2022 (8) TMI 702 - HC - Central Excise

Court quashes delayed show cause notices, upholds legal principles. Petition allowed, other issues left open.

The court quashed the show cause notices dated 04.09.2008 and 12.11.2008 due to inordinate delay in adjudication, following legal principles established ... Time Limitation - Wrongful availment of CENVAT Credit - motor vehicles cleared without payment of excise duty claiming exemption under N/N. 06/2006-CE dated 01.03.2006 - Case of Department is that petitioner has wrongly availed of the exemption inasmuch as Cenvat Credit on the input consumed in the manufacture of bodies manufactured on duty paid chassis received from independent owners of the chassis had been taken and the vehicles so manufactured had been cleared for payment of applicable central excise duty - inordinate delay in adjudication of the show cause notices as per Section 11(A) of the Central Excise Act, 1944. HELD THAT:- The issue as regards inordinate delay in adjudication of the show cause notices as per Section 11(A) of the Central Excise Act, 1944 came to be dealt with exhaustively by a Division Bench of this Court in M/s Shree Baba Exports through proprietor Ms. Jyotsna Agarwal vs. Commissioner, GST & Central Excise, Commissionerate, Chandigarh and another (CWP No. 11860 of 2021) decided on 15.03.2022 [2022 (3) TMI 749 - PUNJAB & HARYANA HIGH COURT], where it was 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. In the facts of the present case the impugned show cause notices were issued in the year 2008. The same have not been adjudicated upon and the only explanation coming forth in the written statement is that the matter had been transferred to the Call Book as per CVIC guidelines issued from time to time. There are no cogent basis or legal impediment has been offered which may be construed to be a plausible explanation for not adjudicating upon the show cause notices within the time prescribed. In view of the above and by following the dictum laid down in COMMISSIONER GST AND CENTRAL EXCISE & ANR. VERSUS M/S SHREE BABA EXPORTS [2022 (8) TMI 634 - SC ORDER] the impugned show cause notices cannot sustain as there has been an inordinate delay in adjudication of the same. Petition allowed. Issues Involved:1. Wrongful availing of excise duty exemption.2. Inordinate delay in adjudication of show cause notices.Detailed Analysis:1. Wrongful Availing of Excise Duty Exemption:The petitioner was engaged in fabricating vehicle bodies on chassis received from manufacturers and independent/private owners. While excise duty was paid on vehicles built on manufacturer-provided chassis, the petitioner claimed exemption under Notification No. 06/2006-CE for vehicles built on privately owned chassis. The Revenue disputed this exemption, arguing that Cenvat Credit was wrongly availed on inputs used in manufacturing these bodies. Consequently, two show cause notices were issued: one dated 04.09.2008 for Rs. 1,62,99,205/- and another dated 12.11.2008 for Rs. 2,43,05,657/-.During the proceedings, the petitioner sought relief under the Sabka Vishvas (Legacy Dispute Resolution) Scheme, 2019, which required pending adjudication of show cause notices as of 30.06.2019. The petitioner filed declarations under Section 124(1)(a)(ii) of the SV Scheme, considering the amount paid by reversing Cenvat Credit under Rule 6 of the Credit Rules. However, the Designated Committee disagreed with this computation, disallowing the deduction of the reversed Cenvat Credit amount.2. Inordinate Delay in Adjudication of Show Cause Notices:The petitioner also argued for setting aside the show cause notices due to inordinate delay in adjudication. The court referred to a Division Bench judgment in M/s Shree Baba Exports vs. Commissioner, GST & Central Excise, which interpreted Section 11(A) of the Central Excise Act, 1944. The court emphasized that the Central Excise Officer must serve notice within one year for non-fraudulent cases and within five years for cases involving fraud or collusion. The Division Bench held that delays extending beyond these periods, without plausible explanation, are unreasonable.In this case, the show cause notices issued in 2008 had not been adjudicated, with the only explanation being their transfer to the Call Book as per CVIC guidelines. The court found this explanation insufficient and not a valid reason for the delay. Citing the precedent set in M/s Shree Baba Exports, which was affirmed by the Supreme Court, the court concluded that the inordinate delay rendered the show cause notices unsustainable.Conclusion:The court quashed the show cause notices dated 04.09.2008 and 12.11.2008 due to the inordinate delay in adjudication, following the legal principles established in previous judgments. Other issues raised in the writ petition were kept open, and the petition was allowed on these terms.