Case Law Details
IDCOL Ferro Chrome & Alloys Ltd Vs Commissioner Central Excise, Customs & Service Tax (Orissa High Court)
Court is unable to find any valid explanation offered by the Department in delaying in issuing the initial SCN under Section 11A of the CE Act, 4 years after the period of demand and then, more importantly, taking 16 years to retrieve the matter from the Call Book
In CCE v. Cemphar Drugs and Liniments 1989 (40) ELT 276 (SC), the Supreme Court observed as under:
“In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to subsection 1 1A 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.”
High Court quashes the impugned SCN dated 11th March, 1999 and all proceedings consequent thereto including the impugned notice dated 26th May, 2017.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
The prayer in the present petition is for quashing of a Show-Cause Notice (SCN) dated 11th March, 1999 issued by the Department to the Petitioner in relation to the alleged violations of Rules 9(1), 52A, 173B and 173C of the Central Excise Rules, 1944 (CE Rules) read with Section 1 1A(1) of the Central Excise Act, 1944 (CE Act).
2. The admitted position is that the period for which the demand was sought to be raised by virtue of the above SCN was April, 1994 to April, 1995.
3. For some reason, which is not clear, the case appears to have been transferred to ‘Call Book’ on 28th April, 1999. Meanwhile, on 1 8th June 1999, the Petitioner replied to the SCN.
4. The Department then slept over the matter for a long period of 16 years, after which on 15th July 2016, it was suddenly decided to retrieve the matter from the Call Book. On 26th May 2017, a notice was issued to the Petitioner fixing 1st June, 2017 as the date of personal hearing.
5. On 31st May 2017, the Petitioner requested for an adjournment and in the meanwhile filed the present petition in which Opposite Party-Central Excise, Customs and Service Tax Department entered appearance and (notice was issued by this Court) on 14th September, 2017, this Court stayed further proceedings pursuant to the said notice. That stay order has continued since.
6. In reply to the writ petition, there is no valid explanation offered by the Department as to what prompted it to shift the case to the Call Book on 28th April, 1999 and then retrieved it from the said Call Book 16 years later, all of a sudden. The precise averment in the counter affidavit in this regard reads as under:
“4. That with regard to the averments made in paragraph 1 of the Writ petition, it is humbly submitted that no time limit has been prescribed for section 1 1A (2) of the Central Excise Act, 1944. The said case has been transferred to Call Book on 28.04.1999 and kept in Call Book as the matter was arose out of objection by the office of the Accountant General, Odisha (AG(O)) and the central Excise Department (Opposite Party) contested the matter with it. However. since no decision has been taken by the Office of the Accountant General, Odisha (A G(O)), even after several letters from the Opposite Parties to settle the issue, the said Show Cause Notice was retrieved from the Call Book on 15.07.2016 based on the Board’s Circular No. 1023/11/2016-CX dated 08.04.2016 and initiated the process of Adjudication. A copy of the Board’s Circular No. 1023/11/2016-CX dated 08.04.2016 is annexed herewith as ANNEXURE-A/1.”
7. C.R. Das, learned counsel appearing for the Petitioner relies on the decision of this Court in Maxcare Laboratories Ltd. v. Joint Commissioner, CGST, Central Excise & Custom 2021 (378) ELT 401 (Ori.) and an order dated 15th December, 2021 passed by this Court in W.P.(C) No.13195 of 2010 (M/s. Orissa Mining Corporation Ltd v. Sales Tax Officer).
8. In Maxcare Laboratories Ltd. (supra), in more or less identical circumstances, this Court quashed the SCN and the further notice fixing the date of hearing. In the presence case also the Court is unable to find any valid explanation offered by the Department in delaying in issuing the initial SCN under Section 11A of the CE Act, 4 years after the period of demand and then, more importantly, taking 16 years to retrieve the matter from the Call Book. As noticed by this Court in Maxcare Laboratories Ltd. (supra), in similar circumstances, the Supreme Court of India in Government of India v. Citedal Fine Pharmaceuticals 1989 (42) ELT 515, in the context of proceedings for recovery of excise duty on medicinal toilet preparations observed as under:
“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.”
9. Likewise, in CCE v. Cemphar Drugs and Liniments 1989 (40) ELT 276 (SC), the Supreme Court observed as under:
“In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to subsection 1 1A 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.”
10. Other High Courts too have invalidated SCNs where attempts were made by the Department to revive a matter sent to the Call Book several years later. These decisions include Siddhi Vinayak Syntex Pvt. Ltd. v. Union of India 2017 (352) ELT 455 (Guj.) and Meghamani Organics Ltd. v. Union of India 2019 (368) ELT 433 (Guj.)
11. For the aforementioned reasons, this Court quashes the impugned SCN dated 11th March, 1999 and all proceedings consequent thereto including the impugned notice dated 26th May, 2017.
12. The writ petition is allowed in the above terms, but in the circumstance, with no order as to costs.
