Case Law Details
Siddhi Vinayak Syntex Pvt. Ltd. Vs Union of India (Gujarat High Court)
With effect from the year 2011 a time limit has been prescribed for determining the amount of duty of excise where it is possible. It cannot be gainsaid that when the legislature prescribes a time limit, it is incumbent upon the authority to abide by the same. While it is true that the legislature has provided for such abiding by the time limit where it is possible to do so, sub-section (11) of section 11A of the Act gives an indication as to the legislative intent, namely that as far as may be possible the amount of duty should be determined within the above time frame, viz. six months from the date of the notice in respect of cases falling under subsection (1) and one year from the date of the notice in respect of cases falling under sub-section (4) or sub-section (5). When the legislature has used the expression “where it is possible to do so”, it means that if in the ordinary course it is possible to determine the amount of duty within the specified time frame, it should be so done. The legislature has wisely not prescribed a time limit and has specified such time limit where it is possible to do so, for the reason that the adjudicating authority for several reasons may not be in a position to decide the matter within the specified time frame, namely, a large number of witnesses may have to be examined, the record of the case may be very bulky, huge workload, non-availability of an officer, etc. which are genuine reasons for not being able to determine the amount of duty within the stipulated time frame. However, when a matter is consigned to the call book and kept in cold storage for years together, it is not on account of it not being possible for the authority to decide the case, but on grounds which are extraneous to the proceedings. In the opinion of this court, when the legislature in its wisdom has prescribed a particular time limit, the CBEC has no power or authority to extend such time limit for years on end merely to await a decision in another case. The adjudicatory authority is required to decide each case as it comes, unless restrained by an order of a higher forum. This court is of the view that the concept of call book created by the CBEC, which provides for transferring pending cases to the call book, is contrary to the statutory mandate, namely, that the adjudicating authority is required to determine the duty within the time frame specified by the legislature as far as possible. Moreover, as discussed hereinabove, there is no power vested in the CBEC to issue such instructions under any statutory provision, inasmuch as, neither section 37B of the Central Excise Act nor rule 31 of the rules, envisage issuance of such directions. The concept of call book is, therefore, contrary to the provisions of the Central Excise Act and such instructions are beyond the scope of the authority of the CBEC. Transferring matters to the call book being contrary to the provisions of law, the explanation put forth by the respondents for the delay in concluding the proceedings pursuant to the show cause notice 3.8.1998 cannot be said to be a plausible explanation for not adjudicating upon the show cause notice within a reasonable time. In view of the settled legal position, as propounded by various High Courts, with which this court is in full agreement, the revival of proceedings after a long gap of ten to fifteen years without disclosing any reason for the delay, would be unlawful and arbitrary and would vitiate the entire proceedings.
Examining the matter from another angle, it is the stand of the respondents that the matter was kept in the call book for all these years to await the outcome of a similar case in the case of M/s. Siddharth Petro Products Limited and others, which was pending before the Appellate Tribunal. In such a situation, the decision in the case of the petitioner should be governed by the decision of the Appellate Tribunal. However, the respondents after keeping the matter in the call book for fifteen years, have thereafter chosen not to follow the outcome of the other matter wherein the show cause notice had been dropped by the adjudicating authority, and the Appellate Tribunal had dismissed the appeal, albeit on grounds other than on merits.
Moreover, as is evident from the facts noted hereinabove, the respondents while consigning the matter to the call book did not deem it fit to inform the petitioner about it. Since in other cases, such proceedings had been dropped, the petitioner had reason to form a bona fide belief that the proceedings in its case had also been dropped. During the interregnum the petitioner’s position has changed considerably. ln view of the fact that the factory of the petitioner company has been closed down and sold, it cannot be gainsaid that even if the petitioner was served with the notice of personal hearing, it would be difficult for it to defend the case inasmuch as in view of the lapse of time and intervening circumstances, the evidence might have been lost. After seventeen years, the persons who were conversant with the case may not be available, documentary evidence may have been displaced. Thus, the delay in deciding the proceedings, that too without bringing it to the notice of the petitioner that the case was transferred to the call book and was therefore pending, causes immense prejudice to the petitioner. The revival of the proceedings, therefore, is in complete breach of the principles of natural justice and hence, the impugned show cause notice and the order-in-original passed pursuant thereto, cannot be sustained.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Rule. Mr. Devang Vyas, learned Assistant Solicitor General waives service of notice of rule on behalf of the respondent No.1 and Mr. Sudhir Mehta, learned senior standing counsel waives service of notice of rule on behalf of the respondents No.2 and 3. With the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.
2. This petition is directed against the order-in-original dated 11.3.2016 and the show cause notice dated 3.8.1998 passed by the second respondent Commissioner of Central Excise, Ahmedabad, whereby the demands raised in the show cause notice have been confirmed.
