Case: Madhu Milan Syntex Pvt. Limited and another Vs. Union of India and others

these cases have no relevance in considering the questions before us because it is quite apparent that in the present case no urgent or emergent action was required and Section 11-A of the Central Excises Act clearly provides that prior show cause notice must be issued to the person against whom any demand on ground of short levy or non-levy of payment of excise duty is proposed to be made. In Gokak Patel Volkart Ltd. v. Collector of Central Excise [(1987) 2 SCC 93 : AIR 1987 SC 1161 : 1987 SCC (Tax) 165] this Court has held that the provisions of Section 11-A(1) and (2) of Central Excises and Salt Act, 1944 make it clear that the statutory scheme is that in the situations covered by sub-section (1), a notice of show cause has to be issued and sub-section (2) requires that the cause shown by way of representation has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice. An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order. Notice is thus a condition precedent to a demand under sub-section (2). 6. In view of the aforesaid decision the submission of Mr. Gobind Das must be rejected and it must be held that the aforesaid notice of demand was clearly bad in law and the High Court was fully, with respect, justified in quashing the same. 7. The next submission of Mr. Gobind Das was that, in any event, as the Collector of Central Excise (Appeals) had been directed to examine the merits of the matter in respect of alleged short levy or non-levy and the modification of the classification lists after allowing adequate opportunity to the petitioners to show cause in respect of the period from February 7, 1984, onwards, the question as to whether there was short levy or non-levy in respect of the period from August 15, 1983 to February 6, 1984 should also be allowed to be decided by the Collector. It was submitted by Mr Gobind Das that although the notice of demand may be set aside the notice to show cause dated February 9/10, 1984 should be treated as a valid and effective notice in respect of the period from August 15, 1983 to February 6, 1984 as well as the period from February 7, 1984 onwards. In this connection, it is the submission of Dr Chitale that this notice merely asked the petitioners to show cause against calculation or determination of the amount of short levy and not against the alteration in the classification lists on the basis of which short levy was alleged and hence, in respect of the said period from August 15, 1983 to February 6, 1984 the show cause notice is liable to be struck down. In our view the submission of Dr Chitale deserves to be accepted. The opening paragraph of the show cause notice refers to the service of notice of demand dated February 7, 1984 for Rs. 26, 47, 794.39 on the petitioner. Paragraphs 2 and 3 of the said notice run as followsAnd whereas the Assistant Collector Central Excise, Ujjain under his letter C. N. V(18)III/I/1/83/1371-1374 dated February 9, 1984 has modified approval of the classification lists of the party and has directed that the short levy should be quantified by the Inspector, Central Excise, Biaora/Superintendent Central Excise, Ujjain and confirmation or otherwise of such short levy and recoveries if any would be ordered by him (Assistant Collector, Central Excise Division, Ujjain) after following the prescribed procedure. Therefore, in accordance with the said order of the Assistance Collector, Central Excise Division, Ujjain, you are called upon to show cause to the Assistant Collector, Central Excise, Ujjain within 10 days of the receipt of this show cause notice as to why the short levies of Rs. 26, 47, 749.39 should not be recovered form you, under Section 11-A of the Central Excise and Salt Act, 1944. 8. A reading of these paragraphs clearly shows that the notice set out as an established fact that the classification lists submitted by the petitioners had been modified by the Assistant Collector, Central Excise, Ujjain and the only matter with respect to which the petitioners were asked to show cause was with regard to the quantification of the amount of the short levy and consequently, the amount which was liable to be recovered form petitioner 1. This notice, therefore, cannot be regarded as a show cause notice against the modification of the classification lists in respect of the aforesaid period. In these circumstances, the show cause notice is bad in law and of no legal effect as far as the said earlier period is concerned. Under Section 11-A of the Central Excise Act, the notice can relate only to a period of six months prior to the issue of that notice except in cases where it is alleged the short levy or short payment has occurred by reason of fraud, collusion or wilful misrepresentation or suppression of facts or contravention of the provisions of the said Act or rules made by the period concerned, as contemplated in the proviso to sub-section (1) of Section 11-A. No such case has been sought to be made here in the said show cause notice. The result is that the said show cause notice must be struck down insofar as period up to February 6, 1984 is concerned, and can be regarded as a proper show cause notice only in respect of the subsequent period from February 7, 1984 onwards. We are, therefore, of the view that under the said show cause notice the question of short levy or non-levy of excise duty prior to February 6, 1984 cannot be gone into by the Collector and the High Court was right in the view which it took.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are of the view these cases have no relevance in considering the questions before us because it is quite apparent that in the present case no urgent or emergent action was required and Section 11-A of the Central Excises Act clearly provides that prior show cause notice must be issued to the person against whom any demand on ground of short levy or non-levy of payment of excise duty is proposed to be made. In Gokak Patel Volkart Ltd. v. Collector of Central Excise [(1987) 2 SCC 93 : AIR 1987 SC 1161 : 1987 SCC (Tax) 165] this Court has held that the provisions of Section 11-A(1) and (2) of Central Excises and Salt Act, 1944 make it clear that the statutory scheme is that in the situations covered by sub-section (1), a notice of show cause has to be issued and sub-section (2) requires that the cause shown by way of representation has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice. An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order. Notice is thus a condition precedent to a demand under sub-sectionIn view of the aforesaid decision the submission of Mr. Gobind Das must be rejected and it must be held that the aforesaid notice of demand was clearly bad in law and the High Court was fully, with respect, justified in quashing thein accordance with the said order of the Assistance Collector, Central Excise Division, Ujjain, you are called upon to show cause to the Assistant Collector, Central Excise, Ujjain within 10 days of the receipt of this show cause notice as to why the short levies of Rs. 26, 47, 749.39 should not be recovered form you, under Section 11-A of the Central Excise and Salt Act,A reading of these paragraphs clearly shows that the notice set out as an established fact that the classification lists submitted by the petitioners had been modified by the Assistant Collector, Central Excise, Ujjain and the only matter with respect to which the petitioners were asked to show cause was with regard to the quantification of the amount of the short levy and consequently, the amount which was liable to be recovered form petitioner 1. This notice, therefore, cannot be regarded as a show cause notice against the modification of the classification lists in respect of the aforesaid period. In these circumstances, the show cause notice is bad in law and of no legal effect as far as the said earlier period is concerned. Under Section 11-A of the Central Excise Act, the notice can relate only to a period of six months prior to the issue of that notice except in cases where it is alleged the short levy or short payment has occurred by reason of fraud, collusion or wilful misrepresentation or suppression of facts or contravention of the provisions of the said Act or rules made by the period concerned, as contemplated in the proviso to sub-section (1) of Section 11-A. No such case has been sought to be made here in the said show cause notice. The result is that the said show cause notice must be struck down insofar as period up to February 6, 1984 is concerned, and can be regarded as a proper show cause notice only in respect of the subsequent period from February 7, 1984 onwards. We are, therefore, of the view that under the said show cause notice the question of short levy or non-levy of excise duty prior to February 6, 1984 cannot be gone into by the Collector and the High Court was right in the view which it took