Judgment:
1. These appeals have been filed against the Order-in-Original No.44/2004 dated 30.12.2000, passed by the Commissioner of Customs, Bangalore.
2. Shri Kiran S. Javali, the learned Advocate appeared on behalf of M/s Kesar Marbles and Granites Ltd. & Ors. and Shri Varadarajn, the learned Advocate appeared for M/s Kohinoor Granite and Marbles Co. & Ors. Shri R.K. Singla, the learned Jt. CDR appeared for the Revenue.
3. We have heard both the parties. The learned Advocates invited our attention to the show cause notice dated 5.2.2000 issued under the provisions of Customs Act, 1962 to all the parties demanding duty of Rs. 1,43,45,371/- and proposing penalties. Personal hearings were held on 18.10.2000 and 20.11.2000 before the Commissioner. In the course of these personal hearings, the appellants contended that the provisions of Customs Act would not be made applicable to the present case.
Thereafter, the Respondent issued a letter C. No. VIII/10/14/2000 Cus.Adjn dated 12.12.2000 for demand of duty under the provisions of the Central Excise Act. The learned Advocate contended that this letter cannot be considered either as a corrigendum or addendum to the original Show Cause Notice because it completely changes the basis of demand and the very complexion of the Show Cause Notice. The Apex Court in the case of Metal Forging v. Union of India has held that a Show Cause Notice was mandatory requirement for raising demand and that communications, orders, suggestions or advises from Department cannot deemed to be a Show Cause Notice. Hence it was urged that the letter dated 12.12.2000 does not amount to Show Cause Notice and hence, the demand is not sustainable. A further submission was made that the activity of cutting and polishing of granites amounts to manufacture only from 1.3.2006 in view of the Budgetory changes in 2006. Therefore the alleged clandestine removal of granite slabs for the period from 1996-2000 does not amount to manufacture. In view of this also the demand of duty does not arise.
4. On a careful consideration of the entire issue, we find that the original Show Cause Notice was issued on 5.2.2000. Para 63 of the Show Cause Notice demands duty of Rs. 1,53,10,093/- under Section 28 of the Customs Act. However, the impugned Order-in-Original dated 30.12.2000 demands duty of Rs. 1,43,45,371/- under proviso to Section 11A(i) of the Central Excise Act, 1944. The appellants have cited a large number of case laws to show that this is not permissible. In terms of the Apex Court decision in the case of Metal Forging, cited supra, "the law requires the said notice to be issued under a specific provision of law and not as a correspondence or a part of an order". The Department appears to have followed a very unsatisfactory and irregular procedure in the adjudication proceedings. It is seen that after personal hearings are over, based on the submissions of the appellants, another letter dated 12.12.2000 has been issued changing entirely the basis of the demand from provisions of the Customs Act to provisions of the Central Excise Act. A similar issue cropped up before the CESTAT, New Delhi in the case of S.T.L. Exports Ltd. v. CC, Indore , wherein it is held that demand transformation from excise duty to customs duty belatedly more than 2 years of original notice is not permissible especially if at stage of reply to notice the Department did not realize its mistake. We are re-producing the Para 5 of the order: 5. The original show cause notice dated 1.7.98 was issued within the normal period of limitation under Section 11A of the Central Excise Act by the Superintendent of Central Excise. That notice demanded Central Excise duty from the appellants under the above provision of law and also proposed to impose penalty on them under a Central Excise Rule. The party replied to the show cause notice in August, 1998 contending mainly that the show cause notice was without jurisdiction. After about two and a half years, the Superintendent issued a corrigendum dated 9.2.2001 which sought to transform the demand of duty and proposal of penalty from Central Excise to Customs. On a perusal of the appellants' reply to the show cause notice dated 1.7.98, we observe that their reply contained enough material to make the department realize the mistake of having invoked the Central Excise Act and Rules. It should have occurred to the Department at that stage that demand of duty should have been raised under the Customs Act. The Central Excise Act and the Customs Act are independent, self contained statutes. The nature of duty leviable and the basis of a demand thereof under the Central Excise Act are different from those under the Customs Act. Hence a demand of certain duty raised under one Act cannot be transformed into demand of a different duty under the other Act through a corrigendum to the show cause notice issued under the former Act, though it is open to the department to issue a corrigendum within reasonable time to amend a show cause notice under a given statute without enlarging the scope of, or otherwise changing the complexion of the case made out in, the original notice. The fact that the authority for issuing show cause notices under both the statutes is vested in the same officer is not a relevant factor in this context. We note that the amendments brought about by a corrigendum to show cause notice would normally date back to the notice itself and therefore, as in the instant case, a belated corrigendum for demanding one kind of duty under one statute, to a notice issued earlier for demanding another kind of duty under another statute can be grossly prejudicial to the assessee's substantive right of pleading limitation under the former statute. An assessee's right to resist a demand of duty on the ground of limitation cannot be defeated by the Revenue in this manner. The DR has not shown to us any provision of law or cited any judicial authority in support of his defence of the corrigendum in question. We are of the considered view that the show cause notice dated 1.7.98 as amended by the so-called corrigendum dated 9.2.2001 should be treated as an original show cause notice issued on 9.2.2001 for demanding customs duty and imposing penalty under the provisions of the Customs Act. We also note that the larger period of limitation was not invoked for this demand. Obviously, the demand of customs duty raised on 9.2.2001 in respect of the raw material imported by the appellants during 1997-98 is barred by limitation under Section 28 of the Customs Act.
Further in the case of Carponix Pvt Ltd. v CCE Bangalore , it has been held that after personal hearing, initiating fresh proceedings by issuing an addendum to the Show Cause Notice alleging new grounds of suppression, etc. and making out a new case of extended time limit is not permissible. In the case of Food Specialty Ltd. v CCE, Chandigarh 2004 (177) ELT 217 (Tri- Del), it has been held that department is not competent to make out a new case for determination of assessable value by issuing addendum to the original Show Cause Notice. In the case of Khandelwal Engineering Works v.Collector of C. Ex., Kanpur, it has been held that second Show Cause Notice issued after six years alleging suppression of facts should be treated as fresh Show Cause Notice and not corrigendum/amendment. Hence extended period is not admissible. In the present case after the issue of original Show Cause Notice and after the personal hearing, the above said letter has been issued by the Commissioner. This letter cannot be considered as an addendum or corrigendum to the original Show Cause Notice as the very basis of demand changes from Customs to Excise Act.
It is also seen that based on the submissions made out at the time of personal hearings, this letter has been issued proposing demand of duty under the Central Excise Act. This is not only a bad procedure for quasi judicial proceedings but also bad in law. The ratio of the cases cited above is squarely applicable to the present case. Hence we set aside the impugned order and all the appeals are allowed.
(Operative portion of the order has been pronounced in the open court on completion of hearing)