2022 (3) TMI 749 - HC - Central Excise

Court quashes 11-year-old Show Cause Notices, citing Central Excise Act; delays deemed unreasonable

The court allowed the writ petitions and quashed the Show Cause Notices issued over 11 years ago, emphasizing adherence to time limits under Section 11(A) ... Validity of Show Cause notice - Non adjudication / delayed adjustication of SCN for 11 years - CENVAT Credit - inputs - Menthol/Menthol flakes - Mentholised Oil (DMO) - Deterpinated Menthol & like inputs - invoices issued by the J&K and North East based units by showing supply of raw materials without supply of goods - HELD THAT:- It is clear that in Section 11-A(11), the legislature has prescribed a time limit. The Authority(s) are duty bound to abide the same. The expression “where it is possible to do so” does not mean that the time prescribed can be extended perpetually. The time limit cannot be taken to be directory except in a case where the Authority has a reason to offer as an explanation for extending the said time limit - In the present case, no explanation has been offered in the written statement which can be held to be a plausible explanation for not adjudicating upon the Show Cause Notice within the time prescribed. No explanation has been offered in the written statement as to why the Show Cause Notice(s) issued in 2009/2010 could not be adjudicated prior to 2018. The present writ petitions are allowed. Issues Involved:1. Quashing of Show Cause Notices due to non-adjudication for over 11 years.2. Validity of transferring Show Cause Notices to Call Book category.3. Interpretation of Section 11(A) of the Central Excise Act, 1944.4. Impact of pending appeals before the Jammu & Kashmir High Court on adjudication of Show Cause Notices.Issue-wise Detailed Analysis:1. Quashing of Show Cause Notices due to non-adjudication for over 11 years:The petitioners sought quashing of Show Cause Notices issued more than 11 years ago, which remained unadjudicated. The court noted that the respondents did not dispute the non-adjudication. The petitioners relied on Section 11(A) of the Central Excise Act, 1944, and relevant case laws, including 'Siddhi Vinayak Syntex Private Limited vs Union of India' and 'State of Punjab vs. Bathinda District Co-op. Milk P. Union Limited', to argue that such prolonged non-adjudication is unreasonable and warrants quashing of the notices.2. Validity of transferring Show Cause Notices to Call Book category:The respondents argued that the Show Cause Notices were transferred to the Call Book category due to pending appeals before the Jammu & Kashmir High Court, as per Circular No.1053/02/2017-CX dated 10.03.2017. They contended that this transfer justified the non-adjudication. However, the court observed that the appeals were filed in 2018, and no explanation was provided for the delay in adjudicating the notices issued in 2009/2010 prior to 2018.3. Interpretation of Section 11(A) of the Central Excise Act, 1944:Section 11(A) prescribes a time limit for adjudicating Show Cause Notices. The court emphasized that the expression “where it is possible to do so” does not allow indefinite extension of this time limit. The court referred to the Division Bench ruling in 'M/s GPI Textiles Limited vs. Union of India and others', which held that notices issued more than a decade ago without conclusion within a reasonable time should be quashed. The court also cited the Supreme Court's interpretation in 'Commissioner of Central Excise vs. Krishna Wax (P) Limited' that the issuance of a Show Cause Notice is significant and should be timely.4. Impact of pending appeals before the Jammu & Kashmir High Court on adjudication of Show Cause Notices:The court noted that the appeals before the Jammu & Kashmir High Court were filed in 2018, long after the issuance of the Show Cause Notices in 2009/2010. The Division Bench in 'M/s Mentha & Allied Products Ltd. vs. Commissioner, Central Goods & Service Tax, Chandigarh' had previously held that such pending appeals do not justify the delay in adjudication. The court found no plausible explanation for the delay and concluded that the pending appeals did not affect the requirement to adjudicate the notices within the prescribed time.Conclusion:The court allowed the writ petitions and quashed the Show Cause Notices issued more than 11 years ago, emphasizing adherence to the time limits prescribed under Section 11(A) of the Central Excise Act, 1944, and rejecting the justification of transferring the notices to the Call Book category due to pending appeals.