1988 (10) TMI 53 - HC - Central Excise

Appeal - Writ jurisdiction - Prima facie case made out - Adjudication - Jurisdiction - Evasion of excise duty - Issuance of show cause notice - Demand - Short-levy

Issues Involved
1. Declaration of sale price on cigarette packages.
2. Levy of excise duty on "adjusted sale price."
3. Jurisdiction and authority of the Director, Directorate of Anti-Evasion (Central Excise).
4. Allegations of bias and fair adjudication.
5. Interpretation of fiscal statutes and notifications.
6. Validity of the show cause notice and the evidence supporting it.

Issue-Wise Detailed Analysis

1. Declaration of Sale Price on Cigarette Packages
The judgment emphasizes that packages of cigarettes must be sold at the price declared on the packages as the maximum price. If a manufacturer declares a lower price on the package while communicating a higher price to the trade, it constitutes a misdeclaration. This misdeclaration attracts the provisions of Section 11-A of the Central Excises and Salt Act, 1944, as it results in short levy and short payment of excise duty due to "fraud, collusion, or any willful misstatement or suppression of facts."

2. Levy of Excise Duty on "Adjusted Sale Price"
The court held that the charging section for excise duty is Section 3 of the Central Excise Act, which levies duty on the manufacture of cigarettes. Notifications under Rule 8 are mechanisms to effectuate this charge and should not be construed to frustrate the charge. The "adjusted sale price" is the basis for calculating excise duty, and any misdeclaration of this price leads to short levy, attracting Section 11-A.

3. Jurisdiction and Authority of the Director, Directorate of Anti-Evasion (Central Excise)
The court upheld the validity of the Notification No. 215/86-Central Excise, which conferred jurisdiction on the Director of the Directorate of Anti-Evasion to exercise powers of a Collector throughout India. The court found no geographical limitation in the Central Excise Act or the Rules that would prevent such authorization.

4. Allegations of Bias and Fair Adjudication
The court dismissed the allegations of bias against the Director, Directorate of Anti-Evasion, stating that mere prima facie findings and press statements do not indicate a closed mind. The court also rejected the argument that the reward scheme for officers would bias the Director, as the Director himself would not receive any reward.

5. Interpretation of Fiscal Statutes and Notifications
The court emphasized that fiscal statutes must be strictly construed, and clear words are necessary to make a person liable to tax. The Notifications under Rule 8 must be read in conjunction with the charging section (Section 3) and should not be interpreted in a way that frustrates the charge. The manufacturer is required to declare the maximum sale price on the packages, and any misdeclaration leads to short levy of duty.

6. Validity of the Show Cause Notice and Evidence Supporting It
The court held that disputed questions of fact cannot be agitated in a writ court challenging a show cause notice. The court can only intervene if it is shown that even if the facts stated in the show cause notice are correct, no case has been made out. The court found that the show cause notice issued to the petitioner was based on sufficient evidence and that the allegations of fact made in the notice were not disputed before the court below. The court dismissed the appeal, allowing the adjudication proceedings to continue.

Conclusion
The court dismissed the writ petition challenging the show cause notice, stating that the adjudication proceedings must continue. The court emphasized that the manufacturer must declare the true maximum sale price on cigarette packages and that any misdeclaration leads to short levy of excise duty, attracting the provisions of Section 11-A of the Central Excises and Salt Act, 1944. The court also upheld the jurisdiction of the Director, Directorate of Anti-Evasion, to issue the show cause notice and dismissed allegations of bias.

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