Case Note & Summary
The Supreme Court allowed the appeal filed by the Commissioner of Central Excise, Haldia against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which had dismissed the Department's appeal. The dispute arose from a search conducted on 23.09.2005 at the premises of M/s. Krishna Wax (P) Ltd., the respondent, on the basis that it manufactured Foots Oil, Pressed Wax, and Pressed Paraffin Wax without observing mandatory procedures and clearing excise duty. The respondent filed a writ petition before the Calcutta High Court challenging the jurisdiction of the Assistant Commissioner to proceed. The High Court directed the Assistant Commissioner to decide the preliminary objection regarding jurisdiction. An internal order dated 15.03.2006 was passed by the Assistant Commissioner deciding that the matter could proceed under the Central Excise Act. Subsequently, a show cause notice was issued on 21.03.2006 demanding duty of Rs.1,56,31,712 along with education cess and interest. The respondent again approached the High Court, which directed that a copy of the internal order be furnished and that the respondent could file a reply to the show cause notice. Instead of filing a reply, the respondent appealed against the internal order before the Commissioner (Appeals), who allowed the appeal holding that the process did not amount to manufacture. The Department appealed to CESTAT, which dismissed the appeal. The Supreme Court held that the internal order dated 15.03.2006 was not an appealable order under Section 35 of the Central Excise Act as it was merely a preliminary decision on jurisdiction and did not finally determine any rights or liabilities. The proper course was to let the adjudication proceedings pursuant to the show cause notice be completed. The Court also noted that the Commissioner (Appeals) and CESTAT had erred in deciding the merits of the manufacturing process without the adjudication being completed. The Supreme Court set aside the orders of the Commissioner (Appeals) and CESTAT and remanded the matter to the adjudicating authority to proceed with the show cause notice in accordance with law.
Headnote
A) Central Excise - Appealability of Internal Order - Section 35 of Central Excise Act, 1944 - An internal order deciding a preliminary objection regarding jurisdiction, passed without hearing the assessee and before issuance of show cause notice, is not an appealable order under Section 35 of the Act as it does not determine any rights or liabilities finally - The proper course is to let the adjudication proceedings pursuant to the show cause notice be taken to a logical conclusion (Paras 4-6). B) Central Excise - Manufacture - Section 2(f) of Central Excise Act, 1944 - The process of separating Foots Oil from Slack Wax or Residue Wax by manual tilting of drums and using hydraulic pressure does not amount to manufacture as no new product emerges and the processed material remains classified under the same tariff heading - Held that such process is not manufacture under Section 2(f) (Paras 7-8).
Issue of Consideration
Whether an internal order deciding a preliminary objection regarding jurisdiction to proceed under the Central Excise Act is appealable under Section 35 of the Act before the adjudication process is complete.
Final Decision
The Supreme Court allowed the appeal, set aside the orders of the Commissioner (Appeals) and CESTAT, and remanded the matter to the adjudicating authority to proceed with the show cause notice in accordance with law.
Law Points
- Appealability of internal orders
- Manufacture under Section 2(f) of Central Excise Act
- 1944
- Scope of Show Cause Notice
- Premature appeal
