H1 High Court of Judicature at Calcutta

merit and it appears to the respondent that the mattercan be proceeded with under Central Excise Act andwhereas it appears from the facts mentioned below thatM/s. Krishna Was Private Ltd. having theirmanufacturing unit at…..”

After the aforesaid opening recitals, the facts were consideredand finally the Respondent was called upon to show cause :- “i) Why the Central Excise Duty of Rs.1,56,31,712.00 (rupeesone crore fifty six lakhs thirty one thousand seven hundred andtwelve only) Education Cess of Rs.2,11,007.00 (rupees two lakhseleven thousand and seven only as detailed in Annexure-A)should not be demanded and recovered under the extendedproviso to Section 11A of the said Act?

ii) Why interest as applicable at the appropriate rate should notcharged under Section 11 AB of the said Act?

3.6. The “said party” is directed to produce all the evidence uponwhich they intend to rely in support of his defense, when the casewill be heard before the Adjudicating Authority.

3.7 The “said party” should also inform whether they wish tobe heard in person or through authorized representative whenthe case will be posted for hearing.”

(c) The Respondent again approached the High Court byfiling Writ Petition No. 1719 of 2006, which was disposedof on 27.11.2006 by the High Court with followingobservations:- “The show cause notice has mainly been challengedon the ground that notwithstanding an order dated28.11.2005 of this Court (P.K. Chattopadhyay, J.)directing the respondent, Commissioner of CentralExcise, Anti-Evasion Unit to decide the preliminaryobjection raised by the petitioners regarding jurisdictionof the respondents to proceed against the petitionersunder the Central Excise Act, 1944, he said respondenthad not done so. It was alleged that the Show CauseNotice had been issued without deciding the preliminaryobjection of the petitioner.

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Mr. Tarafdar has produced the records pertaining tothe case. It appears that the preliminary objection ofthe petitioners was decided by an order dated 15[th]March, 2006. A copy of the said order shallimmediately be furnished to the petitioner and in anycase within a week from date.

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The petitioners shall submit their reply to the ShowCause Notice impugned within four weeks from date.It will be open to the petitioners to take objection tothe jurisdiction of the concerned Respondents toproceed against the petitioner under the Central ExciseAct, 1944. The adjudication proceedings shall beconducted strictly in accordance with law and incompliance with principles of natural justice.

The writ application is disposed of accordingly.”

(d) Consequently, a copy of the Internal Order dated15.03.2006 was furnished to the Respondent. Withoutfiling any reply to the Show Cause Notice and, adoptingthe course in tune with the observations of the High Courtin its Order dated 27.11.2006, the Respondent chose tofile Appeal No.01/HAL/07 before the Commissioner ofCentral Excise (Appeals-I) Kolkata challenging theaforementioned Internal Order dated 15.03.2006. It wassubmitted that no manufacturing process was beingundertaken by the Respondent. An objection was takenon behalf of the Appellant that the Appeal wascompletely premature as the matter was not yet goneinto; no reply to the Show Cause Notice was filed by theRespondent and there was, as a matter of fact, noadjudication by the concerned authority. The objectionswere rejected by the Appellate Authority observing thatan appeal could lie against any order passed under theAct by a Central Excise Officer lower in rank to theCommissioner. It was further concluded that the processundertaken by the Respondent did not amount tomanufacture as under:- “I, therefore, find that no new produce has emerged.The names are used interchangeably in literature,character is not changed; only by a mechanical processoil has been separated, but still a high oil content hasremained in the wax. Both the raw materials and endproducts are sold to grease manufacturers andlubricant manufacturers. From tariff also no new entrycan be cited for the product. The process involved assuch cannot be called incidental to manufacture.Department has failed to discharge the burden to provemanufacture.”

The appeal was thus allowed by the Appellate Authority videorder dated 10.01.2007.

