Collector of Sales Tax and Central Excise, Lahore vs M/s. Pettoki Sugar and 5 other
This matter concerns petitions for leave to appeal against a High Court judgment that invalidated show-cause notices issued by the Collector of Sales Tax and Central Excise regarding alleged evasion of excise duty. The core legal question is whether the show-cause notices issued by the department were legally sufficient and within the prescribed period of limitation, particularly given the requirements of Rule 10 of the Central Excise Rules, 1944. The High Court had previously relied on the precedent set in the Khyber Electric Lamps case to declare the notices illegal, arguing that they lacked specific allegations required to invoke the relevant sub-rules of Rule 10, which carry distinct limitation periods. The Supreme Court, after considering the arguments regarding the sufficiency of the notices and the applicability of the limitation periods under the Central Excise Rules, 1944, granted leave to appeal. The Court determined that the matter requires further examination to resolve whether the notices adequately specified the grounds for evasion and whether the department's actions were time-barred under the statutory framework.
- Does a show-cause notice for excise duty evasion require specific mention of the applicable sub-rule of Rule 10 of the Central Excise Rules, 1944 to be valid?
- Are the limitation periods for re-opening excise duty cases under Rule 10 of the Central Excise Rules, 1944 dependent on the specific nature of the allegation made in the show-cause notice?
- Can a show-cause notice be considered legally defective if it fails to explicitly cite the relevant statutory provision despite containing factual details of the alleged violation?
- Rule 10, Central Excise Rules 1944
- Rule 12, Central Excise Rules 1944
- Rule 13(1), Central Excise Rules 1944
- Section 32, Customs Act 1969
- Section 10(2), Central Excises Act 1944
ORDER
1. IFTIKHAR MUHAMMAD CHAUDHRY, C.J.--- These petitions have been filed for leave to appeal against the judgment dated 7.3.2005. It is to be noted that matter related to alleged evasion of excise duty falling within the mischief of Rule 10 of Central Excise Rules, 1944. The department issued show-cause notices to the petitioners calling upon them to show as to why proposed action for non-payment of the central excise duty be not taken. Case-wise detail of the same is reproduced herein-below from the chart which has been submitted under the direction of the Court by the learned counsel for the petitioner:-- Sr NoCase and Title Period of evasion of dutyDate/Show- Cause NoticeNature of allegation mentioned in the show-cause notice and the relevant sub-rule attracted to the facts of the case.
2. 1.B13-1/05 Collector C.E. & Sales Tax Vs. Sales Tax Vs. Pattoki Sugar.January, 1999 to March, 199914.10.2000 In para-2 (at page No, 36 of the Paper Book) of the Show- Cause Notice the reasoning of alleged willful evasion of Central Excise Duty has been adequate provided. The combined effect and import of 1 proviso Rule 12, Rule 13(1) and SRO 547(I)/96, dated 1.6.1996 has been explained Moreover, in para. 04 of the Show-cause Notice, sub-rule 3 of the Rule 10 was added by the adjudicating authority under his own hand.
3. 2.814/L/2005 Collector C.E. & Sales Tax Vs. Sales Tax Vs. M/s. Fauji SugarFebruary, 1998 to May, 199814.10.2000 In Para-2 (at Page No, 37 of the Paper Book) of the show- Cause Notice, the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96, dated 1.6.96 had been explained.
4. 3.815/L/2005 Collector C.E. & Sales Tax Vs. M/s. Haseeb Waqas SugarApril, 1998 14.10.2000 In Para-2 (at Page No, 37 of the paper book).
5. Of the Show- cause Notice thest st reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96 dated 1.6.1996 has been explained.
6. 4.816/L/2005 Collector C.E. & Sales Tax Vs. M/s. Haseeb Waqas SugarJuly, 1998 to May, 199910.4.2000 In Para-2 (at Page No, 36 of the paper book).
7. Of the Show- cause Notice the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96 dated 1.6.1996 has been explained.
8. 5.817/L/2005 Collector C.E. & Sales Tax Vs. M/s. brother SugarSeptember, 1998 to December, 199814.10.2000 In Para-2 (at Page No, 37 of the paper book).
9. Of the Show- cause Notice the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) andst st st SRO 547(I)/96 dated 1.6.1996 has been explained.
