Court quashes arbitrary Show Cause Notice on modvat credit, deems it time-barred and unsupported by law.

The Court quashed the Show Cause Notice demanding modvat credit availed by the petitioner, ruling it arbitrary, time-barred, and unsupported by the Central Excise Act. The Court held that the Notice was without jurisdiction and not in accordance with the law. Despite objections by the respondents, the Court found interference under Article 226 justified due to the arbitrary nature and limitation issues of the Notice. The Writ Petition was allowed without costs, and the Court refrained from addressing the refund claim, clarifying the petitioner's ineligibility for the modvat credit portion.

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Issues:
1. Validity of Show Cause Notice demanding modvat credit availed by the petitioner during a specific period.
2. Jurisdiction of the Court in quashing the Show Cause Notice under Article 226 of the Constitution.

Issue 1: Validity of Show Cause Notice
The petitioner, a manufacturer of Scented Supari, had a long-standing dispute regarding the excisability of their products, which was settled in their favor by court orders. Subsequently, the Department initiated proceedings for a refund claim and issued a Show Cause Notice demanding modvat credit availed during the same period. The petitioner contended that the Notice was without jurisdiction, opposed to the Central Excise Act and Rules, and barred by limitation. They argued that the modvat credit was rightfully availed during the material time but became ineligible due to the non-excisability of the final products as determined by the Court. The Department's objection to the credit only arose after the petitioner filed a refund claim, making the demand arbitrary and untenable. The Court found the Notice to be an arbitrary exercise of power, hit by limitation, and not supported by Section 5-B of the Central Excise Act. The plea of equity by the respondents regarding limitation was deemed misplaced, and the Notice was quashed on these grounds.

Issue 2: Jurisdiction of the Court
The respondents argued that the Writ Petition was premature as statutory remedies were available, citing various legal precedents. However, the Court found that the circumstances of the present case, including the arbitrary nature of the Show Cause Notice and its limitation issues, warranted interference under Article 226. The Court held that the Show Cause Notice was an arbitrary exercise of authority, hit by the bar of limitation, and thus the statutory remedy was not efficacious. Consequently, the Court quashed the Show Cause Notice while refraining from expressing an opinion on the proceedings related to the refund claim. The Court clarified that the petitioner was not entitled to the modvat credit portion of the refund claim, which would be disposed of in accordance with the law.

In conclusion, the Writ Petition was allowed, and no costs were imposed. The connected miscellaneous petition was closed in light of the Court's decision.

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