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) ... Quashing of show cause notice for inordinate delay - statutory time-limit in Section 11A(11) of the Central Excise Act, 1944 - where it is possible to do so - temporal obligation on adjudicating authority - effect of pendency of appeals on computation of limitation - administrative transfer to Call Book under CBIC circular not a substitute for adjudicationQuashing of show cause notice for inordinate delay - statutory time-limit in Section 11A(11) of the Central Excise Act, 1944 - where it is possible to do so - temporal obligation on adjudicating authority - Show Cause Notices issued in 2009-2010 were liable to be quashed for having remained unadjudicated for more than a decade notwithstanding the words 'where it is possible to do so' in Section 11A(11). - HELD THAT: - The Court held that Section 11A(11) prescribes temporal limits for determination of duty (six months for cases under sub-section (1); one year for cases under sub-section (4)/(5)) and that the phrase 'where it is possible to do so' does not permit perpetual extension of those periods. Authorities are duty-bound to adhere to the statutory timeframe and must offer a plausible explanation to justify any extension. In the present cases no such explanation was furnished for the failure to adjudicate the Show Cause Notices issued in 2009-2010. Reliance placed on judicial precedents which set aside belated adjudications and on the Supreme Court's pronouncement regarding the significance of the date of issuance of the Show Cause Notice for reckoning limitation reinforced the view that delay of over a decade, without adequate justification, rendered continuation of the proceedings unreasonable and liable to be quashed. The Court therefore quashed the Show Cause Notices issued more than eleven years earlier. [Paras 11, 12, 13, 15]Show Cause Notices issued in 2009/2010 quashed for failure to adjudicate within the statutory period prescribed by Section 11A(11).Effect of pendency of appeals on computation of limitation - administrative transfer to Call Book under CBIC circular not a substitute for adjudication - Pendency of appeals filed in 2018 and administrative transfer of matters to a Call Book category pursuant to the CBIC circular did not justify the decade-long non-adjudication of Show Cause Notices issued in 2009/2010 in the absence of any explanation showing why adjudication could not be completed prior to 2018. - HELD THAT: - The Court noted that the appeals before the Jammu & Kashmir High Court were filed in 2018 and that no explanation was placed on record to show why the Show Cause Notices issued in 2009/2010 could not have been adjudicated before those appeals were filed. The respondents' reliance on the CBIC Circular transferring matters to Call Book was insufficient to cure the inordinate delay; administrative shelving does not amount to a legally adequate reason for not complying with statutory time-limits. Earlier decisions of this Court addressing similar facts were held to be applicable, and the pendency of later-filed appeals did not operate retrospectively to justify delay already occasioned. Consequently, the Court rejected the contention that pendency of appeals or administrative transfer prevented quashing of the stale Show Cause Notices. [Paras 6, 14, 15]Pendency of appeals filed in 2018 and transfer to Call Book under the CBIC circular do not validate the decade-long non-adjudication; the Show Cause Notices were quashed.Final Conclusion: Writ petitions allowed; Show Cause Notices dated 31.12.2009, 23.02.2010 and 12.03.2010, issued more than eleven years prior and left unadjudicated without plausible explanation, are quashed. 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.