(e) The Appellant, being aggrieved, filed Appeal No. E/211/07 before the Tribunal, which came to be dismissed byorder dated 31.05.2017. The Tribunal concluded that thedecision dated 15.03.2006 was appealable before theCommissioner (Appeals) under Section 35 of the Act asit entailed civil consequences. It observed:- “12. On perusal of the process as stated hereinabove,we find that the Respondent imported the materialsunder CTH 27129090 & 27129090 amongst others andthe Revenue also classified the processed materialunder the same tariff item. We find that the entireprocess undertaken by the Respondent-assessee ismainly a manual process and there is a marginal useof hydraulic pressure in the process.

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15. In the present case, we find that the imported SlackWax, Residue Wax is in semi-solid form in drums.Foots Oil is part of Residue Wax or Slack Wax beinglighter comes up on surface and siphoned by tilting thedrums. The thinner Slack Wax called Foots Oil is thusseparated. The pressure created by liquid throughorifice for the purpose of exit is known as the hydraulicpressure. Basically, processed materials are emergingfrom the imported materials and the Revenue classified AB

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the processed material under the same Tariff Heading& CTH. The Hon’ble Supreme Court and the Tribunalin various decisions held that such process cannot betreated as manufacture under Section 2(f) of theCentral Excise Act, 1944. Thus, we find force in thefindings of the ld. Commissioner (Appeals).”

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3. We heard Ms. Nisha Bagchi, learned Advocate, in support ofthis Appeal and Ms. Christi Jain, learned Advocate, for the Respondent.

Ms. Bagchi, learned Advocate submitted that the process ofadjudication had never taken place in the matter; there was no responseCto the Show Cause Notice; nothing was submitted by the Respondentdenying or disputing the assertions made in the Show Cause Noticeand the matter was considered by the Appellate Authority and theTribunal from completely incorrect perspective. According to her, incases such as the present one, where the manufacturing process wasDundertaken and the goods were cleared without payment of any ExciseDuty, the Show Cause Notice itself would cover not only the basic issuewhether the process so undertaken amounted to manufacture or notbut also the resultant liability, in case the process in question amountedto manufacture; and it would always be open to the assessee to makesuch submissions touching upon both the issues; and the proper courseEwas to let the proceedings pursuant to the Show Cause Notice, be takento a logical conclusion.

Ms. Christi Jain, learned Advocate for the Respondent submittedthat the Internal Order dated 15.03.2006 had taken a view that theprocess amounted to manufacture and such assessment was arrivedFat without affording any hearing to the Respondent. Said order affectedthe interest of the Respondent adversely and the Respondent wastherefore entitled to challenge the Order dated 15.03.2006. Accordingto her, after due service of said Order dated 15.03.2006, the Respondentwas well within its rights to challenge said Order. In support of herGsubmission, reliance was placed on the decision of this Court in GKNDriveshafts (India) Ltd. v. Income Tax Officers and others[2] andof the decision of the Tribunal in Reliance Industries Ltd. v. Collectorof Central Excise[3].

2 (2003) 1 SCC 72H3 1987(11) ECR 287 (Tri.-Mumbai)

4. The Act was enacted to consolidate and amend the lawrelating to Central Duties of Excise. Section 3 of the Act provides thatduty of excise as prescribed shall be levied and collected on all excisablegoods 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 thesubject of valuation of excisable goods for purposes of charging of dutiesof excise and Section 6 obliges a person who is engaged inter alia inthe production or manufacture of any specified goods to get himselfregistered in such manner as may be prescribed. Section 11A of theAct deals with recovery of duties not levied or not paid or short-leviedor short-paid or erroneously refunded and is to the following effect:- A

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“Section 11A. Recovery of duties not levied or not paidor short-levied or short-paid or erroneously refunded.-

(1) Where any duty of excise has not been levied or paid or hasbeen short-levied or short-paid or erroneously refunded, for anyreason, other than the reason of fraud or collusion or any wilfulmisstatement or suppression of facts or contravention of any ofthe provisions of this Act or of the rules made thereunder withintent to evade payment of duty,- D

(a) the Central Excise Officer shall, within one year from therelevant date, serve notice on the person chargeable withthe duty which has not been so levied or paid or whichEhas been so short-levied or short-paid or to whom therefund has erroneously been made, requiring him to showcause why he should not pay the amount specified in thenotice; F

(b) the person chargeable with duty may, before service ofnotice 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 underGsection 11AA.