3. The petitioner is a company set up with the business objectives of manufacturing textile goods. The petitioner was manufacturing polyester filament yarn in its factory at Chhatral in the year 1991. The dispute involved in this case relates to an activity/process known as “Draw Winding” of yarns. According to the petitioner, till February, 1995, Draw Winding was admittedly not “manufacture” and hence, no excise duty was levied or recovered on Draw Wound yarns, though base yarn, namely Partially Oriented Yarn (POY) was excisable; and such base yarns were subjected to Draw Winding not attracting levy of excise duty. Such yarns were covered under subheadings of Chapter 54 of the First Schedule to the Central Excise Tariff Act, 1985. It appears that in the Union Budget of Financial Year 1995-96, an amendment was made in Note 3 of Chapter 54 of the Tariff; and a fiction of manufacture was created for products on various headings of Chapter 54 with reference to processes like dyeing, printing, bleaching etc. including conversion of any form of such product into another form. It is the case of the petitioner that for Draw Winding, it was the general impression in the entire textile trade that even the change or amendment in the above referred Chapter Note did not render such activity liable to excise duty. The Draw Winders Association of India, of whom the petitioner company was also a member, obtained a legal opinion from a renowned firm of Advocates about this process and the opinion was given to the effect that there was no change in the form of base yarns after Draw Winding process and, therefore, Drawn and Wound yarn were not in the nature of excisable goods and there was no duty liability also. It appears that in view of the general understanding, the petitioner company had not been paying excise duty on Drawn Wound Yarn, but this activity was declared in the classification list filed by the petitioner in accordance with rule 173B of the erstwhile Central Excise Rules, 1944. It appears that the Central Excise authorities conducted certain inquiry against the petitioner company on 13.2.1998 pursuant to which a show cause notice dated 3.8.1998 came to be issued by the Commissioner of Central Excise alleging that a certain quantity of finished product subjected to Draw Winding by the petitioner company during 1.4.1995 to 12.2.1998 attracted excise duty and duty aggregating to Rs.1,00,75,528/- was evaded by the petitioner company. The larger period of limitation was invoked in the show cause notice and penalties were also proposed to be imposed against the petitioner company as well as the Director. In response to the above show cause notice, the petitioner company filed a reply on 15.3.2000 explaining the correct factual and legal position. According to the petitioner, for almost fifteen years, no further action was taken by the excise authorities in reply to the above show cause notice and that the petitioner was given to understand that similar cases for demanding duty of Draw Winding were dropped in Surat region and, therefore, the cases in Ahmedabad and elsewhere were also closed.
4. In the meanwhile, the petitioner’s factory was closed down and the possession of plant and factory was taken over by the Gujarat State Financial Corporation, which auctioned the properties in or about the year 2004. The residential house of the Directors was also sold off to clear bank debts in 2002 and availing of a one-time settlement scheme, the Directors paid off the bank debts out of the funds generated by selling the house in Green Ville Flats, Ahmedabad. Thus, the factory was closed down and all the properties of the company including the factory were sold off. Since there was no work, the Director Shri Pravinchandra Joshi went to USA and worked there for some time and returned to India in January, 2001 and started working in a small textile unit in Ahmedabad in March, 2001 and is presently working in a textile plant at Dahej and stays in a rented house at Bharuch. It is the case of the petitioner that during this entire period there was no intimation about any action that the revenue proposed to take in respect of the above referred show cause notice dated 3.8.1998. According to the petitioner, it appears that the second respondent took up the above referred show cause notice for adjudication and fixed personal hearing of the case of which the petitioner herein did not receive any intimation because the factory was closed down more than a decade ago and all the factory properties and other assets of the company were sold off during the intervening period. The second respondent thereafter passed an adjudication order pursuant to the above referred show cause notice, however, the petitioner was unaware about such adjudication order also.
5. It is further the case of the petitioner that the Superintendent of Central Excise visited the site of the Registrar of Companies (ROC) and found the name and address of the Chartered Accountant who was the statutory auditor of the petitioner company at the relevant time. Thereafter, the said Chartered Accountant was contacted by the Superintendent to inquire about the details of the petitioner company and that the Chartered Accountant could obtain the mobile number of Shri Pravinchandra R. Joshi through his brother-in-law and furnished the mobile number to the Superintendent. The Superintendent of Central Excise, thereafter, contacted Shri Joshi on his mobile and informed him about the Commissioner’s order and payment of duties etc. to be made in that regard. In view of the telephonic discussion between Shri Joshi and Superintendent, a letter dated 31.8.2016 was submitted by Shri Joshi on 2.9.2016 requesting the Superintendent for the original copy of the adjudication order, whereupon under a covering letter dated 5.9.2016, the Superintendent served upon him a copy of the adjudication order dated 11.3.2016 passed by the Commissioner of Central Excise, Ahmedabad-III.
6. It is the case of the petitioner that it was only upon receipt of the copy of the adjudication order that the petitioner learnt that the show cause notice dated 3.8.1998 was taken up for adjudication in November, 2015 and the proposals levelled in the show cause notice had been confirmed by the Commissioner. Being aggrieved by the order-in-original as being in violation of the principles of natural justice and having been passed without considering the submissions made by the petitioner company in February, 1999 and 2000, the petitioner has invoked the extraordinary jurisdiction of this court under Article 226 of the Constitution of India.
7. Mr. Paresh Dave, learned advocate for the petitioner, assailed the impugned order by submitting that there is twin violation of the principles of natural justice in this case. It was submitted that firstly, the show cause notice issued in August, 1998 was kept pending for more than seventeen years after the petitioner company cross-examined two witnesses in February, 1999 and filed reply in March, 2000, and therefore, finalising the adjudication of a case so kept pending for an inordinately long period is clearly in violation of the principles of natural justice. Secondly, the petitioner has not been afforded adequate opportunity of being heard while taking up adjudication of a case after more than seventeen years and the statutory documents filed by the petitioner company at the relevant time about disclosure of the processes undertaken on base yarn have also not been taken into consideration while upholding invocation of the extended period of limitation. It was argued that the general impression prevailing in the textile trade at the relevant time and also a representation made by the Association to the Government showing that there was a scope of confusion about the duty liability are also kept out of consideration, which was also in violation of the principles of natural justice.
