Case Law Details
Maxcare Laboratories Ltd. Vs Joint Commissioner (Orissa High Court)
Conclusion: Reviving of assessee’s case after 18 years, the Opposite Parties had acted unreasonably particularly since assessee could not have reasonably expected that the proceedings against it would be kept alive for these many years without any action being taken and also, assessee could not be expected to preserve its records for these many years and to be able to answer a SCN after 18 years.
Held: Assessee-company was carrying on business of manufacturing of perfumed hair oil and red tooth powder having its plant at Mancheswar Industrial Estate. It was stated that the plant had been closed since long and assessee had no business operation in the State of Odisha. The first impugned show cause notice (SCN) was issued by the Commissioner, Central Excise and Customs (Opposite Party 2) proposing a demand of excise duty in the sum of Rs.75,65,511/- invoking the extended period of limitation in terms of the proviso to Section 11A(1) of the Central Excise Act, 1944 (‘CE Act’) and Rules 9 (2) of the Central Excise Rules, 1944 (‘CE Rules’). The SCN alleged that assessee had suppressed production of perfumed hair oil and red tooth powder and removed surreptitiously the said excisable goods without payment of central excise duty during the year 1994-95. The SCN further stated that in course of verification of the RT-5 returns of assessee for the year 1994-95, it was observed that assessee had not shown the expected production as per the production norms which had been declared by letter dated 16th December, 1995. The suppressed quantity, according to SCN, works out to 3,19,961.00 liters of perfumed hair oil and 1,23,608 kg of red tooth powder which were in contravention of Rules 53, 173G and 226 of the CE Rules. Assessee replied to the SCN on 16th December, 1995 and did not hear anything from the Opposite Parties and all of a sudden, more than 17 years later on 28th December, 2017 received a fresh SCN on the same issue with reference to the earlier SCN dated 29th March, 2000 and stating that a personal hearing was fixed on 9th January, 2018. It was held that nothing was indicated in the counter affidavit about the Board specifically ordering this case kept pending by entry in the ‘call book’. In effect, the attempt to revive the proceeding after 18 years appeared to contrary to the circulars issued generally by the Department for expeditious disposal of the SCNs. No convincing explanation was offered as to why the Department sat over the matter for 18 years. By not informing assessee that its case was being transferred to the ‘call book’, and then seeking to revive it after 18 years, the Opposite Parties had acted unreasonably particularly since assessee could not have reasonably expected that the proceedings against it would be kept alive for these many years without any action being taken. Also, assessee could not be expected to preserve its records for these many years and to be able to answer a SCN after 18 years.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
Dr. S. Muralidhar, CJ
1. The challenge in this writ petition by M/s. Maxcare Laboratories Ltd. (MLL) is to a show cause notice dated 29th March, 2000 (Annexure-1) issued by the Commissioner, Central Excise and Customs, Bhubaneswar I (Opposite Party 2) as well as a further notice dated 28th December, 2017 (Annexure-3) issued by the Superintendent (ADJN), CGST, Central Excise and Customs, Bhubaneswar (Opposite Party No.3) and a notice dated 9th January, 2018 (Annexure-5) issued by the said officer.
2. The background facts are that the Petitioner is a company carrying on business of manufacturing of perfumed hair oil and red tooth powder having its plant at Mancheswar Industrial Estate, It is stated that the plant has been closed since long and the Petitioner has no business operation in the State of Odisha.
3. The first impugned show cause notice (SCN) was issued by the Commissioner, Central Excise and Customs (Opposite Party 2) proposing a demand of excise duty in the sum of Rs.75,65,511/- invoking the extended period of limitation in terms of the proviso to Section 11A(1) of the Central Excise Act, 1944 (‘CE Act’) and Rules 9 (2) of the Central Excise Rules, 1944 (‘CE Rules’).
4. The SCN alleged that the Petitioner had suppressed productionof perfumed hair oil and red tooth powder and removed surreptitiously the said excisable goods without payment of central excise duty during the year 1994-95. The SCN further stated that in course of verification of the RT-5 returns of the Petitioner for the year 1994-95. It was observed that the Petitioner had not shown the expected production as per the production norms which had been declared by letter dated 16th December, 1995. The suppressed quantity, according to SCN, works out to 3,19,961.00 liters of perfumed hair oil and 1,23,608 kg of red tooth powder which were in contravention of Rules 53, 173G and 226 of the CE Rules.