(2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of suchpayment in writing, who, on receipt of such information, shall notserve any notice under clause (a) of that sub-section in respect H

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of the duty so paid or any penalty leviable under the provisionsof this Act or the rules made thereunder.

(3) Where the Central Excise Officer is of the opinion that theamount paid under clause (b) of sub-section (1) falls short ofthe amount actually payable, then, he shall proceed to issue thenotice as provided for in clause (a) of that sub-section in respectof such amount which falls short of the amount actually payablein the manner specified under that sub-section and the period ofone year shall be computed from the date of receipt of informationunder sub-section (2).

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(4) Where any duty of excise has not been levied or paid or hasbeen shortlevied or short-paid or erroneously refunded, by thereason of- C

(a) fraud; or

(b) collusion; or

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(c) any wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Act or of therules made thereunder with intent to evade payment ofduty, E

by any person chargeable with the duty, the Central ExciseOfficer shall, within five years from the relevant date, servenotice on such person requiring him to show cause why he shouldnot pay the amount specified in the notice along with interestFpayable thereon under section 11AA and a penalty equivalent tothe duty specified in the notice.

(5) to (7) Omitted[4]

(7A) Notwithstanding anything contained in sub-section (1) orsub-section (3) or sub-section (4), the Central Excise OfficerGmay, serve, subsequent to any notice or notices served under anyof those sub-sections, as the case may be, a statement, containingthe details of duty of central excise not levied or paid or short-levied or short-paid or erroneously refunded for the subsequent period, on the person chargeable to duty of central excise, then,service of such statement shall be deemed to be service of noticeon such person under the aforesaid sub-section (1) or subsection(3) or sub-section (4) or sub-section (5), subject to the conditionthat the grounds relied upon for the subsequent period are thesame as are mentioned in the earlier notice or notices.

(8) Where the service of notice is stayed by an order of a courtor tribunal, the period of such stay shall be excluded in computingthe 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 maybe.

(9) Where any appellate authority or Tribunal or court concludesthat the notice issued under sub-section (4) is not sustainable forthe reason that the charges of fraud or collusion or any wilfulmis-statement or suppression of facts or contravention of anyof the provisions of this Act or of the rules made thereunder withintent to evade payment of duty has not been established againstthe person to whom the notice was issued, the Central ExciseOfficer shall determine the duty of excise payable by such personfor the period of one year, deeming as if the notice were issuedunder clause (a) of sub-section (1).

(10) The Central Excise Officer shall, after allowing theconcerned person an opportunity of being heard, and afterconsidering the representation, if any, made by such person,determine the amount of duty of excise due from such personnot being in excess of the amount specified in the notice.

(11) The Central Excise Officer shall determine the amount ofduty of excise under sub-section (10)- (a) within six months from the date of notice in respect ofcases falling under subsection (1);

(b) within one year from the date of notice, where it is possibleto do so, in respect of cases falling under sub-section (4)

(12) Where the appellate authority or tribunal or court modifiesthe amount of duty of excise determined by the Central ExciseOfficer under sub-section (10), then the amount of penalties andinterest under this section shall stand modified accordingly, takinginto account the amount of duty of excise so modified.

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(13) Where the amount as modified by the appellate authorityor tribunal or court is more than the amount determined undersub-section (10) by the Central Excise Officer, the time withinwhich the interest or penalty is payable under this Act shall becounted from the date of the order of the appellate authority ortribunal or court in respect of such increased amount.

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(14) Where an order determining the duty of excise is passedby the Central Excise Officer under this section, the person liableto pay the said duty of excise shall pay the amount so determinedalong with the interest due on such amount whether or not theamount of interest is specified separately.

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(15) The provisions of sub-section (1) to 14 shall apply, mutatismutandis, to the recovery of interest where interest payable hasnot been paid or part paid or erroneously refunded.

