Improvement in the quality of Show Cause Notices, Adjudication Orders etc.

Document Text

Government of India Central Board of Excise and Customs M.D. Singh Commissioner (L & J) D.O.F.No.275/55/2008-CX.8A New Delhi Dated 23rd February, 2009 Subject: Improvement in the quality of Show Cause Notices, Adjudication Orders etc. Your attention is invited to para 6(iii) of the minutes of the Chief Commissioners' conference held in May 2008, reproduced here-in-below:- In the context of the presentation on 'Improvement in the quality of decisions', it was stated that the suggestions for improving the show cause notices; the quality of orders passed/ etc., may be issued in the form of a consolidated comprehensive circular for the benefit and guidance of the departmental officers. The aforesaid suggestion was found to be important as it has been felt 2. that the root cause for not achieving the desired success by the Department in appeals before various fora lies in the weakness of show cause notices and passing of injudicious orders. 2.1 The show cause notice constitutes the foundation on which the demand made by the department can stand or fall. The allegations along with the evidences relied upon should be spelt out dearly and firmly in the show cause notices. 2.2 Similarly, a adjudication order should dearly demonstrate dispute in question, relevant facts for consideration, material evidence, submission of both sides, reasons for decisions, etc. The orders passed in favour of revenue in a causal manner seriously harm the cause of revenue especially in cases booked after conduct of thorough investigations as they fail to pass the test of judicial scrutiny. 3. It is imperative that quasi-judicial decisions taken at stages as above need to be judicious and well thought out within the four corners of law. I am enclosing a comprehensive guidelines (Annexure 'A'), to be circulated to the officers in your jurisdiction, for bringing out improvement in drafting of show cause notices and adjudication orders. 4. It is hoped that notable improvement in decision making in the above areas of work is brought out. This J no doubt, would help in building the taxpayers} trust in judicious functioning of the department, and further, would result in achieving enhanced level of voluntary compliance to tax laws. 5. This issues with the approval of Chairman, CBEC. With regards, Yours sincerely, Sd/- (M.D. Singh) Encl.: As above. ANNEXURE 'A' GUIDELINES FOR SHOW CAUSE NOTICES AND ADJUDICATION ORDERS A. DRAFTING OF SHOW CAUSE NOTICE (i) The drafting of Show Cause Notice has to be done very carefully and professionally as the show cause notice constitutes the foundation on which the demand made by the Department could stand or fall. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bangalore vs. Brindavan Beverages (P) Ltd. [2007 (213) E.L.T. 487 (S.C.)] has observed that "the show cause notice is the foundation on which the department has to build up its case. If the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show cause notice." While the facts of the case and the evidences relied upon are to be brought out clearly and firmly, the allegations and charges needs to be made in a tentative manner, so as not to give any opportunity for the noticee to state that the Department has already made its mind against the noticee. (ii) A list of the relied upon documents should invariably be annexed to the Show Cause Notice. Copies of all these documents should also be attached to the Show Cause Notice. This will avoid unnecessary delay in taking copies because it is invariably noticed that the party protracts the time taken to reply to the Show Cause Notice on this ground, and quite often the officers are also not very prompt in making the documents available. If there are voluminous registers, then these would of course have to be examined by the notice in the office and/or photocopied. In such cases, the adjudicating authority should ensure that when a request is made for inspection/ photocopies, he should clearly specify the date and time within which the noticee is bound to come for inspection, and the investigating officers are also duty-bound to make these documents available. The officers should maintain a date and time chart, when the inspection is provided for. (iii) The Show Cause Notices should be scrutinized minutely by the issuing authority as it is the responsibility of the issuing authority to ensure that the show cause notice does not suffer from any legal lacuna. (iv) In a case where there is a seizure of goods, care will have to be taken so that the show cause notice is prepared well in advance of the expiry of the 6 months period, so that the Show Cause notice in such cases are not made to be approved by the appropriate authority in the last moment, without the requisite scrutiny. (v) In respect of Show Cause Notices issued by the authorities below Commissioner, it is desirable that the Commissioner also supervises and guides the investigation and the drafting of the Show Cause Notices. The Commissioner can choose the important cases for such purpose, and he can do so while reviewing the 335J register along with the respective investigation files at the beginning of every month. Such monitoring and guidance would add to the quality of the investigation