7.1 It was further submitted that the show cause notice was issued by the Commissioner on 3.8.1998 and after conducting hearing in February, 1999, when two Superintendents were cross-examined, no further action was taken by the adjudicating authority; and suddenly more than fifteen years thereafter, the case was taken up for decision. Referring to the impugned order, it was pointed out that no reasons are disclosed in the order for reviving the proceedings after such a long and unreasonable delay and there is also no reason stated in the order as to why the adjudication was not conducted and completed during Financial year 1999-2000. It was submitted that revival of proceedings after a time gap of seventeen years without disclosing any reason for the delay is not a mere matter of impropriety. It was contended that when the show cause notice proceedings do not culminate into an adjudication order within a reasonable time, the long unexplained delay would vitiate the proceedings; inasmuch as such delay would result in the relevant documents being lost and misplaced as regards the assessee, thereby causing prejudice.
7.2 Reliance was placed upon the decision of the Bombay High Court in the case of Shirish Harshavadan Shah v. Deputy Director, Enforcement Directorate, Mumbai, (2010) 254 E.L.T. 259 (Bom.), wherein the court held thus:
“12. Almost for a period of 12 years, no steps were taken by the respondents to proceed with the adjudication proceedings. No fault can be attributed to the petitioners for this delay and inaction on the part of the respondents. The respondents are not alleging any malice on the part of the petitioner. It is not the case of the respondents that the petitioners are responsible for delaying the proceedings. No justification is to be found in the explanation tendered for causing such enormous delay in the adjudication process. The absence of relevant record due to lapse of more than 12 years is also a factual aspect which needs to be taken into account. In our view, the respondents cannot be allowed to re-open the proceedings at such a belated stage. If allowed, it would cause serious detriment and prejudice to the petitioner. The Department is not entitled to re-open old matters in this manner. As rightly observed in the earlier judgment of this court, if the Department’s contention as to limitation were to be accepted, it would be mean that the department can commence adjudication proceedings 20 years, 25 years or 30 years after the original show cause notice which cannot be permitted. In the peculiar facts and circumstances of this case and for the reasons recorded by us in the case of Cambata Industries Pvt. Ltd. (supra), petition is liable to be allowed based on the facts of this case.”
7.3 Reliance was also placed upon the decision of the Bombay High Court in the case of Hindustan Lever Limited v. Union of India, (2011) 264 E.L.T. 173 (Bom.), for the proposition that it is well settled that adjudicatory proceedings have to be culminated within a reasonable time and if not done so, they stand vitiated on the said ground.
7.4 Reference was also made to the decision of the Delhi High Court in the case of R. M. Mehrotra v. Enforcement Directorate, (2009) 246 E.L.T. 141 (Del.), wherein the court expressed the opinion that public interest dictates that economic offences are curbed and offenders duly prosecuted. The court, however, noted that the show cause notice in the said case was issued in the year 1994 much before the FERA was repealed and observed that the notice of hearing is a mere continuation of the process and, therefore, it could not be argued that the action was time barred. The court held that however, the revival of the proceedings after a time gap of ten years, without the notice of hearing disclosing any reason for the delay, is not a mere matter of impropriety; the respondents were under a duty to disclose what compulsions held up the adjudicatory process for so long. In the absence of such explanation, revival of the proceedings would be unlawful and arbitrary. The duty to give reasons is a sine qua non of any executive action, without which the action is liable to be struck down. Mr. Dave submitted that in the facts of the present case also nothing had been disclosed in the impugned order as to why the proceedings have been revived after a time gap of almost fifteen years. It was submitted that absence of such explanation, would render the revival of the proceedings unlawful and arbitrary and hence, the impugned order is required to be quashed and set aside.
7.5 Reference was also made to the decision of the Supreme Court in the case of Government of India v. Citedal Fine Pharmaceuticals, Madras, (1989) 42 E.L.T. 515 (SC), wherein the court held thus:
“6. Learned counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submission. 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.”
7.6 It was accordingly, submitted that the case could not have been kept pending for so many years and the delay of more than seventeen years is fatal and amounts to re-opening the case. It was submitted that no mala fide or any other default is attributable to the petitioner for the delay in adjudicating the show cause notice and hence, the impugned order which has been passed after a reasonable period of time is required to be quashed and set aside.