(16) The provisions of this section shall not apply to a case wherethe liability of duty not paid or short-paid is self-assessed andDdeclared as duty payable by the assessee in the periodic returnsfiled by him, and in such case, recovery of non-payment or short-payment of duty shall be made in such manner as may beprescribed.

Explanation 1.-For the purposes of this section and sectionE11AC,- (a) “refund” includes rebate of duty of excise on excisablegoods exported out of India or on excisable materials usedin the manufacture of goods which are exported out ofIndia; F

(b) “relevant date” means,-

(i) in the case of excisable goods on which duty of excisehas not been levied or paid or has been short-levied orshort-paid, and no periodical return as required by theprovisions of this Act has been filed, the last date onGwhich such return is required to be filed under this Actand the rules made thereunder;

(ii) in the case of excisable goods on which duty of excisehas not been levied or paid or has been short-levied orshort-paid and the return has been filed, the date onHwhich such return has been filed;

(iii) in any other case, the date on which duty of excise isrequired to be paid under this Act or the rules madethereunder;

(iv) in a case where duty of excise is provisionally assessedunder this Act or the rules made thereunder, the dateof adjustment of duty after the final assessment thereof;

(v) in the case of excisable goods on which duty of excisehas been erroneously refunded, the date of such refund;

(vi) in the case where only interest is to be recovered, thedate of payment of duty to which such interest relates.

(c) Omitted.

Explanation 2:- For the removal of doubts, it is hereby declaredthat any non-levy, short levy, non-payment, short-payment orerroneous refund where no show cause notice has been issuedbefore the date on which the Finance Bill, 2015 receives theassent of the President, shall be governed by the provisions ofsection 11A as amended by the Finance Act, 2015.”

5. Section 11A thus deals with various facets including non-levyand non-payment of excise duty and contemplates issuance of a showcause notice by the Central Excise Officer requiring the “personchargeable with duty” to show cause why “he should not pay the amountspecified in the notice.” In terms of sub-section 10 of said Section 11A,the concerned person has to be afforded opportunity of being heardand after considering his representation, if any, the amount of duty ofexcise due from such person has to be determined by the Central ExciseOfficer. Without going into other details regarding the period oflimitations and the circumstances under which show cause notice canbe issued, the crux of the matter is that such determination is after theissuance of show cause notice followed by affording of opportunity andconsideration of representation, if any, made by the concerned person.

6. If the process or activity undertaken does not amount tomanufacture or if no duty is payable for any reason including the benefitunder any scheme of exemption holding the field, it shall always be opento the concerned person to project such view point while making anyrepresentation in response to the show cause notice. There can bevariety of cases namely that the process in question does not amountto manufacture; and if it does, the goods would be entitled to avail A

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Abenefit of any prevalent exemption; or that the duty would be chargeableat a rate lesser than the rate at which it was set out in the show causenotice or that the quantity of goods manufactured by the concernedperson was in any way lesser than what was attributed in the showcause notice, or that the benefit of any remission has to be madeavailable etc. All such possible submissions can always be advancedBand considered during the course of hearing pursuant to issuance ofshow cause notice.

7. However, the scheme of Section 11A does not contemplatethat before issuance of any show cause notice, there must, prima facie,be: (a) a preliminary determination that the process or activityCundertaken in the matter amounts to manufacture; and (b) beforearriving at such preliminary determination, any hearing to the concernedperson is contemplated. In other words, there is no segregation of thematter at different stages and all the possible contours of the matterincluding whether the process in question amounts to manufacture ornot are to be gone into while considering the response to the show causeDnotice itself. It is only after considering all the relevant aspects of thematter that the final determination under sub-section 10 of Section 11Ais to be arrived at.

8. The issuance of show cause notice under Section 11A alsohas some significance in the eyes of law. The day the show cause noticeEis issued, becomes the reckoning date for various issues including theissue of limitation. If we accept the submission of the respondent thata prima facie view entertained by the department whether the matterrequires to be proceeded with or not is to be taken as a decision ordetermination, it will create an imbalance in the working of variousprovisions of Section 11A of the Act including periods of limitation. ItFwill be difficult to reckon as to from which date the limitation has to becounted.

