The Gujarat High Court has held that the revenue cannot ignore the mandatory requirement of pre-consultation notice the origin of the show cause notice is the intelligence gathered from the Additional Director General.
The appellant is a factory unit of Larsen & Toubro Ltd. Larsen & Toubro demerged its Hydrocarbon Division as a going concern to a separate legal entity. Following this, the excise department show-cause notices dated 31st December 2018 came to be issued to the writ applicant raising the demand of Rs.19,61,06,399/- towards the excise duty.
Before the High Court, the appellant argued that the impugned show cause notice and the order are without jurisdiction in the absence of pre-show cause notice consultation in accordance with the CBEC master circular No.1053/2/2017-CX dated 10th March 2017.
The department defended the order and contended that pre-consultation is not mandatory as the present case originated from the investigation by the ADG, DGGST, and therefore hit by the exclusion clause as provided in the Circular dated 10th March 2017.
While allowing relief to the appellant, Justice J.B.Pardiwala and Justice Nisha M. Thakore, observed that merely because in the present case, the case originated on account of the investigation of the DGGI will not be a sufficient ground for not following the mandatory procedure prescribed by the Board which is binding on the department.
“Therefore, it was mandatory for the adjudicating authority in the present case to conduct the pre-show cause notice consultation and in absence of the same the present proceedings could be said to be bad in law and deserves to be quashed and set aside,” the High Court said.
It was observed that “the Revenue is not correct in its stance that in the case on hand, the pre-show cause notice consultation was not necessary as the impugned show cause notice is for preventive/related to an offence. Just because, the origin of the show cause notice is the intelligence gathered from the Additional Director General, the same by itself would not bring the show cause notice within the ambit of preventive / offense.”.
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