TMI Blog2010 (11) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... tioning the legality of a show-cause notice, stalling the proposed enquiry and retarding the investigative process to ascertain facts with the participation and in the presence of the parties, must be deprecated. Unless the High Court is satisfied that the show-cause notice is non-est Writ Petitions should not be entertained for the mere asking, and as a matter of routine, and the petitioner should, invariably, be directed to respond to the show-cause notice and take all stands, highlighted in the Writ Petition, therein. (Special Director v. Mohd. Ghulam Ghouse [(2004) 3 SCC 440 = 2004 (164) E.L.T. 141 (S.C.)]; Divisional Forest Officer v. M. Ramalinga Reddy [(2007) 9 SCC 286]; Saravani Impex Pvt. Ltd. v. Additional Director General, Directorate of Revenue Intelligence, Chennai [2010 (1) ALD 40 (DB)]; M/s. Vasavi Business Combines v. Commissioner of Customs [Judgment of A.P.H.C. D.B. in W.P. No. 16170 of 2010, dated 28-7-2010]; M/s. Jasper Industries Pvt. Ltd v. Commercial (CT), (Audit), Hyderabad [Judgment of A.P.H.C. D.B. in W.P. No. 18725 of 2010, dated 27-8-2010]. A show-cause notice does not give rise to any cause of action as it is not an adverse order which affects the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.C.); M. Ramalinga Reddy [(2007) 9 SCC 286]; Saravani Impex Pvt. Ltd. [2010 (1) ALD 40 (DB)]. Whether the show cause notice was founded on any legal premise is a jurisdictional issue which can even be urged by the recipient in his reply to the notice, and such an issue can also be initially adjudicated by the authority, issuing the very notice, before the aggrieved can approach the Court. [Mohd. Ghulam Ghouse (2004) 3 SCC 440 = 2004 (164) E.L.T. 141 (S.C.); M. Ramalinga Reddy [(2007) 9 SCC 286]; Saravani Impex Pvt. Ltd. [2010 (1) ALD 40 (DB)]; M/s. Vasavi Business Combines [Judgment of A.P.H.C. D.B. in W.P. No. 16170 of 2010, dated 28-7-2010]; M/s. Jasper Industries Pvt. Ltd. [Judgment of A.P.H.C. D.B. in W.P. No. 18725 of 2010, dated 27-8-2010]. 3. Abstinence from interference at the stage of issuance of the show-cause notice, in order to relegate parties to the proceedings before the authorities concerned, is the normal rule. However the said rule is not without exception. Where a show-cause notice is issued either without jurisdiction, or is an abuse of process of law, the Writ Court would not hesitate to interfere even at the stage of issuance of the show-cause notice. (Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s during the period March, 2005 to February, 2010), should not be demanded from the petitioner under the proviso to Sub-Section (1) of Section 11-A of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000; interest, at the applicable rates, on the duty should not be demanded under Section 11AB of the Central Excise Act, 1944; penalty, equal to the duty demanded, should not be imposed on them under Section 11AC of the Central Excise Act, 1944 for suppression of facts that resulted in short-payment of duty; penalty, under Rule 25(d) of the Central Excise Rules, 2002, should not be imposed on them for contravention of the Rules; and why the impugned goods should not be confiscated in terms of the said Rule. The Managing Director of the Petitioner Company was also called upon to show cause why penalty should not be imposed on him under Rule 26 of the Central Excise Rules, 2002. The Petitioner Company and its Managing Director were asked to produce evidence in support of their defence; and to specify in their reply whether they wished to be heard in person by the adjudicating authority. 5. Sri S.R. Ashok, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a new item which is the sine qua non for levy of excise duty; the bought-out hardware items have never been brought into the petitioner s factory and no cenvat credit, on the duty paid on such hardware, has ever been taken; the department has pre-judged the issue and the proceedings before the respondent is an empty formality; the order of the Commissioner suffers from non-application of mind; inspite of the legal position being set out in the reply, and representations submitted by them, the Commissioner has issued the impugned proceedings without taking into consideration either the petitioner s reply or their representation; and the impugned proceedings are without jurisdiction and are liable to be set aside. 6. On the other hand, Sri A. Rajasekhar Reddy, Learned Senior Standing Counsel for Central Excise Customs, would submit that the petitioner has an effective remedy of filing his explanation to the show cause notice raising all grounds which are available to them; the question, whether the commodity is to be classified under one head or the other attracting higher or lower duty, is to be decided in the facts arising in each case; after introduction of the new 8-digit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be relegated to file their reply to the show cause notice. 