9. In the present case, the respondent had not registered itselfand was not paying any excise duty on the products that it wasmanufacturing. The search conducted by the Department at theGregistered office and the factory premises of the respondent led to therecovery of certain material on the basis of which the Department wasconsidering the matter. At that stage, a writ petition was filed in whichan order was passed by the High Court on 28.11.2005 directing theappellant to decide whether the Department had jurisdiction to proceedHin the matter before deciding any other issues on merits. As stated above, the provisions of the Act do not contemplate any such primafacie determination to be arrived at and requiring that a copy of suchdetermination to be submitted to the concerned person and onlythereafter to proceed in the matter. Nonetheless, since a direction wasissued by the High Court, the Department in deference to such directiondid consider the matter and by an Internal Order dated 15.03.2006prima facie recorded an opinion that the authorities under the Act hadjurisdiction to proceed in the matter. Since the provisions of the Act donot contemplate any prima facie determination which must becommunicated to the concerned person, the Department was justifiedin not communicating the Internal Order on its own. The matter wascorrectly assessed by the High Court on the next occasion when inspite of having directed that a copy of the Internal Order be supplied,it acknowledged that the remedy of the respondent lied in submittingreply to the show cause notice, in which reply it would be open to therespondent to take objections to the jurisdiction of the appellant toproceed against the respondent under the provisions of the Act.

10. The communication of the Internal Order dated 15.03.2006was only in deference to the order passed by the High Court. At thecost of repetition, it must be stated that neither the Act contemplatesany such prima facie determination which must be communicated onlywhereafter the proceedings could be initiated nor was such courseundertaken by the Department on its own. Therefore, merely becausethe Internal Order was communicated to the respondent, it would notafford the respondent a cause of action to file an appeal against saidInternal Order. The communication of said Internal Order was only inobedience of the directions issued by the High Court. It was not adecision or determination which was arrived at in terms of sub-section10 of Section 11A. The respondent therefore could not have preferredany appeal against said Internal Order dated 15.03.2006. The AppellateAuthority as well as the Tribunal, in our view, completely failed toappreciate this basic distinction.

11. It must be noted that while issuing a show cause notice underSection 11A of the Act, what is entertained by the Department is onlya prima facie view, on the basis of which the show cause notice isissued. The determination comes only after a response or representationis preferred by the person to whom the show cause notice is addressed.As a part of his response, the concerned person may present his viewpoint on all possible issues and only thereafter the determination or AB

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Adecision is arrived at. In the present case even before the responsecould be made by the respondent and the determination could be arrivedat, the matter was carried in appeal against said Internal Order. Theappellant was therefore, justified in submitting that the appeal itself waspre-mature.

B12. It has been laid down by this Court that the excise law is acomplete code in itself and it would normally not be appropriate for aWrit Court to entertain a petition under Article 226 of the Constitutionand that the concerned person must first raise all the objections beforethe authority who had issued a show cause notice and the redressal interms of the existing provisions of the law could be taken resort to ifCan adverse order was passed against such person. For example inUnion of India and another vs. Guwahati Carbon Limited[5], it wasconcluded; “The Excise Law is a complete code in order to seekredress in excise matters and hence may not be appropriate for thewrit court to entertain a petition under Article 226 of the Constitution”,Dwhile in Malladi Drugs and Pharma Ltd. vs. Union of India[6], it wasobserved:- “…The High Court, has, by the impugned judgment held that theAppellant should first raise all the objections before the Authoritywho have issued the show cause notice and in case any adverseEorder is passed against the Appellant, then liberty has been grantedto approach the High Court…

…in our view, the High Court was absolutely right in dismissingthe writ petition against a mere show cause notice.”

It is thus well settled that writ petition should normally not beFentertained against mere issuance of show cause notice. In the presentcase no show cause notice was even issued when the High Court hadinitially entertained the petition and directed the Department to primafacie consider whether there was material to proceed with the matter.