8. Opposing the petition, Mr. Sudhir Mehta, learned senior standing counsel for the respondents, at the outset, raised a preliminary objection to the very maintainability of the petition on the ground of availability of an efficacious alternative statutory remedy of appeal. On the merits of the case, the learned counsel placed reliance upon the contents of the affidavit filed on behalf of the respondents, and submitted that firstly, in a similar case, the demand was dropped by the Commissioner, Surat-I and such order was reviewed by the Board; and secondly, the Department had filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as the “Appellate Tribunal”) in the case of M/s. C. K. Textiles, M/s. Siddhartha Petro Products Ltd., M/s. Siddharth Filaments Private Limited and M/s. Shreeram Alkalies and Chemicals. The attention of the court was invited to the fact that the Larger Bench of the Appellate Tribunal dismissed the Department’s appeal in the case of M/s. Siddharth Petro Products v. CEC, Surat, against which the Department filed an appeal before this High Court, and a Division Bench of this court restored the appeal before the Tribunal; and that by an order dated 18.6.2013 passed in the case of Shri Pradeep Kumar Shyam Shukla, M/s. Siddharth Filaments Private Limited and M/s. Siddharth Petro Products Limited, the appeal was decided against the revenue. It was submitted that by a letter dated 20.2.2014, the Chief Commissioner, Vadodara Zone informed them that the order of the Appellate Tribunal had been accepted. It was submitted that in view of the fact that a similar issue was pending before the Tribunal, the present case was transferred to the call book and upon the dismissal of the appeal by the Tribunal, the show cause notice was retrieved from the call book on 26.4.2014 and proceedings for adjudication came to be started pursuant to which the impugned order in original dated 11.3.2016 came to be passed. It was submitted that insofar as non-compliance with the principles of natural justice is concerned, the petitioner was duly afforded opportunities of personal hearing on 13.11.2015, 16.11.2015, 17.11.2015, 27.11.2015 and 25.1.2016. However, the intimation for personal hearing came to be returned undelivered by the postal authorities with remarks “left”. The efforts to deliver the notice for personal hearing directly to the petitioner were also not successful as they were not available at the factory address and hence, lastly in terms of the proviso to section 37C of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) the notice for personal hearing was affixed on the notice board of the Department. However, there was no appearance on behalf of the petitioner during the course of personal hearing nor was any request for adjournment made. It was submitted that in these circumstances, when the petitioner had not intimated the Department about their whereabouts, and it was left to the Department to search them out, it cannot be said that there is any breach of principles of natural justice, inasmuch as, the petitioner had been duly served in accordance with the provisions of section 37C of the Act.
8.1 Reference was made to the Board Circular No. 162/73/-CX dated 14.12.1995, to submit that in view of the said circular, the show cause notice issued to the petitioner was transferred to the call book by the then Commissioner, Central Excise, Ahmedabad-III on 23.3.2000, in view of the fact that in a similar case where the demand was dropped by Commissioner, Surat-I was revived by the Board and secondly, an appeal was pending before the Appellate Tribunal. It was submitted that the respondent authorities, therefore, waited for the outcome of the appeal of the revenue before the Appellate Tribunal and in the process there was a delay. However, such delay is justified in view of the fact that the matter was transferred to the call book.
8.2 As regards the decisions of different High Courts on which reliance has been placed by the learned counsel for the petitioner, it was submitted that the same would not be applicable to the facts of the present case as in none of the cases, the show cause notices were transferred to the call book. It was urged that the only reason why the petitioner has avoided availing of the alternative statutory remedy of appeal and invoked the writ jurisdiction of this court, is to avoid making of pre-deposit which it was otherwise required to make. It was urged that the proceedings pursuant to the show cause notice were never closed and that, at best, if the court comes to the conclusion that there has been breach of principles of natural justice, the court may set aside the impugned order and remand the matter, but the entire proceedings may not be quashed.
8.3 In support of such submission the learned counsel referred to the decision of this court in the case of Waghbakriwala Rayons v. Commissioner of Cental Excise, Surat-I, (2016) 331 E.L.T. 433 (Guj.), wherein the court had remanded the matter to the adjudicating authority to decide the case afresh in de novo adjudication after providing all relied upon documents to the petitioners and after extending them an opportunity of personal hearing.
9. In rejoinder, Mr. Paresh Dave, learned advocate for the petitioner submitted that insofar as the question of alternative remedy is concerned, the order made by the Commissioner of Central Excise, Ahmedabad-III is in violation of the principles of natural justice, because the same has been passed ex parte. It was submitted that the order made after reviving the show cause notice proceedings, which were lying dormant for about seventeen years, is also unreasonable and is an illegal action. It was contended that the order made after reviving the proceedings without any explanation for the long time gap is without jurisdiction and, therefore, the only remedy available to the petitioner against such unauthorised action, which is in violation of the principles of natural justice, is a writ petition under Article 226 of the Constitution of India. It was further submitted that the petitioner does not have the means of pre-depositing any amount for filing appeal before the Appellate Tribunal and, therefore, in this case, the remedy of appeal under the statute is illusory.
9.1 It was submitted that the reason for delay in adjudication of the show cause notice has been explained by the respondents by stating that the show cause notice had been transferred to the call book. It was submitted that the concept of call book has come on record only in the reply and is contrary to the provisions of law and the decisions of this court. Moreover, the petitioner was never informed that its case has been kept pending and has been consigned to the call book. Besides, there is no legal provision for creating a call book and transferring cases to it. Reference was made to the provisions of section 11A of the Act, to point out that subsection (1) thereof, provides for service of notice where duty has not been levied or paid or which has been short-levied or short-paid or where refund has been erroneously made within a period of one year from the relevant date, and sub-section (4) thereof provides for service of such notice within a period of five years from the relevant date where the extended period of limitation is sought to be invoked. Reference was made to subsection (11) of section 11A which postulates that the Central Excise Officer shall determine the amount of duty of excise under sub-section (10) within a period of six months from the date of notice where it is possible to do so in respect of cases falling under sub-section (1); and within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub-section (4) or sub-section (5). It was submitted that the statute itself provides for timelines for issuance of notice and completion of adjudication and, thus, the law does not contemplate any stagnancy but, on the contrary, contemplates speedy disposal of cases. Reference was made to the provisions of section 35A of the Act, which provides for procedure of appeal before the Commissioner (Appeals) and more particularly, to sub-section (4A) thereof, which provides that the Commissioner (Appeals) shall where it is possible to do so, hear and decide every appeal within a period of six months from the date on which it is filed. Reference was also made to the provisions of sub-section (2A) of section 35C of the Act, which provides that the Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of three years from the date on which such appeal is filed.
