2022 (8) TMI 988 - HC - Central Excise

Court Rules in Favor of Petitioner, Sets Aside Orders in Writ Petitions

The Kisan Sahkari Chini Mills Ltd. Thr. Its General Manager, Simbhaoli Sugars Ltd. Thru General Manager Legal Gonda Versus Union Of India Thr. The Secy. Deptt. of Revenue And 4 Others

The Kisan Sahkari Chini Mills Ltd. Thr. Its General Manager, Simbhaoli Sugars Ltd. Thru General Manager Legal Gonda Versus Union Of India Thr. The Secy. ... Issues Involved:1. Remission of duty under Rule 21 of the Central Excise Rules.2. Marketability of brown sugar and its liability to central excise duty.3. Limitation period for issuing show-cause notices under Section 11A of the Central Excise Act.4. Compliance with procedural requirements such as intimation within 24 hours as per Trade Notice No. 29/2003.Issue-wise Detailed Analysis:1. Remission of Duty under Rule 21 of the Central Excise Rules:The petitioner challenged the rejection of remission of duty under Rule 21 on the ground that the application was not filed within the prescribed period of 24 hours as per Trade Notice No. 29/2003. The court observed that the Tribunal in the case of Ramala Sahkari Chini Mills Ltd. v. Commissioner Central Excise, Meerut had held that procedural requirements in a trade notice cannot override statutory rules. Rule 21 does not prescribe any time limit for intimation of losses. The court concluded that the department could not rely solely on the trade notice to deny remission. The orders impugned were set aside as the remission claimed was within the prescribed limit of 2% and the show-cause notice was issued beyond the prescribed period of limitation without any foundation for invoking the extended period of limitation.2. Marketability of Brown Sugar and Its Liability to Central Excise Duty:The petitioner contended that brown sugar, which is not marketable due to high molasses content and other impurities, should not be liable to central excise duty. The court reiterated that central excise duty is payable on manufacture and goods must be marketable to be liable to duty. Since there was no material to establish that brown sugar was marketable, no duty could be levied. Additionally, the show-cause notice lacked any allegations of clandestine removal or suppression of facts, making the demand unsustainable. The impugned orders were set aside.3. Limitation Period for Issuing Show-Cause Notices under Section 11A of the Central Excise Act:The court noted that the show-cause notice for the month of May 2007 was issued beyond the six-month limitation period without any specific averment to invoke the extended period of limitation under the proviso to Section 11A. The court emphasized that without a foundation to invoke a larger period of limitation, no orders could be passed under the extended period. The impugned orders were set aside due to the lack of any specific allegations of fraud, collusion, or suppression of facts.4. Compliance with Procedural Requirements Such as Intimation within 24 Hours as per Trade Notice No. 29/2003:The court held that the requirement of intimation within 24 hours as per Trade Notice No. 29/2003 could not override the statutory provisions of Rule 21, which does not prescribe any time limit for intimation of losses. The court followed the precedent set by the Tribunal in Ramala Sahkari Chini Mills Ltd. and concluded that the procedural requirement in the trade notice could not be used to deny remission. The impugned orders were set aside as the claim for remission was within the prescribed limit and there was no material to allege evasion of duty.Conclusion:All three writ petitions were allowed. The impugned orders in each case were set aside based on the findings that procedural requirements in trade notices cannot override statutory rules, the goods in question were not marketable, and the show-cause notices were issued beyond the prescribed limitation period without proper foundation for invoking the extended period of limitation.