7. It is wholly unnecessary for this Court to examine the contentions urged by the Learned Senior Counsel, except those grounds on the basis of which the impugned show cause notice is said to suffer from inherent lack of jurisdiction, for the other grounds can as well be agitated, after submitting their reply to the show cause notice, before the adjudicating authority. The show cause notice is said to be without jurisdiction in as much as the bought-out items, which are proposed to be subjected to excise duty, do not form part of the petitioner s manufacturing process; they neither entered the petitioner s factory premises nor were they cleared from their factory; and they were supplied directly to the customers from the petitioner s godown located at a distance far away from the factory premises. The jurisdiction of the High Court, under Article 226 of the Constitution, should not be permitted to be invoked in order to challenge a show-cause notice unless, accepting the facts stated therein to be correct, the show-cause notice is, ex facie, without jurisdiction (State of U. P. v. Anil Kumar Ramesh Chandra Glass Works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective hardware items; the value of the hardware items supplied with the doors, as per the financial accounts/balance sheets from 2005-06 to February, 2010 worked out to Rs. 103,27,89,375/-; the value of goods supplied from the unregistered godown, i.e., the hardware items against commercial invoices had to be added to the value of the unlinished/semi-finished goods cleared from the factory against central excise invoices; duty was required to be collected on the value portion of the hardware items cleared from the unregistered godown; the assessee was in the knowledge of mis-classification and under-valuation of excisable goods; they had also failed to declare the existence of a store/godown where essential/ integral parts of doors are stocked/stored; and the purchase orders were composite in nature i.e., for supply of manufactured items along with the hardware items. 8. It is not in dispute that the petitioner s godown, from which the bought-out items were supplied directly to the customers is located far away from the petitioner s factory premises; and these bought-out items neither entered the petitioner s factory premises nor were they cleared therefrom. The case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity from excise duty is on the manufacture of excisable goods. The assessee has to pay duty on the manufacture of such goods. With chargeability, question of quantification of duty comes in. Classification decides the applicable rate. It is followed by valuation i. e. value on which the rate is to be applied. The concept of classification is, therefore, different from the concept of valuation . In the present matter there is confusion in application of the aforestated two concepts by the Commissioner. In our view, the thrust of the show cause notice is towards undervaluation and not classification . ..As stated above, the concept of classification is different from the concept of valuation . In the present matter, along with the stand-alone compressor, the assessee has supplied fly wheel, safety valve and filter to its buyers. They have also supplied bought-out items like V. belt, motor, pulley, belt guard, gauge, gauge board, angle valve, M. S. male flange, C. A. F. Gasket, set of tools, bolts and nuts, etc. to their buyers, as a package. Therefore, on the question of valuation, the Commissioner should have examined the pricing aspect of the entire package supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n inherent lack of jurisdiction. 11. Sri S.R. Ashok, Learned Senior Counsel, would submit that that the respondents had, on 16-8-2004, accepted that the value of bought-out items were excludable from the value of manufactured items, and it was not open to them to now contend that they form an integral part of the manufactured items. On the other hand, Sri A. Rajasekhar Reddy, Learned Senior Standing Counsel, would submit that, after 28-2-2005, when a new eight digit tariff heading was introduced, and on further investigation, the authorities were of the view that excise duty is leviable on the hardware items. The matter relating to commodity classification, whether it falls under one heading or the other or attracts higher or lower duty, has to be decided on the facts arising in each case. Even though a decision may have been taken earlier, the matter may have to be re-examined on further investigation, on discovery of new facts or where the law has changed. It is not proper for the High Court to interfere in such matters at the stage of a show cause notice. (Commissioner of Cus. C. Ex. v. Charminar Nonwovens Ltd. [2004 (167) E.L.T. 372 (S.C.)]; M/s. Vasavi Business Combines [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or demand of duty not paid by them on these goods; the assessee was resorting to under-valuation of goods by setting up an un registered godown, and supplying (transacting) hardware items by misclassification and suppression of value with an intent to evade the duty payable; the assessee had intentionally suppressed the fact of clearance of the said hardware items from the unregistered premises; the suppression of actual/total value of the excisable goods is with the mala fide intention of evading duty on the value of the goods cleared in the guise of bought-out items which are essential/integral parts of the goods manufactured by the assessee, and attracts the provisions of Rule 8 of the Central Excise Rules 2002, read with the proviso to Section 11A(1) of the Central Excise Act, 1944; the act of not including the value of goods i.e. the hardware items, cleared from a separate un-registered godown/premises, had resulted in short payment of duty, and the assessee was liable for payment of duty so short paid, along with interest under the proviso to Section 11A(1) of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Go ..... 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