9.2 Reliance was placed upon the decision of the Supreme Court in the case of Abdul Rehman Antulay v. R. S. Nayak, (1992) 1 SCC 225, and more particularly to the contents of paragraph 86 thereof, wherein the Supreme Court has laid down certain propositions which are meant to serve as guidelines. Reference was made to clause 3(c) thereof, wherein the court has observed that the concerns underlying the right to speedy trial from the point of view of the accused are (c) undue delay may well result in impairment of the ability of the accused to defend himself, whether on account of death, disappearance or non-availability of witnesses or otherwise. It was submitted that the said decision though rendered in the context of the provisions of the Code of Criminal Procedure would also be applicable to the facts of the present case, inasmuch as, the petitioner also is entitled to the right of speedy adjudication of the show cause notice issued against it and that the delay would result in disappearance or non-availability of witnesses and other documentary evidence on which the petitioner may place reliance. It was submitted that in case of indirect taxation, the sooner the decision is taken, the assessee can recover its dues from the revenue or the revenue from the assessee, as the case may be. It was submitted that if transferring of a matter to the call book to await adjudication by the higher authority is taken to its logical end, in a given case, if the Appellate Tribunal comes to a particular view and the aggrieved party approaches the High Court and thereafter the Supreme Court, the matters would remain in the call book for years together. It was submitted that the statute does not contemplate such a course of action.
9.3 The attention of the court was drawn to the fact that circular No.162/73/-CX dated 14.12.1995, providing for transferring the matters to the call book has been issued by the Central Board of Excise and Customs (CBEC). Reference was made to the provisions of section 37B of the Act which empowers the CBEC to issue instructions of Central Excise officers, to submit that the concept of call book does not fall within any of the categories enumerated thereunder. It was argued that, therefore, issuance of the circular itself is without jurisdiction and authority of law.
9.4 Reliance was placed upon the decision of this court in the case of Larsen and Toubro Limited v. Union of India, 2016 (334) E.L.T. 268 (Guj.) wherein the petitioner therein had succeeded before the Tribunal and had applied for refund to the adjudicating authority, which rejected the refund claim, against which the petitioner preferred an appeal before the Appellate Commissioner. The court observed that it expected the Appellate Commissioner to decide the appeal latest by 28.2.2016; however, the learned counsel for the revenue submitted that the Commissioner had presently kept the appeal in “call book” as per the circular; in other words, the Commissioner has kept the hearing of the appeal in abeyance sine die. The court observed that this was presumably because the Department’s appeal against the judgment of the Tribunal, which was in favour of the petitioner was pending before the High Court. The court, however, noticed that while admitting the appeal, the High Court had rejected the Department’s stay application and was of the opinion that when, thus, the court refused to stay implementation of the judgment of the Tribunal, benefit thereof must flow in favour of the assessee, who succeeded. The court held that the action of the Commissioner in keeping the appeal against the order of the adjudicating authority refusing to grant refund would be an indirect attempt to deny the benefit to the petitioner flowing from such judgment of the Tribunal when the High Court refused to grant protection. The court held that the Commissioner, by way of indirect method, cannot bestow the same unto himself and directed the Commissioner to withdraw the appeal from the call book and dispose of the same as directed. It was submitted that, therefore, the very concept of call book is illegal and that on the basis thereof, the delay of seventeen years in the case of the petitioner cannot be justified by the Department. It was, accordingly, urged that the impugned order which has been passed after a delay of more than seventeen years and in breach of the principles of natural justice, as well as the show cause notice dated 3.8.1998, deserve to be quashed and set aside.
9.5 Another argument put forth by the learned counsel for the petitioner was that the respondents had kept the matter in the call book with a view to await the decision in the case of M/s. Siddharth Petro Products Limited, therefore, when it was the case of the Department that the case of Siddharth Petro Products Limited was similar to the facts of the present case, the revenue was bound to follow the decision in the said case and drop the proceedings, and that if it is the case of the revenue that the decision of M/s Siddharth Petro Products was not applicable to the facts of the present case, the matter would not have been transferred to the call book for all these years. It was submitted that in either case, the respondents are not justified in their action.
10. In sur-rejoinder, Mr. Sudhir Mehta, learned senior standing counsel for the respondents invited the attention of the court to the provisions of section 37B of the Act to submit that the Central Board of Excise and Customs is duly empowered to issue instructions of the Central Excise Officers. Reference was made to rule 31 of the Central Excise Rules, 2002, which provides for power to issue supplementary instructions and lays down that the Board or the Principal Chief Commissioner or Chief Commissioner, as the case may be, or the Principal Commissioner or Commissioner, as the case may be, may issue written instructions providing for any incidental or supplemental matters, consistent with the provisions of the Act and the rules. It was submitted that, therefore, the CBEC is duly empowered under the Act and the rules to issue instructions and in exercise of such powers, has issued the circular dated 14.12.1995, which is binding upon the revenue authorities and, therefore, the second respondent was wholly justified in transferring the matter to the call book and the delay in adjudicating the show cause notice being in consonance with the instructions by the CBEC, stands duly explained. It was, accordingly, urged that the petition being devoid of merits, deserves to be dismissed.
