Revenue Department Cannot Resume Decade-Old Inquiry Under Rule 14 Cenvat Credit Rules and Section 11A The Bombay HC struck down the Revenue Department's attempt to resume inquiry into show cause cum demand notices under Rule 14 of Cenvat Credit Rules, 2004 ...
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Revenue Department Cannot Resume Decade-Old Inquiry Under Rule 14 Cenvat Credit Rules and Section 11A
The Bombay HC struck down the Revenue Department's attempt to resume inquiry into show cause cum demand notices under Rule 14 of Cenvat Credit Rules, 2004 and Section 11A of Central Excise Act, 1944 after more than 10 years. The court held that Section 11A provides statutory time limits of six months/two years for recovery actions depending on the subsection applicable. Reviving inquiries after a decade violated these statutory limitations and was illegal. Following similar precedents in service tax matters, the court found the prolonged delay contrary to law and allowed the petition striking down the resumed proceedings.
Issues Involved: The judgment addresses the issue of the Revenue Department's powers to resume inquiry into show cause cum demand notices after a lapse of more than 10 years, specifically in the context of Cenvat Credit Rules and Central Excise Act.
Details of the Judgment:
1. The petitioner, a public limited company engaged in manufacturing excisable goods, had filed excise returns audited by the Assistant Commissioner of Goods and Service Tax. The respondent issued show cause notices regarding the reversal of Cenvat Credit availed by the petitioner, leading to the petitioner's grievance over the resumed inquiries after a significant delay.
2. The petitioner argued that the respondent was not entitled to resume the inquiries due to the unreasonable delay of 10 to 13 years in adjudicating the matters post the issuance of show cause notices. Citing various judgments, the petitioner sought relief from being kept under prolonged uncertainty and requested a mandamus to drop the proceedings.
3. The respondent explained that the delay was due to the department's appeal before the Supreme Court regarding the petitioner's inadmissible Cenvat Credit. Following the withdrawal of the appeal and subsequent revival of cases, the respondent justified the delay from the date of Supreme Court's decision and highlighted the impact of the pandemic on the proceedings.
4. The court analyzed the statutory provisions of Section 11A of the Central Excise Act, emphasizing the limitation period for initiating recovery actions. It noted the illegal revival of inquiries after a decade, contrary to the statutory time limits, and referenced previous judgments that struck down similar belated actions.
5. Despite the respondent's explanation regarding the Call Book maintenance and circulars, the court found the delay unjustified, emphasizing the necessity of informing the petitioner about any delays or pending actions. It referenced past judgments to support its conclusion that the revived inquiries were arbitrary and contrary to the law.
6. Ultimately, the court allowed the writ petitions, making the Rule absolute in favor of the petitioners in accordance with the prayer clauses, thereby striking down the revived inquiries that had been dormant for an extended period.
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