2016 (4) TMI 980 - HC - Central Excise

Court Invalidates Time-Barred Excise Duty Notices, Emphasizes Limited Interference

Madura Coats Limited Versus The Deputy Commissioner of Central Excise

The court set aside the show cause notices dated 2001 demanding recovery of excise duty beyond the five-year limitation period under the Central Excise ... Period of limitation - Demand of excise duty - clearance of grey and processed fabrics from the 100% EOU during the period 1994 to 1996 - Petitioner contended that SCN were issued beyond the period of five years from the relevant date, hence, liable to be set aside under Section 11A of the Central Excise Act. Held that:- normally, the Writ Court should not interfere at the stage of issuance of show cause notices by the authorities for the reason that the authorities should provide an ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities about the absence of case for proceeding against the persons against whom the show cause notices have been issued. Where a show cause notice is issued either without jurisdiction or in an abuse of process of law, in that case, the writ Court can interfere even at the stage of issuance of show cause notice. It should be prima-facie established to be so. On the face of the show cause notices, it is clear that the demand made by the respondent is time barred under Section 11A of the Central Excise Act. When that demand made by the respondent itself is time barred under the Act, this Court can interfere at the stage of issuance of show cause notice. Therefore, show cause notices are liable to be set aside. - Decided in favour of petitioner Issues:Challenging show cause notices for excise duty recovery and penalty imposition beyond the statutory time limit under the Central Excise Act.Analysis:The petitioner, a 100% Export Oriented Unit (EOU), challenged show cause notices demanding recovery of excise duty allegedly not paid for fabric clearances from 1993 to 1996. The petitioner contended that the notices issued in 2001 were beyond the five-year limitation period under Section 11A of the Central Excise Act. The petitioner argued that if proceedings were based on a customs bond violation, they should have been initiated under the Customs Act, not the Central Excise Act. The petitioner relied on a Supreme Court judgment emphasizing limited interference at the show cause notice stage unless issued without jurisdiction or as an abuse of process.The respondent, however, argued that the proceedings were based on a bond dated 1996 valid until 2002, justifying the notices issued in 2001. The respondent claimed the notices were issued under the Central Excise Act, not the Customs Act, and recovery was subject to Section 11A limitations. The court noted that the notices demanded duty for periods ending in 1996 but were issued in 2001, exceeding the five-year limit. The court rejected the respondent's argument that proceedings were under the 1996 bond, stating appropriate action should have been under the Customs Act if that were the case.The court emphasized that interference at the show cause notice stage should be rare but warranted if notices were time-barred or issued without jurisdiction. Given the time limitation under Section 11A, the court found the demand by the respondent to be time-barred, justifying interference at the notice issuance stage. Consequently, the court set aside the show cause notices dated 2001, ruling in favor of the petitioner.