Case Law Details
Himadri Speciality Chemical & Anr. Vs Commissioner of Central Excise (Calcutta High Court)
Conclusion: Ex-parte order imposing excise duty on the incineration of lean gas used in the generation of electricity was quashed and the matter was remanded back to the adjudicating authority concerned to pass a fresh adjudication order by allowing assessee to file an objection against the adjudication order by treating it as show cause notice and to take all the points raised in this writ petition.
Held: Assessee had been a manufacturer of “Carbon Black” since 2009. During the process of manufacturing Carbon Black, a waste gas, off gas, or tail gas emerged as a by-product, and having regard to environmental norms and pollution laws, assessee incinerated the gas so as to prevent the emission of toxic materials, i.e., carbon monoxide (CO) and other hydrocarbons. A considerable amount of heat was generated in incinerating the gas, which was used in the generation of electricity, partly for captive consumption and partly for sale. A show cause notice under Section 11A of the Central Excise Act, 1944, was issued primarily on the ground that since the gas was used in the generation of electricity, which was subject to the Nil rate of duty and non-excisable and/or exempted goods, the gas was marketable and therefore excisable. Assessee filed the writ petition challenging the validity and/or legality of the show cause notice. During the pendency of the writ petition, the respondent authority concerned proceeded with the adjudication proceeding in spite of repeated requests from assessee. Assessee contended that the department proceeded to levy excise duty on the gas after ascertaining the taxable value with regard to electricity captively consumed and sold to the grid. This approach by the department made it manifestly clear that the focal point of adjudication was the production of electricity for captive consumption and sale to the grid. Since electricity was subject to a nil rate of duty, the respondent authority concerned sought to levy duty on a product that was never intended to be manufactured by assessee and that, under no circumstances, was marketable because of its high CO content. Department contended that show cause notice was issued under proper authority, and the same was neither without jurisdiction nor violative of the principles of natural justice, and the order-in-original passed therein was binding on assessee, and thus this writ petition was not maintainable. It was held that after considering relevant provisions of law, relevant circulars, submission of the parties and judgments referred, a very vital unignorable aspect that initial subject matter of challenge in this writ petition was impugned show cause notice which culminated into impugned ex-parte final adjudication order which had been passed during pendency of this writ petition and though it appeared from record that several opportunities were given to assessee to file objection/reply to the impugned show cause notice and for hearing before passing the impugned adjudication order, but since it was the case of assessee that it had immediately filed this writ petition against the impugned show cause after receipt of same, assessee thought it proper to not to give any reply to the same or to participate in the impugned proceeding and all the legal and factual points in challenging the impugned show cause and adjudication order it had taken in this writ petition, supplementary affidavit, and in course of hearing of the same against the impugned show cause notice and order-in-original could not be taken before the adjudicating authority, ex parte adjudication order dated 30th November, 2017 was set aside and the matter was remanded back to the adjudicating authority concerned to pass fresh adjudication order by allowing assessee to file objection against the impugned adjudication order by treating the same as show cause notice and to take all the points raised in this writ petition and supplementary affidavit, the judgments and relevant circulars and notifications assessee intended to rely in support of its case and after giving opportunity of hearing to assessee or its authorized representatives within two weeks from date and final adjudication order should be passed within four months from the date of receipt of such objection/reply by observing principles of natural justice.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
Heard learned advocates appearing for the parties.
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