5. The Petitioner repliedto the SCN on 16th December, 1995 submitting details of raw material/packing material as well as the tentative input-output According to the Petitioner, it had also submitted the statement on 3rd March, 2000 before the Superintendent, Central Excise, Bhubaneswar-I Range stating that “they do not have any fixed input output ratio due to wastage/variation in quality of raw material”. It was further pointed out that the allegation regarding suppression was made solely on the basis of consumption of one of the raw materials i.e. ground nut oil in case of perfumed hair oil and garric powder in case of red tooth powder instead of considering all types of raw materials and packing materials.
6.Treating the above reply dated 3rd March 2000 to be not convincing, the impugned SCN was issued on 29th March, 2000. Learned counsel for the Petitioner contends that the Petitioner responded to the said SCN on 27th April 2000, a copy of which has been enclosed as Annexure-1 to this
7. Thereafter the Petitioner did not hear anything from the Opposite Parties and all of a sudden, more than 17 years later on 28th December, 2017 received a fresh SCN on the same issue with reference to the earlier SCN dated 29th March, 2000 and stating that a personal hearing was fixed on 9th January, 2018.
8. The Petitioner on the same day i.e. on 9thJanuary, 2018 prayed for an adjournment of four weeks as the issue pertains to a very old period and the persons dealing with the matter had already left the company. Efforts were being made to collect information from different
9. On 9thJanuary, 2018 a fresh notice was issued to the Petitioner fixing the next date of hearing on 18th January, The Petitioner made another request on 18th January, 2018 for adjournment by four weeks Thereafter the present petition was filed.
10. When this petition was listed first on 22ndMarch 2018, notice was issued to the Opposite Parties and further proceedings pursuant to the aforementioned notice was
11. Since then a reply was filed by the Opposite Parties to whichthe Petitioner has also filed a
12. This Court has heard the submission of Jagabandhu Sahoo, learned Senior Advocate for the Petitioner and Mr. R.S. Chimanka, learned Senior Standing Counsel for the Opposite Parties (Department).
13. One of the principal submissions of Mr. Sahoo, learned Seniorcounsel for the Petitioner, is that the impugned notices are time barred as proceedings are sought to be continued after a gap of 18 years and are per se illegal and arbitrary. Reliance is placed on the decisions in State of Punjab v. Bhatinda District Co-Op Milk Union Ltd. (2007) 11 SCC 363; Shirish Harshvardhan Shah v. Deputy Director, Enforcement Directorate, Mumbai (2010) 254 ELT 259 (Bom.); Government of India Citedal Fine Pharmaceuticals 1989 (42) ELT 515; Hindustan Lever Ltd. v. Union of India 2011 (24) STR 97 (SC); Siddhi Vinayak Syntex Pvt. Ltd. v. Union of India, 2017 (352) ELT 455 (Guj); Meghamani Organics Ltd. v. Union of India, (2019) TIOL 1607 -HC-AHM- CX; M/s Swati Menthol and Allied Chemicals Ltd. Commissioner, GST and Central Excise (CWP-9304-2021 disposed of on 17th May, 2021); Parle International Ltd. v. Union of India (Writ Petition No.12904 of 2019 disposed of on 26th November, 2020); M/s. GPI Textiles Limited v. Union of India (CWP No.10530 of 2017 (O & M) disposed of on 2nd August, 2018). Specific to Section 11 A of the CE Act, reliance was placed on the decision in CCE v. Cemphar Drugs and Liniments 1989 (40) ELT 276 (SC); Pushpan Pharmaceuticals Co. v. CCE, Bombay 1995(78) ELT 401 (SC) and Padmini Products v. CCE 1989 (43) ELT 195 (SC).
14. Sahoo further submitted that in a situation where no further intimation was received from the Opposite Parties to the Petitioner’s reply submitted on 27th April, 2000, to the SCN, the Petitioner presumed that further proceedings stood concluded. The Petitioner was clueless that the adjudication proceeding had been transferred to the “call book”.