and that of the Show Cause Notice. There have been many cases where investigation was well conducted but in drafting Show Cause Notice spoilt the department’s case. lacunae (vi) The specific provisions of the Statute, Rules made thereunder and Notification etc. which are alleged to have been violated by the noticee as well as the provisions which the department intends to invoke should be clearly brought out with grounds of invocation in the show cause notice. The Hon'ble Supreme Court in the case of Amrit Foods Vs. Commissioner of Central Excise, U.P [2005 (190) E.L.T 433 (S.C)] observed that "assesses should be put on notice as to exact nature of contravention for which he is liable under the penal provisions". The said provisions should be quoted in verbatim so that they can be readily referred by the adjudicating as well as appellate authority and courts. (vii) Where the extended period of limitation is invoked, the ingredients of suppression of facts, willful mis-statement, etc. with intent to evade payment of duty should be discussed in the show cause notices. Similar issues have been dealt with by the Board by the following Circular:- (a) Circular No.5/92 dated 13.10.1992 issued from F.No.167/39/92-CX.4 (b) Circular No. 268/102/96-CX dated 14.11.1996 issued from F. No. 385/782/96-JC (c) Circular No. 312/28/97-CX dated 22.04.1997 issued from F. No. 496/88/97-CX.9. B. PASSING OF AN ADJUDICATION ORDER While issuing the Adjudication order, the following parameters may be considered:- (i) The adjudication order must be a reasoned speaking order giving the details of findings on each of the issues raised in the Show Cause Notice, and countered by the noticees. (ii) The basic rule of natural justice requires recording of reasons in support of the order. The order has to be self explanatory and well reasoned. Reasons provide live link between conclusion and evidence that vital link is a safeguard against arbitrariness, passion and prejudice. Reason is a manifestation of mind of adjudicator. It is a tool for judging the validity of the order. The reasons introduced clarity in an order. The requirement of indicating reasons has been judicially recognized as imperative by the Supreme Court in the case of Suga Ram vs. State of Rajasthan (2006) 8 SCC 641. These views were reiterated by the Apex Court in the case of Jawahar Lal Singh Vs. Naresh Singh (1987) 2 SCC 222 wherein it had also referred to the judgement of Lord Denning, M.R in Breen Vs. Amalgamated Engg. Union. In the said judgement, the Hon'ble Court observed that "The giving of reasons is one of the fundamentals of good administration". Apart from this, the Apex Court in the AIR 1995 SC 686 has held" A 'decision' does not merely mean the conclusion. It embraces within its fold the reasons for arriving at the conclusion.” (iii) During the course of adjudication, the adjudicating authority must satisfy himself that all the evidences relied upon in the Show Cause notice have been disclosed to the noticee and copies given thereof. (iv) Sufficient opportunity as stipulated in Section 122A of the Customs Act, 1962 and Section 33A of the Central Excise Act, 1944 must be given for appearance for personal hearing. If the notice does not avail of the opportunity within a reasonable time, the adjudicating authority would be at liberty to decide the matter on the basis of available records, by recording clearly about the opportunities offered and not availed of so that the ground of denial of natural justice cannot be made before the appellate authority. (v) The noticee's request for cross-examination of witnesses should be handled judiciously by the adjudicating authority. There have been certain Supreme Court and High Court judgements in terms of which the denial of cross examination by the adjudicating authority does not tantamount to denial of natural justice, provided the adjudicating authority records with reasons that cross examination of the witnesses is not likely to reveal new facts which would help in deciding the matter in a judicious manner. for cross Wherever the adjudicating authority refuses the request examination, he must record the reasons thereof, within the parameters prescribed by Section 90 of the Central Excise Act, 1944 and Section 138B of the Customs Act, 1962. (vi) The Adjudicating Authority must deal with each of the cited case laws by the noticee in their reply on the allegations and charges made in the Show Cause Notice. If he feels that these case laws are not germane to the issue or that the facts and circumstances of the present case are different from those relating to the case laws relied upon, he must record so in his findings. No case law relied upon by the notice should be left undealt with. (vii) The adjudicating authority must pass judicious, well reasoned orders, correct in law, irrespective of whether the orders are in favour or against the Revenue. The adjudication order should dearly demonstrate the following:- (a) Dispute in question; (b) Relevant facts for consideration; (c) Material evidence; (d) Submission of both sides; (e) Reasons for decision; and (f) The decision.

HS Codes Referenced

Acts & Provisions Referenced

• Central Excise Act, 1944 and Section 138B of the Customs Act, 1962.

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