11. From the facts and contentions noted hereinabove, as well as on a perusal of the impugned order, it appears to be an accepted position that the show cause notice was issued on 3.8.1998, pursuant to which the petitioner filed its written submissions under letter dated 15.3.2000; however, prior thereto, two Superintendents were cross-examined on 16.2.1999. But, after the petitioner filed its written submissions, for fifteen years no further action was taken by the respondents. It is the case of the petitioner that it was given to understand that similar cases for demanding duty on Draw Winding were dropped in the Surat region and therefore, the cases in Ahmedabad and elsewhere were also closed. In the meanwhile, due to efflux of time, viz., about fifteen years, the petitioner’s factory was closed down and possession of the plant and factory was taken over by the Gujarat State Financial Corporation and the same were auctioned around 2004. It appears that the residential house of the Directors was also sold off to clear bank debts in 2002. Thereafter, like a bolt from the blue, the impugned order-in-original came to be served upon the Director after tracing his whereabouts, as mentioned hereinabove. Now, before this court, in the affidavit-in-reply, the respondents have come out with a case that the show cause notice dated 3.8.1998 issued to the petitioner company was transferred to the call book by the then Commissioner Central Excise, Ahmedabad-II on 23.3.2000, in view of the fact that in a similar case where the demand was dropped by the Surat-I Commissioner which was reviewed by the Board, the Department had filed an appeal. It appears that the Appellate Tribunal had initially dismissed the appeal on the ground of maintainability against which, the revenue had approached this High Court, which restored the appeal to the Appellate Tribunal. Ultimately, the Appellate Tribunal by an order dated 18.6.2013 dismissed the appeal filed by the revenue, which order has been accepted by the revenue. It is after the dismissal of the revenue’s appeal that the show cause notice has been retrieved from the call book on 26.4.2014, whereafter, after a considerable delay, notice for personal hearing has been issued fixing the personal hearing in November, 2015. Thus, there is a delay of more than one and a half year even after the show cause notice came to be retrieved from the call book. However, in the interregnum the aforesaid events have taken place on account of which the petitioner could not be served with the notice of hearing and the second respondent has proceeded to decide the matter ex parte.
12. Since the very maintainability of the present writ petition against an order-in-original has been challenged by the respondents, the same would be required to be dealt with at the outset. On behalf of the petitioner, it has been contended that the revival of the show cause notice proceedings, which were lying dormant for about fifteen years, is unreasonable and illegal, and the order, having been made after reviving the proceedings without any reason for explaining the delay, is without jurisdiction. It has also been alleged that the impugned order has been passed in violation of the principles of natural justice, as the same is an ex parte order. In this regard it may be noted that is by now well settled that where there is an alternative statutory remedy available, the High Court ordinarily would not exercise its extraordinary jurisdiction under Article 226 of the Constitution, except in cases where there is violation of the principles of natural justice, or where the authority concerned lacks jurisdiction or exercises powers in excess of its jurisdiction or does not does not exercise the jurisdiction vested in it. In the present case, the petition filed been filed on the ground that the impugned order is without jurisdiction, as the adjudicating authority has exercised powers beyond a reasonable period of time and that the same is in breach of principles of natural justice. Under the circumstances, if the petitioner is in a position to show that any of the above circumstances are satisfied, it would be entitled to invoke the writ jurisdiction of this court under Article 226 of the Constitution.
13. Another notable aspect of the matter is that in view of the reply filed by the respondents wherein a stand has been taken that the matter has been referred to the call book, the very validity of the circular issued by the Central Board of Excise and Customs for transferring the matters to call book, has been called in question by the petitioner, which can be done only by invoking the writ jurisdiction of this court under Article 226 of the Constitution and cannot be challenged before any of the statutory authorities under the Act. Therefore, the contention that the petition is not maintainable does not merit acceptance.
14. Adverting to the merits of the case, as can be seen from the impugned order, the same is totally silent as regards why the matter was kept pending from the year 2000 to November 2015 when notices for personal hearing came to be issued. In the affidavit-in-reply, the stand adopted by the respondents is that in view of the fact that a similar issue in the case of M/s. Siddharth Petro Products Limited and others, was pending consideration by the Appellate Tribunal, the matter was transferred to the call book on 23.03.2000, and it is only after the said case was decided by the Appellate Tribunal by an order dated 10.06.2013, that the show cause notice was retrieved from the call book on 26.04.2014, that is, after a period of more than ten months. Subsequently, after a further period of one and a half year, notices for personal hearing came to be issued, whereby personal hearing was fixed on 13.11.2015, 16.11.2015, 17.11.2015, 27.11.2015 and 25.01.2016, after which, the matter was decided ex parte by the impugned order dated 11.03.2016. From the dates fixed for personal hearing, it is evident that insofar as the first three dates are concerned, considering the fact that the dates are in quick succession, different notices could not have been issued for fixing such date of personal hearing. The small gap between the notices is also indicative of the fact that no serious efforts were made to serve the petitioner. It is quite perplexing that when it came to service of notice to the petitioner in a proceeding which had been kept in cold storage by the respondents for a period of more than seventeen years, the respondents did not deem it fit to find the whereabouts of the petitioner with a view to afford due opportunity of hearing to it. Whereas when it came to recovery of dues pursuant to the impugned order-in-original, with a little effort, the address of the Director of the petitioner company was easily traced out by the respondents. Had such an effort been made at the stage of hearing, the entire exercise before this court could have been obviated. Be that as it may, since the notice has been displayed on the notice board in compliance with the provisions of section 37C of the Act, it cannot be said that there was no service of notice upon the petitioner.
