Case: Commissioner of Central Excise, Haldia Vs. Krishna Wax Ltd

2. The facts leading to the filing of this Appeal, in brief, are asOn 23.09.2005 a search was conducted at the registered office as well as the factory premises of the Respondent herein by the officers of the Central Excise Commissionerate on the basis that the Respondent manufactured Foots Oil, Pressed Wax, Pressed Paraffin Wax without observing the mandatory procedure and clearing Excise Duty. Soon thereafter, Writ Petition No. 2073 of 2005 was filed by the Respondent before the High Court High Court of Judicature at Calcutta submitting inter alia that the Assistant Commissioner of Central Excise had no authority to proceed in the matter as no manufacturing activity was undertaken by the Respondent. The High Court by Order dated 28.11.2005 directed asheard the Learned Advocates appearing for the parties and considering the facts and circumstances of the case, I dispose of this petition by directing the respondent No.1 to decide the preliminary objection raised on behalf of the petitioners regarding the jurisdiction of the respondents to proceed in the matter under Central Excise Act before deciding any other issues in this matter onno affidavit in opposition has been used on behalf of the respondents, all allegations levelled against the said respondents in this writ petition should not be deemed to beOn 21.03.2006 a Show Cause Notice was issued by the office of the Commissioner of Central Excise, Haldia, which stated inter alia that in terms of the aforesaid directions of the High Court, the Assistant Commissioner of Central Excise had considered the preliminary objection and decided to proceed in the matter. It further recited that from the facts available on record it appeared that manufacturing activity was being undertaken by the Respondent without following due procedure and without paying any Excise Duty. It wasM/s. Krishna Wax (Pvt.) Ltd., having their Registered 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 and obtained an order, whereby the respondent, namely, Assistant Commissioner of Central Excise, was to decide preliminary objection regarding jurisdiction to proceed in the matter under Central Excise Act on merit and it appears to the respondent that the matter can be proceeded with under Central Excise Act and whereas it appears from the facts mentioned below that M/s. Krishna Was Private Ltd. having their manufacturing unitthe aforesaid opening recitals, the facts were considered and finally the Respondent was called upon to show causeWhy the Central Excise Duty of Rs.1,56,31,712.00 (rupees one crore fifty six lakhs thirty one thousand seven hundred and twelve only) Education Cess of Rs.2,11,007.00 (rupees two lakhs eleven thousand and seven only as detailed in Annexure-A) should not be demanded and recovered under the extended proviso to Section 11A of the saidThe ?said party? is directed to produce all the evidence upon which they intend to rely in support of his defense, when the case will be heard before the AdjudicatingThe ?said party? should also inform whether they wish to be heard in person or through authorized representative when the case will be posted forThe Respondent again approached the High Court by filing Writ Petition No. 1719 of 2006, which was disposed of on 27.11.2006 by the High Court with followingshow cause notice has mainly been challenged on the ground that notwithstanding an order dated 28.11.2005 of this Court (P.K. Chattopadhyay, J.) directing the respondent, Commissioner of Central Excise, Anti-Evasion Unit to decide the preliminary objection raised by the petitioners regarding jurisdiction of the respondents to proceed against the petitioners under the Central Excise Act, 1944, he said respondent had not done so. It was alleged that the Show Cause Notice had been issued without deciding the preliminary objection of the petitioner.Mr. Tarafdar has produced the records pertaining to the case. It appears that the preliminary objection of the petitioners was decided by an order dated 15 th March, 2006. A copy of the said order shall immediately be furnished to the petitioner and in any case within a week fromhe petitioners shall submit their reply to the Show Cause Notice impugned within four weeks from date. It will be open to the petitioners to take objection to the jurisdiction of the concerned Respondents to proceed against the petitioner under the Central Excise Act, 1944. The adjudication proceedings shall be conducted strictly in accordance with law and in compliance with principles of naturalwrit application is disposed ofConsequently, a copy of the Internal Order dated 15.03.2006 was furnished to the Respondent. Without filing any reply to the Show Cause Notice and, adopting the course in tune with the observations of the High Court in its Order dated 27.11.2006, the Respondent chose to file Appeal No.01/HAL/07 before the Commissioner of Central Excise (Appeals-I) Kolkata challenging the aforementioned Internal Order dated 15.03.2006. It was submitted that no manufacturing process was being undertaken by the Respondent. An objection was taken on behalf of the Appellant that the Appeal was completely premature as the matter was not yet gone into; no reply to the Show Cause Notice was filed by the Respondent and there was, as a matter of fact, no adjudication by the concerned authority. The objections were rejected by the Appellate Authority observing that an appeal could lie against any order passed under the Act by a Central Excise Officer lower in rank to the Commissioner. It was further concluded that the process undertaken by the Respondent did not amount to manufacture astherefore, find that no new produce has emerged. The names are used interchangeably in literature, character is not changed; only by a mechanical process oil has been separated, but still a high oil content has remained in the wax. Both the raw materials and end products are sold to grease manufacturers and lubricant manufacturers. From tariff also no new entry can be cited for the product. The process involved as such cannot be called incidental to manufacture. Department has failed to discharge the burden to proveappeal was thus allowed by the Appellate Authority vide order datedThe Appellant, being aggrieved, filed Appeal No. E/211/07 before the Tribunal, which came to be dismissed by order dated 31.05.2017. The Tribunal concluded that the decision dated 15.03.2006 was appealable before the Commissioner (Appeals) under Section 35 of the Act as it entailed civil consequences. ItOn perusal of the process as stated hereinabove, we find that the Respondent imported the materials under CTH 27129090 & 27129090 amongst others and the Revenue also classified the processed material under the same tariff item. We find that the entire process undertaken by the Respondent-assessee is mainly a manual process and there is a marginal use of hydraulic pressure in the process. … …In the present case, we find that the imported Slack Wax, Residue Wax is in semi-solid form in drums. Foots Oil is part of Residue Wax or Slack Wax being lighter comes up on surface and siphoned by tilting the drums. The thinner Slack Wax called Foots Oil is thus separated. The pressure created by liquid through orifice for the purpose of exit is known as the hydraulic pressure. Basically, processed materials are emerging from the imported materials and the Revenue classified the processed material under the same Tariff Heading & CTH. The Hon?ble Supreme Court and the Tribunal in various decisions held that such process cannot be treated as manufacture under Section 2(f) of the Central Excise Act, 1944. Thus, we find force in the findings of the ld. Commissioner (Appeals).?

