Case: Commnr. Central Excise &amp; Customs, Mumbai &amp; Others Vs. M/s. I.T.C. Ltd. &amp; Others

2. M/s. ITC Ltd., Respondent No. 1 herein manufactures cigarettes. It gets the work done also by way of job work through various factories. These factories inter alia belonged to M/s. Master Tobacco Company situated at 36/40, Mahalaxmi Birdege Arcade, Mahalaxmi Road, Mumbai and M/s. Crown Tobacco Co. situated at 9, St. John Baptist Road, Bandara, Mumbai. A provisional price list was issued by the Department for the period 1.3.1973 to 28.2.1983.3. It appears that their existed a dispute as regards mode of valuation for the purpose of levy of excise duty. By a judgment and order dated 19.7.1995, this Court opined that excise duty should be paid on the wholesale dealers price to their customers and not on the price of Respondent No. 1 to its wholesale dealers.4. A show cause notice was issued on 10.4.1986 as to why Respondent and its wholesale dealers, being related persons, the cost of Corrugated Fibre Containers (CFCs) should not be added to the manufacturing cost. A show cause notice was also issued on 10/11.8.1983 asking the respondent to show cause as to why differential duty of Rs. 57,22,63,857.70 for the period from 1.7.1980 to 31.3.1982 shall not be directed to be paid. Another notice was issued on 8.10.1984 demanding the differential duty of Rs. 43,53,137.70 for the period 1.4.1982 to 30.6.1983. One show cause notice was furthermore issued on 13.4.1987 demanding Rs. 34 crores claiming freight, administrative charges collected by Respondent herein to be added as additional consideration.5. Indisputably, the issue between the parties as regards valuation of the goods was decided in favour of Respondent by CEGAT by an order dated 18.3.1994.6. By reason of the order dated 30.8.1996, the assessees contention that the show cause notices issued prior to finalization of the provisional assessment was invalid had been rejected by the adjudicating authorityThe contention of the noticees that the show cause under consideration is invalid on the ground that it has been issued prior to the finalization of the provisional assessment is not sustainable in law or on facts and hence it is rejected.(ii) The Assistant Commissioner of Central Excise concerned or any other officer who is competent to make final assessment in the case under the relevant provisions of the Central Excise & Salt Act read with the Rules made thereunder will finalize the pending provisional assessment in respect of each of the three notices as per law for the period covered in the show cause notice involved in the present proceedings. The said competent authority while finalizing the provisional assessment as aforesaid is entitled and at liberty to proceed with any enquiry for the purpose of making final assessment in this case. Nothing prevents the said competent authority for the purpose of making the final assessment from utilizing any material collected by the Deptt. and that such material does not cease to be available to the said competent authority by reason alone of the circumstances that such material had been referred to and incorporated in the show cause notice involved in the present proceedings. The material contained in the said notice can be used as independent material to support final assessment, after affording an opportunity to the noticees concerned to meet the case and after considering the cause shown. The finalization of provisional assessment as aforesaid should be completed as expeditiously as possible.(iii) The said competent authority is further directed to intimate the Adjudicating Authority (CCE, Delhi) as soon as he completes the finalization of the said provisional assessment. After that, this show cause notice involved in the present proceedings will be taken up for adjudication by the said Adj. Authority.Yet again on 13.9.1996, the adjudicating authority passed an order in Original No. 6/1996. The final order of assessment was passed on 16.12.1997. An appeal was preferred thereagainst which was marked as Appeal No. 267/M-I/98.8. Yet again a show cause notice during pendency of the said appeal was issued on 31.3.1998, , purported to be in terms of order dated 16.12.1997 whereby Respondent No. 1 was asked to make payment of the differential duty amounting to Rs.1,38,00,035.76. An appeal was preferred against the said second show cause notice as also the demand notice dated 31.3.1998 before the Commissioner (Appeals) which was registered as 571/M-I/98. On an application filed therein for waiver of the requirements of pre-deposit of duty demanded and stay of operation of the said notice of demand during pendency of the appeal, by an order dated 29.12.1998, the Commissioner (Appeals) directed Respondent to deposit an amount of 50% of the disputed duty demanded, as a condition precedent for entertaining the appeals within a period of 15 days therefore. Against the said order, a writ petition was filed before the High Court of Bombay which was allowed by an order dated 22.1.1999 directing the Commissioner (Appeals) to dispose of the stay application afresh by a speaking order within six weeks.9. The Commissioner (Appeals) by a common order dated 26.2.1999 disposed of both the appeals and set aside the order of Assistant Commissioner and the Superintendent upon remitting the matter back to the Commissioner.10. Against the said order also Respondent preferred an appeal before the Tribunal bearing No. E/3234/99 which was dismissed as withdrawn on 15.11.2000. Respondent No. 1 and M/s. Master Tobacco Co. thereafter filed appeals for setting asideShow Cause Notice dated 21.10.1987 issued to Respondent No. 1 for undervaluation during the period from 1.11.1979 to 28.2.1983;(ii) Order in Original No. 5/1996 dated 30.8.1996 and 6/96 dated 13.9.1996 directing jurisdiction Assistant Commissioner to finalize provisional assessment;(iii) Order in Original No. 38/2000 of the Commissioner (Appeals) Delhi dated 29.12.2000 issued in respect of Show Cause Notice dated 21.10.1987;(iv) Show Cause Notices dated 10/11.8.1983 and 8.10.1984 for under valuation;(v) Order in Original No. 6/96 dated 13.9.1996 directing Asst. Commissioner to finalise provisional assessment;(vi) Order in Original No. 8/99 of the Commissioner (Appeals), Delhi dated 30.9.1999 issued in respect of show cause notices dated 10/11.8.1983 and 8.10.1984;(vii) Order of the Commissioner (Appeals) dated 31.7.2002 on the grounds that Show Cause Notices were issued during pendency of provisional assessment.Appellant also preferred an appeal before the Tribunal against the order dated 31.7.2002 of the Commissioner (Appeals) whereby the appeal by the Department against the order in Original No. 254/2000 dated 22.9.2000 for finalization of provisional assessment in respect of Respondent No. 1 whereby and whereunder it was held that Respondent had paid a sum of Rs. 85 lakhs duty in excess was dismissed.12. These appeals were heard by the Tribunal and by a final order dated 18.6.2004, it set aside the show causes notices issued and orders in Original inter alia on a finding that the same could not have been done during pendency of proceedings for final assessment.13. Appellants are, thus, before us.

Court's reasoning:
23. Concededly, in terms of the provisions of the Act and the Rules framed thereunder, the amount becomes payable only in the event, the assessee does not deposit the amount levied within a period of ten days from the date of completion of the order of assessment. A provisional assessment is made in terms of Rule 9B inter alia at the instance of the assessee. Such a recourse is resorted to only when the conditions laid down therein are satisfied, viz., where the assessee is found to be unable to produce any document or furnish any information necessary for assessment of duty on any excisable good.24. Whereas provisional duty is levied in terms of Sub-Rule (1) of Rule 9B, final assessment is contemplated under Sub-Rule (5) thereof by reason of which the duty provisionally assessed shall be adjusted against the duty finally assessed and in the event, the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee will pay the deficiency or will be entitled to a refund, as the case may be. Ultimately, thus, the liability of the assessee would depend upon the undertaking of exercises by the assessing officer to complete the assessment proceeding as contemplated under the Rules.25. On a plain reading of the provisions of the Act and the Rules framed thereunder, we have no doubt in our mind that the Tribunal was correct in its finding that the impugned show cause notices were illegal.