2020 (12) TMI 1230 - HC - Central Excise

Court quashes outdated Show Cause Notices due to unreasonable delays in adjudication

The court found that the Show Cause Notices issued more than a decade ago were unsustainable due to significant delays in adjudication without proper ... Adjudication not finalised even after lapse of more than 10 years - Denial of CENVAT Credit - recovery of rebate claim - petitioner purchased their raw material from J & K based manufacturer who did not purchase any crude Mentha oil from the farmers - HELD THAT:- The subject matter in the present petitions is squarely covered by the ratio of pronouncement in the case of M/S GPI TEXTILES LIMITED VERSUS UNION OF INDIA AND OTHERS [2018 (9) TMI 25 - PUNJAB & HARYANA HIGH COURT] where it was held that the notices in the present cases having been issued more than decade back and the proceedings having not been concluded within reasonable time, the same deserves to be quashed. Filing of the appeal before the Jammu & Kashmir High Court against order dated 28.08.2018 passed by CESTAT, Chandigarh pertaining to supplier of the petitioners (purchaser) - HELD THAT:- It would have no bearing upon the findings recorded above, keeping in view the peculiar facts & circumstances of the case and law laid down referred to above. Moreover, the Jammu & Kashmir High Court has not granted any interim order in favour of the respondent(s)/ Revenue on the appeal filed after 1 ½ year of passing of order of the Tribunal in case of supplier (seller) of goods to the petitioner (purchasers). The show cause notices having been issued long back more than a decade are not sustainable in the eyes of law, and thus, deserve to be quashed - petition allowed. Issues Involved:1. Validity of Show Cause Notices issued after a significant delay.2. Applicability of Section 11A of the Central Excise Act, 1944.3. Impact of pending appeal in Jammu and Kashmir High Court on the proceedings.Issue-wise Detailed Analysis:1. Validity of Show Cause Notices issued after a significant delay:The petitions challenged the Show Cause Notices dated 20.05.2010 and 03.02.2011, arguing that more than a decade had passed without adjudication. The petitioner cited Section 11A of the Central Excise Act, 1944, which prescribes a six-month period for normal cases and one year for cases involving fraud or collusion. The court referenced its earlier judgment in 'M/s GPI Textiles Limited vs. Union of India & others,' which held that significant delays without proper explanation are unlawful and arbitrary. The court reiterated that the concept of transferring cases to the call book, as per the circular dated 14.12.1995, cannot override the statutory mandate of timely adjudication. Consequently, the court found that the prolonged delay in concluding the proceedings rendered the Show Cause Notices unsustainable in law.2. Applicability of Section 11A of the Central Excise Act, 1944:The court examined the relevant provisions of Section 11A, emphasizing the statutory timelines for issuing and adjudicating Show Cause Notices. Section 11A(1) mandates a one-year period for normal cases, while Section 11A(4) allows a five-year period for cases involving fraud, collusion, or suppression of facts. Section 11A(11) further stipulates that adjudication should occur within six months to one year, depending on the case type, where possible. The court noted that the legislative intent behind these timelines is to ensure timely adjudication. Delays caused by transferring cases to the call book without valid reasons contradict the statutory provisions and legislative intent. Therefore, the court held that the Show Cause Notices, issued more than a decade ago, violated the statutory timelines and were thus invalid.3. Impact of pending appeal in Jammu and Kashmir High Court on the proceedings:The respondent argued that the pending appeal (CEA No.8/2020) before the Jammu and Kashmir High Court against the Tribunal's order dated 28.08.2018, which dropped proceedings against the supplier, justified the delay. However, the court found that the pending appeal had no bearing on the current proceedings. The Jammu and Kashmir High Court had not granted any interim order in favor of the respondents. The court emphasized that the appeal, filed 1.5 years after the Tribunal's order, did not justify the prolonged delay in adjudicating the Show Cause Notices. Therefore, the pending appeal did not affect the court's decision to quash the Show Cause Notices.Conclusion:The court concluded that the Show Cause Notices issued more than a decade ago were unsustainable in law due to the significant delay in adjudication without proper explanation. The petitions were allowed, and the Show Cause Notices were quashed. The court's decision was based on the statutory timelines prescribed in Section 11A of the Central Excise Act, 1944, and the principle that prolonged delays without valid reasons are unlawful and arbitrary.