13. We now deal with the decisions relied upon by Ms. Jain,Glearned counsel for the appellant. The decision of this Court in GKNDriveshafts (India) Ltd.[2] was in the context of Section 148 of theIncome Tax Act. Said Section 148 itself contemplates that the AssessingOfficer shall, before issuing any notice under said Section 148, record 5 (2012) 11 SCC 651H6 2004 (166) ELT 153 (S.C.)

COMMISSIONER OF CENTRAL EXCISE, HALDIA v.M/S. KRISHNA WAX (P) LTD. [UDAY UMESH LALIT, J.]

his reasons for issuing such notice. In the backdrop of such requirement,this Court had observed:- “5. We see no justifiable reason to interfere with the order underchallenge. However, we clarify that when a notice under Section148 of the Income Tax Act is issued, the proper course of actionfor the noticee is to file return and if he so desires, to seek reasonsfor issuing notices. The assessing officer is bound to furnishreasons within a reasonable time. On receipt of reasons, thenoticee is entitled to file objections to issuance of notice and theassessing officer is bound to dispose of the same by passing aspeaking order. In the instant case, as the reasons have beendisclosed in these proceedings, the assessing officer has todispose of the objections, if filed, by passing a speaking order,before proceeding with the assessment in respect of theabovesaid five assessment years.”

The decision of the Tribunal in the case of Reliance IndustriesLtd.[3]was also in a completely different context. The order of theCollector dated 03.03.1986 which was subject matter of appeal in thatcase, was a record of a personal hearing in the course of theadjudication proceeding that was communicated to the assessee. It wastherefore concluded that an appeal against such order would bemaintainable. The point of distinction is that it was communicated bythe Department during the course of adjudication proceedings whereasin the present matter there was no such communication by theDepartment on its own and the order dated 19.03.2016 was not a partof any adjudication proceedings. The proceedings would have begunonly after the issuance of show cause notice under Section 11A of theAct.

14. We must at this stage refer to an aspect which was projectedafter the judgment was reserved in the matter. By filing an applicationfor directions, attention of the Court was invited to Circular dated22.08.2019 issued by Ministry of Finance, Department of Revenue,Central Board of Indirect Taxes and Customs (Judicial Cell), the relevantportion of which is to the following effect:- “In exercise of the powers conferred by Section 35R of theCentral Excise Act, 1944 and made applicable to Service Taxvide Section 83 of the Finance Act, 1994, the Central Board ofindirect Taxes and Customs fixes the following monetary limits A

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Abelow which appeal shall not be filed in the CESTAT, High Courtsand Supreme Court.

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2. This instruction applies only to legacy issues i.e. mattersrelating to Central Excise and Service Tax, and will apply topending cases as well.

3. Withdrawal process in respect of pending cases in aboveCforums, as per the above revised limits, will follow the currentpractice that is being followed for the withdrawal of cases fromthe Supreme Court, High Courts and CESTAT. All other termsand conditions of concerned earlier instructions will continue toapply.

D4. It may be noted that issues involving substantial questions oflaw as described in para1.3 of the instruction dt 17.08.2011 fromF.No.390/Misc/163/2010-JC would be contested irrespective ofthe prescribed monetary limits.”

15. In the present case, there was no assessment and computation Eof any duty element. The matter had not gone beyond the Show CauseNotice. The questions in the matter pertained to the correctness of theview whether there was any adjudication in the matter and whetherthe appeal at the instance of the Respondent was maintainable. In ourview the issues involved in the matter do not strictly come within theconfines of the aforesaid Circular.F

16. We therefore allow this appeal, set aside the appellate orderdated 10.01.2007 and the order under appeal and direct that theproceedings pursuant to show cause notice dated 21.03.2006 be takento logical conclusion. The respondent shall be entitled to put in itsresponse to said show cause notice within three weeks from the dateGof this judgment and shall also be entitled to place such material onwhich it seeks to place reliance, in support of its case. The matter shallthereafter be proceeded with in accordance with law.

17. The appeal stands allowed in aforesaid items. No costs.

HDivya Pandey