15. The moot question that arises for consideration in the present case is, whether it was permissible for the respondents to act upon a show cause notice issued in the year 1998, after a period of seventeen years. At this juncture, it may be germane to refer to the decisions on which reliance has been placed by the learned counsel for the petitioner.
16. The decision of the Bombay High Court in the case of Shirish Harshavadan Shah v. Deputy Director, Enforcement Directorate, Mumbai (supra), was relied upon wherein in the facts of the said case for a period of almost twelve years, no steps had been taken by the respondents therein to proceed with the adjudication proceedings. The court held that no fault could be attributed to the petitioners for this delay and inaction on the part of the respondents; the respondents had not alleged any malice on the part of the petitioners nor was it the case of the respondents that the petitioners therein were responsible for the delay in the proceedings. The court found no justification in the explanation tendered for causing delay in the adjudication proceedings and held that the department was not entitled to re-open old matters in this manner and if the department’s contention as to limitation were to be accepted, it would mean that the department can commence adjudication proceedings twenty years, twenty-five years or thirty years after the original show cause notice, which cannot be permitted.
17. In Hindustan Lever Limited v. Union of India (supra), the Bombay High Court held that the extent of delay which had occurred in adjudication upon the issues was also relevant. The court observed that it was well-settled that the adjudication proceedings have to be culminated within a reasonable time and if it is not done so, they stand vitiated on the said ground. The court observed that, normally for compliance of the principles of natural justice it would have remanded the matter back to the concerned authority. However, considering the time lag that has elapsed from the date of first hearing granted to the petitioner, since there had been undue delay in deciding the said proceedings, it did not deem it fit to remand the matter to the concerned authority of the respondents. The court, accordingly, set aside the impugned order.
18. In R.M. Mehrotra v. Enforcement Directorate (supra), the Delhi High Court held that the revival of the proceedings after a time gap of ten years, without notice of hearing disclosing any reason for the delay, is not a mere matter of impropriety; the respondents were under a duty to disclose what compulsions held up the adjudicatory process for so long. In the absence of such explanation, revival of the proceedings would be unlawful and arbitrary.
19. Thus, the consistent approach adopted by the different High Courts insofar as the delay in concluding proceedings pursuant to a show cause notice is concerned, is that revival of proceedings after a long time gap without any proper explanation therefor, is unlawful and arbitrary.
20. The question that, therefore, arises for consideration is as to whether the explanation put forth by the respondents for the delay in determining the duty pursuant to the show cause notice issued in 1998 can be said to be reasonable. As noticed hereinabove, it is the case of the respondents that the show cause notice has remained undecided in view of the fact that it had been consigned to the call book in view of the Circular No.162/73/95-CX dated 14.12.1995 issued by the CBEC. Insofar as the power of the CBEC to issue instructions to the authorities under the Central Excise Act are concerned, the same are relatable to the provisions of section 37B of the Act, which read thus:-
“37-B. Instructions to Central Excise Officers-The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods or for the implementation of any other provision of this Act, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board:
Provided that no such orders, instructions or directions shall be issued-
(a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner: or
(b) so as to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions.
21. Thus, under section 37B of the Act, the Central Board of Excise and Customs is empowered to issue instructions to Central Excise Officers if it considers it necessary or expedient to do so firstly, for the purpose of uniformity in the classification of excisable goods; secondly with respect to levy of duties of excise on such goods; and thirdly, for the implementation of any other provision of the Act. Insofar as the concept of call book is concerned, the same evidently does not relate to uniformity in the classification of excisable goods, or to levy of duties of excise of such goods. Insofar as the implementation of any other provision of this Act is concerned, the concept of call book, cannot be traced to any other provision of the Act nor does it appear to be relatable to the implementation of any other provision of the Act. Evidently, therefore, the circular dated 14.12.1995, cannot be said to have been issued in exercise of powers under section 37B of the Act.
22. On behalf of the respondents, reliance has also been placed upon rule 31 of the Central Excise Rules, which makes provision for power to issue supplementary instructions and lays down that the Board or the Principal Chief Commissioner or Chief Commissioner, as the case may be, or the Principal Commissioner or Commissioner, as the case may be, may issue written instructions providing for any incidental or supplemental matters, consistent with the provisions of the Act and the rules. In view of the provisions of rule 31 of the rules, any instructions issued by the Board thereunder have to be either incidental or supplemental and consistent with the provisions of the Act and the rules. In the opinion of this court, instructions to consign a case to the call book are relatable to the adjudicatory process, and do not provide for any incidental or supplemental matters, consistent with the Act or the rules. Neither the Act nor the rules, in any manner empower the CBEC to issue instructions to any adjudicatory authority in relation to matters pending for adjudication before it.
