2021 (4) TMI 1042 - HC - Central Excise

Court upholds excise duty under Compounded Levy Scheme for full year despite unit closure, rejects challenge on constitutional validity.

The Court upheld the imposition of excise duty under the Compounded Levy Scheme for the entire financial year, despite the production unit's closure. The ... Recovery of Excise Duty - Compounded Levy Scheme - closure of production units - Time Limitation - HELD THAT:- This Court is of the considered opinion that the judgment of the Hon'ble Supreme Court in M/S. BHUWALKA STEEL INDUSTRIES LTD. & ANOTHER VERSUS UNION OF INDIA & OTHERS [2017 (3) TMI 1357 - SUPREME COURT] is regarding the general question which was raised before the Hon'ble Apex Court and further, the said judgment has been referred to the larger bench. However, the fact remains that the petitioner in the present case had opted for Compounded Levy Scheme which was not dealt with by the Hon'ble Apex Court. Therefore, the case on hand is to be decided independently with reference to the terms and conditions of the Compounded Levy Scheme which was framed under the provisions of the Act and Rules. When the petitioner admits that he was paying the excise duty under the Compounded Levy Scheme and he is bound by the scheme and further, the petitioner admitted the fact that the production unit was closed with effect from 26.04.1999, the petitioner is liable to pay excise duty for the whole year as claimed by the Department. Apart from this, the writ petition is filed after a lapse of 7 1/2 years from the date of passing of the impugned order on 28.07.2011. The writ petitions stand dismissed both on merits as well as on the ground of latches. Issues:Challenge to order passed by first respondent under Compounded Levy Scheme; Claim of excise duty post cessation of production activities; Communication of impugned order to petitioner; Applicability of Compounded Levy Scheme; Laches in filing writ petition.Analysis:The writ petitioners sought to quash the order passed by the first respondent under the Compounded Levy Scheme. They operated a Partnership Firm producing Hot Re-rolled products and Plastic Molded Parts under the said scheme. The Commissioner of Central Excise had fixed their Annual Production Capacity and monthly lump sum duty. The petitioners claimed that production activities ceased on a specific date, rendering the claim of excise duty post that date invalid. They cited a Supreme Court judgment emphasizing the need to consider actual production levels in duty calculations under such schemes.The petitioners contended that the closure of their production unit was duly communicated to the respondent, and the respondent did not dispute this fact. They argued that the imposition of excise duty in the absence of production activities was unconstitutional. The respondent, however, argued that the petitioners had acknowledged previous orders and appeals, and the impugned order was duly communicated to the last known address. The respondent maintained that the petitioners, having opted for the Compounded Levy Scheme, were liable to pay excise duty for the entire financial year, despite the production unit's closure.The Senior Standing Counsel highlighted that the Appellate Tribunal had set aside the Commissioner's order, emphasizing the petitioners' obligation to pay excise duty under the Compounded Levy Scheme. The Tribunal's decision was based on interpretations of relevant provisions and previous judgments. The respondent further argued that the petitioners' delay in filing the writ petition after the impugned order's issuance rendered it unsustainable. The Court, considering the Supreme Court's judgment and the specifics of the Compounded Levy Scheme, dismissed the writ petition on both substantive and procedural grounds, emphasizing the petitioners' liability under the scheme and the delay in seeking judicial redress.In conclusion, the Court upheld the imposition of excise duty under the Compounded Levy Scheme for the entire financial year, given the closure of the production unit. The Court rejected the petitioners' arguments based on the communicated closure of activities and the constitutional validity of levying duty without production. Additionally, the Court dismissed the petition on the grounds of delay in filing, emphasizing the importance of adhering to procedural timelines in seeking legal remedies.