Court's reasoning:
Without going into other details regarding the period of limitations and the circumstances under which show cause notice can be issued, the crux of the matter is that such determination is after the issuance of show cause notice followed by affording of opportunity and consideration of representation, if any, made by the concerned person.The issuance of show cause notice under Section 11A also has some significance in the eyes of law. The day the show cause notice is issued, becomes the reckoning date for various issues including the issue of limitation. If we accept the submission of the respondent that a prima facie view entertained by the department whether the matter requires to be proceeded with or not is to be taken as a decision or determination, it will create an imbalance in the working of various provisions of Section 11A of the Act including periods of limitation. It will be difficult to reckon as to from which date the limitation has to be counted.In the present case, the respondent had not registered itself and was not paying any excise duty on the products that it was manufacturing. The search conducted by the Department at the registered office and the factory premises of the respondent led to the recovery of certain material on the basis of which the Department was considering the matter. At that stage, a writ petition was filed in which an order was passed by the High Court on 28.11.2005 directing the appellant to decide whether the Department had jurisdiction to proceed in the matter before deciding any other issues on merits. As stated above, the provisions of the Act do not contemplate any such prima facie determination to be arrived at and requiring that a copy of such determination to be submitted to the concerned person and only thereafter to proceed in the matter. Nonetheless, since a direction was issued by the High Court, the Department in deference to such direction did consider the matter and by an Internal Order dated 15.03.2006 prima facie recorded an opinion that the authorities under the Act had jurisdiction to proceed in the matter. Since the provisions of the Act do not contemplate any prima facie determination which must be communicated to the concerned person, the Department was justified in not communicating the Internal Order on its own. The matter was correctly assessed by the High Court on the next occasion when in spite of having directed that a copy of the Internal Order be supplied, it acknowledged that the remedy of the respondent lied in submitting reply to the show cause notice, in which reply it would be open to the respondent to take objections to the jurisdiction of the appellant to proceed against the respondent under the provisions of the Act.The communication of the Internal Order dated 15.03.2006 was only in deference to the order passed by the High Court. At the cost of repetition, it must be stated that neither the Act contemplates any such prima facie determination which must be communicated only whereafter the proceedings could be initiated nor was such course undertaken by the Department on its own. Therefore, merely because the Internal Order was communicated to the respondent, it would not afford the respondent a cause of action to file an appeal against said Internal Order. The communication of said Internal Order was only in obedience of the directions issued by the High Court. It was not a decision or determination which was arrived at in terms of sub-section 10 of Section 11A. The respondent therefore could not have preferred any appeal against said Internal Order dated 15.03.2006. The Appellate Authority as well as the Tribunal, in our view, completely failed to appreciate this basic distinction.It must be noted that while issuing a show cause notice under Section 11A of the Act, what is entertained by the Department is only a prima facie view, on the basis of which the show cause notice is issued. The determination comes only after a response or representation is preferred by the person to whom the show cause notice is addressed. As a part of his response, the concerned person may present his view point on all possible issues and only thereafter the determination or decision is arrived at. In the present case even before the response could be made by the respondent and the determination could be arrived at, the matter was carried in appeal against said Internal Order. The appellant was therefore, justified in submitting that the appeal itself wasis thus well settled that writ petition should normally not be entertained against mere issuance of show cause notice. In the present case no show cause notice was even issued when the High Court had initially entertained the petition and directed the Department to prima facie consider whether there was material to proceed with the matter.decision of the Tribunal in the case of Reliance Industries Ltd. 3 was also in a completely different context.In the present case, there was no assessment and computation of any duty element. The matter had not gone beyond the Show Cause Notice. The questions in the matter pertained to the correctness of the view whether there was any adjudication in the matter and whether the appeal at the instance of the Respondent was maintainable. In our view the issues involved in the matter do not strictly come within the confines of the aforesaid Circular.