Orissa High Court
M/S. Idcol Ferro Chrome & Alloys vs Commissioner Central Excise on 2 January, 2023
Author: M.S. Raman
Bench: M.S. Raman
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.11837 of 2017
M/s. IDCOL Ferro Chrome & Alloys .... Petitioner
Ltd., Ferro Chrome Project, Jajpur
Mr. C. R. Das, Advocate
-versus-
Commissioner Central Excise, Customs .... Opposite Parties
& Service Tax, Bhubaneswar and
others
Mr. Ananda Prakash Das, Junior Standing Counsel for O.P. No.1
CORAM:
THE CHIEF JUSTICE
JUSTICE M.S. RAMAN
ORDER
02.01.2023 Order No. Dr. S. Muralidhar, CJ.
05. 1. The prayer in the present petition is for quashing of a Show-
Cause Notice (SCN) dated 3rd February, 2010 issued by the Department to the Petitioner in relation to the alleged violations of Rules 4, 8, 10, 11 and 12 of the Central Excise Rules, 2002 (CE Rules) read with Sections 11A and 11AB 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 2004-05 to 2006-07.
Page 1 of 53. For some reason, which is not clear, the case appears to have been transferred to 'Call Book' on 7th February, 2011. Meanwhile, on 14th May, 2010, the Petitioner replied to the SCN.
4. The Department then slept over the matter for a long period of 5 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. In the meanwhile, the present petition was filed in which Opposite Party-Central Excise, Customs and Service Tax Department entered appearance. 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 7th February, 2011 and then retrieve it from the said Call Book 5 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 the said matter arises out of objection raised by the Accountant General, Odisha (AG(O)) and the Opposite Party contested over the said issue. However, precaution Show Cause Notice was issued and kept in the Call Book, and various correspondences have been made with the Accountant General, Odisha to settle the issue. Since the issue was not settled by the Accountant General, Odisha, the Department (Opposite Party) retrieved the case from the Call Book on Page 2 of 5 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.
On scrutiny of the Central Excise records of the Petitioner, it got revealed that they have not accounted for finished product as per input output ratio declared by them during the year 2004-05 and 2005-06, and thereby it appears that they have willfully contravened the provision of Central Excise Rules, 2002 in as much as they have cleared/despatched HCFC without payment of duty, without observing Central Excise procedures, thereby provision to section 11A and 11AB of the Central Excise Act, 1944 is being invoked for the said clandestine removal. So invoking of provision of extended period of limitation is justified."
7. Mr. 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 similar circumstances, this Court quashed the SCN and the further notice fixing the date of hearing. In the presence case as well, the Court is unable to find any valid explanation offered by the Department in delaying the initial SCN under Section 11A of the CE Act, 3 years after the period of demand and then, more importantly, taking 5 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 Page 3 of 5 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 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."Page 4 of 5
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 3rd February, 2010 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.
(Dr. S. Muralidhar) Chief Justice (M.S. Raman) Judge M. Panda Page 5 of 5