Issuing Second SCN for Excise Demand without Adjudicating First Deems Jurisdictionally Void:  CESTAT [Read Order]

The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) ruled that issuing a second Show Cause Notice ( SCN ) for excise demand without adjudicating the first was deemed jurisdictionally void.

M/s. Saf Yesat Company Pvt. Ltd manufactures 'Yeast' and clears it from its factory gate and depots, paying applicable excise duty. The Department alleges incorrect valuation for goods cleared to its depot, claiming it should have been based on the latest aggregate quantity of goods sold, not the price at which the most goods were sold, violating Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

Mr. Vishal Agarwal, representing the appellant, argued that the valuation method was correct, affirmed by a previous Tribunal order. He contended that the Department's pursuit of two show-cause notices for the same period, especially after special audits and prior adjudication, contradicted legal precedents, citing the Apex Court's stance in the case of Osaka Alloys And Steels Pvt. Ltd. and the Gujarat High Court's ruling in Lupin Ltd.

In contesting the extension of the assessment period following the appellant's scrutiny under Audit under 14A and seventeen other audits during the disputed period, it was argued that the department's simultaneous issuance of two show-cause notices for the same timeframe contradicted the precedents set by the Apex Court in the Osaka Alloys And Steels Pvt. Ltd. case and the 2013 judgment of the Gujarat High Court in Lupin Ltd. This contention necessitated the overturning of the Commissioner (Appeals)'s decision.

In response, Mr. P.K. Acharya, representing the respondent department, bolstered the rationale behind the Commissioner (Appeals)'s decision. He cited Circular No. 643/34/2002-CX dated 01.07.2002, arguing that the price of the greatest aggregate quantity should be considered, asserting the soundness of the Commissioner's order. Additionally, he referenced tribunal judgments, specifically the cases of E.I. DU Pont India Pvt. Ltd. vs. Commissioner of Central Excise, Chennai, and Bhuvalka Steel Industries Ltd. vs. Commissioner of Central Excise, Bangalore, in support of the department's stance.

The bench noted the appellant's argument that the show-cause notice dated 04.01.2006 sought MRP-based assessment under Section 4A of the Central Excise Act, 1944, for the same period. Subsequently, the current show-cause notice dated 04.05.2006 was issued for valuation under Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Both notices pertained to the same clearance from the factory. Notably, despite the first notice's adjudication dropping the demand, finalized by CESTAT on 11.01.2018, the department pursued the second show-cause notice and passed an adjudication order thereafter.

The two-member tribunal, consisting of Dr. Suvendu Kumar Pati (Judicial member) and Anil G. Shkkarwar (Technical member), concluded that the appeal was granted. They deemed the order issued by the Commissioner of Central Tax (Appeals-I), Pune, under Order-in-Appeal No. PUN-EXCUS-001-APP-013 to 14/2020-21 dated 29.07.2020, based on a subsequent show-cause notice following the dismissal of the first notice by CESTAT, to be lacking jurisdiction. Consequently, they set aside the order, granting consequential relief.

To Read the full text of the Order CLICK HERE

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