1995 (1) TMI 71 - SC - Central Excise

Issue of show cause notice - Held that - There could be no reason for the issuance of a show cause notice for the period subsequent to the notice as in that case the necessary corrective action could always be taken. But Rule 10 with which we are concerned as well as Sec. 11A to which a reference is made in the case of Rainbow Industries 1994 (10) TMI 59 - SUPREME COURT OF INDIA the show cause notice which must be issued within the time frame prescribed in the said provisions must relate to a period prior thereto as the purpose of the show cause notice is recovery of duties or charges short-levied etc. We therefore find it difficult to accept the contention that the ratio of the decision in Rainbow Industries is that under Sec. 11A past dues cannot be demanded. We must therefore reject that contention. The observations in the said decision must be confined to the facts of that case. Appeal dismissed.

Summary

Issues:
1. Challenge to decision of Revenue levying excise duty under Item 17(4) of the Central Excises and Salt Act, 1944.
2. Interpretation of Rule 10 and Rule 173J regarding recovery of short levy or refund of excess levy.
3. Estoppel based on Department's acceptance of classification of goods and price list.
4. Applicability of past dues recovery based on show cause notice period.

Analysis:
1. The appellant, a Public Limited Company, appealed against the decision of the High Court dismissing its writ petitions challenging the Revenue's excise duty levy under Item 17(4) of the Central Excises and Salt Act, 1944. The show cause notice was issued under Rule 10, which allowed recovery of short-levied duties within three months from the payment date or refund date.

2. Rule 173J provided a one-year time limit for recovery of short levy or refund of excess levy in the case of self-removal, differing from the three-month limit under Rule 10. The show cause notice in this case was issued within time, leading to a reduced demand amount due to the one-year limitation.

3. Two contentions were raised in the writ petitions and appeals. The first contention regarding Section 40(2) of the Act was dismissed based on a previous court decision. The second contention focused on the Department's acceptance of goods classification and price list, arguing against retrospective changes. The appellant relied on a court decision stating reclassification should be effective from the notice date unless there is a legal amendment or judicial pronouncement.

4. The Court analyzed Rule 10 and Section 11A, emphasizing that show cause notices must relate to duties short-levied before the notice issuance. The Court rejected the argument that past dues cannot be demanded based on the Rainbow Industries case, stating that the show cause notice period must pertain to duties or charges prior to the notice issuance. Consequently, the appeals were dismissed without costs.