23. Insofar as the show cause notice in the instant case is concerned, the same has been issued under section 11A of the Act. Proceedings under section 11A of the Act are adjudicatory proceedings and the authority which decides the same is a quasi-judicial authority. Such proceedings are strictly governed by the statutory provisions. Section 11A of the Act as it stood at the relevant time when the show cause notice came to be issued, provided for issuance of notice within six months from the relevant date in ordinary cases and within five years in case where the extended period of limitation is invoked. Section 11A thereafter has been amended from time to time and in the year 2011, various amendments came to be made in the section including insertion of sub-section (11) which provides that the Central Excise Officer shall determine the amount of duty of excise under sub-section (10) –
(a) within six months from the date of notice where it is possible to do so, in respect of cases falling under subsection (1);
(b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under subsection (4) or sub-section (5).
24. Thus, with effect from the year 2011 a time limit has been prescribed for determining the amount of duty of excise where it is possible. It cannot be gainsaid that when the legislature prescribes a time limit, it is incumbent upon the authority to abide by the same. While it is true that the legislature has provided for such abiding by the time limit where it is possible to do so, sub-section (11) of section 11A of the Act gives an indication as to the legislative intent, namely that as far as may be possible the amount of duty should be determined within the above time frame, viz. six months from the date of the notice in respect of cases falling under subsection (1) and one year from the date of the notice in respect of cases falling under sub-section (4) or sub-section (5) . When the legislature has used the expression “where it is possible to do so”, it means that if in the ordinary course it is possible to determine the amount of duty within the specified time frame, it should be so done. The legislature has wisely not prescribed a time limit and has specified such time limit where it is possible to do so, for the reason that the adjudicating authority for several reasons may not be in a position to decide the matter within the specified time frame, namely, a large number of witnesses may have to be examined, the record of the case may be very bulky, huge workload, non-availability of an officer, etc. which are genuine reasons for not being able to determine the amount of duty within the stipulated time frame. However, when a matter is consigned to the call book and kept in cold storage for years together, it is not on account of it not being possible for the authority to decide the case, but on grounds which are extraneous to the proceedings. In the opinion of this court, when the legislature in its wisdom has prescribed a particular time limit, the CBEC has no power or authority to extend such time limit for years on end merely to await a decision in another case. The adjudicatory authority is required to decide each case as it comes, unless restrained by an order of a higher forum. This court is of the view that the concept of call book created by the CBEC, which provides for transferring pending cases to the call book, is contrary to the statutory mandate, namely, that the adjudicating authority is required to determine the duty within the time frame specified by the legislature as far as possible. Moreover, as discussed hereinabove, there is no power vested in the CBEC to issue such instructions under any statutory provision, inasmuch as, neither section 37B of the Central Excise Act nor rule 31 of the rules, envisage issuance of such directions. The concept of call book is, therefore, contrary to the provisions of the Central Excise Act and such instructions are beyond the scope of the authority of the CBEC. Transferring matters to the call book being contrary to the provisions of law, the explanation put forth by the respondents for the delay in concluding the proceedings pursuant to the show cause notice 3.8.1998 cannot be said to be a plausible explanation for not adjudicating upon the show cause notice within a reasonable time. In view of the settled legal position, as propounded by various High Courts, with which this court is in full agreement, the revival of proceedings after a long gap of ten to fifteen years without disclosing any reason for the delay, would be unlawful and arbitrary and would vitiate the entire proceedings.
25. Examining the matter from another angle, it is the stand of the respondents that the matter was kept in the call book for all these years to await the outcome of a similar case in the case of M/s. Siddharth Petro Products Limited and others, which was pending before the Appellate Tribunal. In such a situation, the decision in the case of the petitioner should be governed by the decision of the Appellate Tribunal. However, the respondents after keeping the matter in the call book for fifteen years, have thereafter chosen not to follow the outcome of the other matter wherein the show cause notice had been dropped by the adjudicating authority, and the Appellate Tribunal had dismissed the appeal, albeit on grounds other than on merits.
26. Moreover, as is evident from the facts noted hereinabove, the respondents while consigning the matter to the call book did not deem it fit to inform the petitioner about it. Since in other cases, such proceedings had been dropped, the petitioner had reason to form a bona fide belief that the proceedings in its case had also been dropped. During the interregnum the petitioner’s position has changed considerably. ln view of the fact that the factory of the petitioner company has been closed down and sold, it cannot be gainsaid that even if the petitioner was served with the notice of personal hearing, it would be difficult for it to defend the case inasmuch as in view of the lapse of time and intervening circumstances, the evidence might have been lost. After seventeen years, the persons who were conversant with the case may not be available, documentary evidence may have been displaced. Thus, the delay in deciding the proceedings, that too without bringing it to the notice of the petitioner that the case was transferred to the call book and was therefore pending, causes immense prejudice to the petitioner. The revival of the proceedings, therefore, is in complete breach of the principles of natural justice and hence, the impugned show cause notice and the order-in-original passed pursuant thereto, cannot be sustained.
27. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned Order-in-original No.AHM-EXCUS-003-040-15-16 dated 11.3.2016 as well as the Show Cause Notice F.No.V.54/15-29/OA/98 dated 3.8.1998 are hereby quashed and set aside. Rule is made absolute with no order as to costs.
