2011 (6) TMI 622 - AT - Central Excise

Suppression or mis-declaration - show-cause notices Held that - in the case of Geo Tech Foundations & Construction (2008 - TMI - 3587 - Supreme court - Central Excise) when in the original notice allegation of suppression or mis-declaration was not made the same cannot be made subsequently as the facts alleged to have been suppressed by the appellant would be known to the department. show-cause notice issued earlier was withdrawn and the second notice was issued. order is set aside and the appeal is allowed

Summary

Issues:
1. Assessment of royalty charges/cost of master tape in the assessable value.
2. Invocation of extended period for demand and penalty imposition.
3. Allegations of fraud or suppression in the show-cause notice.

Analysis:

Issue 1: Assessment of royalty charges/cost of master tape
The judgment revolves around the assessable value adopted by the appellants, which the impugned order held should be increased by including royalty charges/cost of master tape. The original adjudicating authority was directed to re-work the demand by amortising the royalty charges on the total quantity of cassettes manufactured and sold to their sister concern. The appellant argued against this increase, citing previous show-cause notices and the need for specific allegations in the notice. The Tribunal found that the lack of specific allegations of fraud or suppression in the show-cause notice undermined the demand for an extended period, ultimately setting aside the impugned order on this ground.

Issue 2: Invocation of extended period for demand and penalty imposition
The appellant contended that the show-cause notice issued in 2001, invoking the extended period for demand and penalty imposition, was not sustainable due to the withdrawal of earlier show-cause notices without invoking the extended period. The Tribunal analyzed the sequence of events, noting that the lack of specific details regarding suppression or misdeclaration in the 2001 notice weakened the invocation of the extended period. Citing the decision in Geo Tech Foundations & Construction case, the Tribunal emphasized that the absence of such allegations in the original notice precluded their introduction subsequently. Consequently, the impugned order was set aside based on the inadequacy of the notice to justify the extended period.

Issue 3: Allegations of fraud or suppression in the show-cause notice
The Tribunal scrutinized the show-cause notices issued in 1998 and 2001, highlighting the absence of explicit allegations of fraud or suppression in the latter notice. The appellant's argument for the necessity of specific allegations to justify the demand for an extended period and penalty imposition was upheld by the Tribunal. Drawing parallels with the Geo Tech case, where similar deficiencies in the notice were found fatal to the subsequent allegations, the Tribunal concluded that the impugned order lacked the requisite grounds to sustain the demand and penalty imposition. Consequently, the appeal was allowed, providing consequential relief to the appellants.

In conclusion, the judgment primarily focuses on the procedural aspects of invoking an extended period for demand and penalty imposition, emphasizing the necessity of specific allegations of fraud or suppression in the show-cause notice to justify such actions. The Tribunal's decision to set aside the impugned order underscores the importance of adherence to procedural requirements in tax matters to ensure fairness and legality in assessments.