2007 (10) TMI 479 - AT - Central Excise

Clearance to (DTA) effected in pursuance of the permission granted in 1992 cannot be guided by subsequent restriction imposed in 1995 by DGFT Repeated SCN on the very same transaction are not permissible so two separate adjudication confirmation of two demands are not permissible

Summary

1. ISSUES PRESENTED and CONSIDERED

(a) Whether the issuance of two separate show cause notices and consequent demands of duty on the same transaction is permissible under the law.

(b) Whether the restriction imposing a time limit of one year for clearance of goods, introduced by a DGFT circular in August 1995, applies retrospectively to permissions granted prior to that date, specifically to clearances effected pursuant to a 1992 permission.

(c) Whether the demand of duty and penalties confirmed by the Commissioner (Appeals) based on the second show cause notice, which includes the duty demanded in the first notice, is legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Legality of multiple show cause notices and demands on the same transaction

Relevant legal framework and precedents: The principle against multiplicity of proceedings and double recovery in adjudication is well established. The appellant relied on the decision in Delux Carpet Co. v. CC (Prev.), Mumbai, which held that repeated show cause notices on the same transaction are impermissible.

Court's interpretation and reasoning: The Tribunal observed that two show cause notices were issued in respect of the same clearances of two machines on 15-10-95. The first notice dated 19-1-96 proposed a duty demand of Rs. 96,689/-, while the second notice dated 12-4-96 proposed a larger demand of Rs. 2,39,951/- which included the amount demanded in the first notice.

The Tribunal held that issuing two separate show cause notices and confirming two separate demands on the same transaction is not permissible. The second demand subsuming the first demand amounts to double recovery. It was also noted that no appeal was filed against the order arising from the first show cause notice, which further complicates the legal position.

Key evidence and findings: The dates and values of the clearances, the contents of the two show cause notices, and the orders passed by the original authority and Commissioner (Appeals) were examined. The overlap in the demands was clearly established.

Application of law to facts: The Tribunal applied the principle against multiplicity of proceedings and held that the second show cause notice and the consequent demand could not stand as it included the earlier demand.

Treatment of competing arguments: The appellant argued against the legality of repeated notices; the revenue did not successfully counter this point. The Tribunal sided with the appellant's submission based on precedent and principles of natural justice.

Conclusion: The second show cause notice and the demand based thereon are legally impermissible as they constitute double recovery for the same transaction.

Issue (b): Applicability of the DGFT circular imposing a one-year time limit retrospectively

Relevant legal framework and precedents: The circular No. 3/95-96 dated 8-8-95 imposed a condition that clearances of excisable goods under EOU permissions must be effected within one year from the date of permission. The appellant contended that this condition cannot be applied retrospectively to permissions granted prior to the circular, specifically the 1992 permission.

Court's interpretation and reasoning: The Tribunal agreed with the appellant that the restriction introduced in 1995 could not be applied to permissions granted in 1992. The clearances in question were made pursuant to the 1992 permission, which did not contain any time limit condition.

Key evidence and findings: The date of the permission letter (16-10-92) and the date of clearance (15-10-95) were crucial to this determination. The circular imposing the time limit was issued nearly three years after the permission.

Application of law to facts: The Tribunal applied the principle that conditions introduced after the grant of permission cannot be imposed retrospectively unless expressly provided. The appellant's clearances were thus not liable to the time limit condition.

Treatment of competing arguments: The revenue argued for the applicability of the circular; however, the Tribunal rejected this argument on grounds of retrospective application and fairness.

Conclusion: The time limit condition introduced by the 1995 circular does not apply to clearances made under the 1992 permission.

Issue (c): Sustainability of the demand and penalty confirmed by the Commissioner (Appeals) based on the second show cause notice

Relevant legal framework and precedents: The principles of natural justice, prohibition of double recovery, and retrospective application of conditions govern the sustainability of such demands.

Court's interpretation and reasoning: Given that the second show cause notice subsumed the first and imposed a higher demand including the earlier amount, and that the time limit condition did not apply retrospectively, the Tribunal found the demand and penalty confirmed by the Commissioner (Appeals) to be unsustainable.

Key evidence and findings: The orders passed by the original authority and Commissioner (Appeals), the value of clearances, and the dates of permissions and circulars were examined.

Application of law to facts: The Tribunal applied the legal principles to conclude that the demand based on the second show cause notice was not legally tenable.

Treatment of competing arguments: The revenue's confirmation of the demand was rejected due to legal infirmities highlighted.

Conclusion: The order of the Commissioner (Appeals) confirming the demand and penalty arising out of the second show cause notice is set aside.

3. SIGNIFICANT HOLDINGS

"We are in agreement with the submissions of the learned advocate that the clearances effected in pursuance of the permission granted in 1992 cannot be guided by the subsequent restriction imposed in 1995 by DGFT authorities."

"Issue of another show cause notice in April '96, including the demand proposed in the earlier show cause notice issued on 19-1-96 and proceeding with two separate adjudications and confirmation of two demands are not permissible."

"The second demand amounting to Rs. 2,39,951/- includes the amount already included in the order of the original authority arising out of the show cause notice dt. 19-1-96 which is not legal and proper."

"The present order of the Commissioner (Appeals) arising out of the show cause notice dt. 12-4-96 cannot be allowed to survive."

Core principles established include the prohibition against multiple proceedings and double recovery on the same transaction, the non-retrospective application of conditions introduced after the grant of permission, and the requirement for legal clarity and fairness in adjudication of duty demands.

Final determinations:

(i) The second show cause notice and