10. 6.818/L/2005 Collector C.E. & Sales Tax Vs. M/s. brother SugarSeptember, 1998 to February, 199930.8.2000 In Para-2 (at Page No, 37 of the paper book).
11. Of the Show- cause Notice the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96 dated 1.6.1996 has been explained.
12. 7.819/L/2005 Collector C.E. & Sales Tax Vs. M/s. Abdullah SugarSeptember, 1998 to December, 199829.6.2000 In Para-2 (at Page No, 35 of the paper book).
13. Of the Show- cause Notice the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96 dated 1.6.1996 has been explained.
14. 8.820/L/2005 Collector C.E. & Sales Tax Vs. M/s. Abdullah SugarJuly, 1998 to April, 199914.10.2000 In para-2 (at page No, 37 of the Paper Book) of the Show- Cause Notice the reasoning ofst st alleged willful evasion of Central Excise Duty has been adequate provided. The combined effect and import of 1 proviso Rule 12, Rule 13(1) and SRO 547(I)/96, dated 1.6.1996 has been explained Moreover, in para. 04 of the Show-cause Notice, sub-rule 3 of the Rule 10 was added by the adjudicating authority under his own hand.
15. 9.835/L/2005 Collector C.E. & Sales Tax Vs. M/s. Baba Farid SugarDecember, 1998 to March, 199914.10.2000 In Para-2 (at Page No, 36 of the paper book).
16. Of the Show- cause Notice the reasoning of alleged evasion of Central Excise Duty has been adequately provided. The combined effect and import of 1 proviso to Rule 12, Rule 13(1) and SRO 547(I)/96 dated 1.6.1996 has been explained.
2. Learned High Court by having relied mainly upon the judgment of this Court in the case of Assistant Collector Customs and others vs. Ws. Khyber Electric Lamps and others (2001 SCM R 838), declared that show-cause notices served upon the respondents by the petitioner were patently illegal and beyond the period of limitation. Learned counsel for the petitioner, inter alia, contended that:
(i) The show-cause notice in substance contains the details in respect of violation of the provisionst st of Rules 10, 12, 13 and S.R.O. 547(1)/96, dated 1.6.1996, therefore, according to him non-mentioning in the notices subsequent provision of the rule is not fatal.
(ii) The question for, determination before adjudicating authority as well as the High Court was as to whether excise duty has been evaded. According to him the show-cause notice contains sufficient material to hold that the respondents have evaded the duly and are liable for action under Section 10(2) of the Central Excises Act, 1944.
(iii) The judgment which has been relied upon is distinguishable on the facts of the case.
3. On the other hand learned counsel appearing for the respondent vehemently opposed the petition and stated:
(a) Learned High Court had rightly applied the principle laid down by this Court in Khyber Electric Lamps case (ibid). As according to them the provision of Section 32 of the Custom Act, 1969 is similar to that of Rule 10 of the Central Excise Rules, 1944, therefore, the show-cause notices issued by the department were rightly found illegal and beyond the limitation.
(b) After announcement of judgment in the case of Khyber Electric Lamps case (ibid) no ambiguity is left to determine as to whether under which clause of Rule 10 the case of the department will fall but as there was no specific allegation in respect of evasion falling under sub-section (1) of rule 10 of the Central Excise Rules, 1944, therefore, the High Court had rightly held that these notices were beyond the limitation as sub-rules (1), (2) and (3) of rule 10, have provided different period of limitation for the purpose of re-opening of the case and unless the case is covered any specific allegation no action can be taken.
(c) Department had knowledge about the export of sugar by the respondents but no action was taken knowing well that there is no violation of any of the provision but subsequently vague notices were issued with a view to cover limitation, therefore, High Court had rightly granted relief to the respondents.
4. After hearing the learned counsel for the parties at considerable length and having gone through the relevant provisions of law, Rule 10 of Central Excise Rules, 1944, Section 32 o the Customs Act, 1969 and ratio in the case of Khyber Electric Lamps as well as the judgment pronounced by this Court in case of Collector of Sales Tax & CE, Lahore vs. Zamindara Paper & Board Mills, etc. (C.P. 702-L/2003) leave to appeal is granted, inter alia, to examine the contentions put forward by the learned counsel for the parties.