15. It is contended by Mr. Sahoo, learned Senior Counsel that thecontention of the Opposite Parties that the same was retrieved from “call book” on 30th June 2016 was baseless and ought not to be accepted. It is stated that when the main allegation of the SCN was clandestine removal of goods which was a fact based issue, the matter could not have been transferred to the “call book” on any legal ground. He further submitted that the Petitioner cannot be relegated to the statutory remedy since this was an instance of gross misuse of the provisions of law by the Opposite Parties and the impugned action was in excess of
16. Chimanka, learned Senior Standing Counsel for the Opposite Parties reiterated the stand taken in the counter affidavit of the Opposite Parties which is that the subject case file was transferred to ‘call book’ on 29th September, 2000 following A.G. Audit I.R. No.48/95-96 (para-10) which was converted to A.P. Cat-III and the case was retrieved from call book on 30th June 2016, basing on Board’s Circular No.1023/11/2016 dated 8th April, 2016 dealt in F. No.206/02/2010-CX6. He further submitted that in order to comply with the rules of natural justice, a personal hearing was fixed for which the impugned notices were issued to the Petitioner. According to him, the Petitioner did not avail those opportunities. Even now, the Petitioner can avail of that opportunity of hearing and then challenge the order if it is adverse to the Petitioner, in accordance with law.
17. The above submissions have been considered. The stand takenby the Opposite Parties about transfer of the case to the “call book” is totally unconvincing. The relevant circular in this regard is dated 14th December, 1995 which identifies the circumstances under which the pending cases can be transferred to the “call book”. These are as follows:
“(i) Cases in which the Department has gone in appeal to the appropriate authority,
(ii) Cases where injunction has been issued by Supreme Court/High Court/CEGAT,
(iii) Cases where audit objections are
(iv) Cases where the Board has specifically ordered the same to be kept pending and to be entered into the Call Book.”
18. In the present case, there is no indication as to which of theabove categories stands attracted. From the facts narrated neither clauses (i), nor (ii) nor (iii) stands attracted. The present case has certainly not reached the stage of appeal and there is no order of the Supreme Court or the High Court or the CEGAT. This is not a case where the audit objections are contested by any one. Further, nothing is indicated in the counter affidavit about the Board specifically ordering this case kept pending by entry in the ‘call book’.
19. In effect, the attempt to revive the proceeding after 18 years appears to contrary to the circulars issued generally by the Department for expeditious disposal of the SCNs. No convincing explanation is offered as to why the Department sat over the matter for 18 years. Except saying that they decided on 13th June, 2016 to revive the case in terms of the Board’s Circular dated 8th April 2016, there is no convincing answer for the inordinate delay in seeking to revive the By not informing the Petitioner that its case is being transferred to the ‘call book’, and then seeking to revive it after 18 years, the Opposite Parties have acted unreasonably particularly since the Petitioner could not have reasonably expected that the proceedings against it would be kept alive for these many years without any action being taken. Also, the Petitioner cannot be expected to preserve its records for these many years and to be able to answer a SCN after 18 years. No effective opportunity of defence can be afforded to the Petitioner in such proceedings.
20. The legal position regarding delays in initiating and concluding proceedings for recovery of taxes and duties is has been explained in several decisions of the Supreme In Government of India v. Citedal Fine Pharmaceuticals (supra), in the context of proceedings for recovery excise duties on medicinal and toilet preparations under Rule 12 of the Medicinal Toilet Preparations (Excise Duties) Rules, 1956, it was observed:
“While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case.”
21. Specificto Section 11-A of the CE Act, the proviso to which is sought to be invoked here, it has been held in CCE v. Cemphar Drugs and Liniments (supra) as under:
“In order to make the demand for duty sustain- able beyond a period of six months and up to a period of 5 years in view of the proviso to subsection 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, beyond the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.” (emphasis supplied)
22. In the present case nothing is indicated in the initial SCN issued on 29th March 2000 to justify the Department invoking the proviso to Section 11-A (1) of the CE
23. Specific to the issue of transfer of cases to the ‘call book’ and then reviving it after a long gap, without any reasonable explanation, there are decisions of the High Courts that have quashed such proceedings. In Siddhi Vinayak Syntex Pvt. Ltd. (supra) the case was sought to be revived 17 years after the initiation of The attempt was negatived. Likewise in Meghamani Organics Ltd. (supra), the Gujarat High Court invalidated the attempt to revive proceedings more than 13 years after initiation of SCNs. To the same effect are the decisions in Swati Menthol and Allied Chemicals Ltd. (supra) Parle International Ltd. (supra), M/s. GPI Textiles Limited (supra) and Sirish Harshavadan Shah (supra).
24. For all the aforementioned reasons, the Court finds no justification for the Opposite Parties to revive the adjudication proceedings against the Petitioner 18 years after the issuance of the SCN. Accordingly, the impugned SCN and the notices are hereby The writ petition is allowed, but in the circumstances, with no order as to costs.
25. As the restrictions due to resurgence of COVID-19 situationare continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587, dated 25th March, 2020 as modified by Court’s Notice No.4798, dated 15th April,
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