2023 (1) TMI 389 - HC - Central Excise

Court allows appeal, sets aside order, and quashes dated Order-in-Original. Adjudication order flawed on limitation; writ petition maintainable.

M/s. EPC International Pvt. Ltd. & Anr. Versus Union Of India & Anr.

M/s. EPC International Pvt. Ltd. & Anr. Versus Union Of India & Anr. - 2023 (384) E.L.T. 31 (Cal.) Issues Involved:1. Jurisdiction of the authority to issue the show cause notice by invoking the extended period of limitation.2. Classification of the product under the Central Excise Tariff Act.3. Allegations of willful suppression and mis-statement by the appellants.4. Validity of the chemical examiner's report.5. Whether the process undertaken by the appellants amounts to 'manufacture' under the Central Excise Act.Detailed Analysis:1. Jurisdiction of the Authority to Issue the Show Cause Notice by Invoking the Extended Period of Limitation:The appellants challenged the jurisdiction of the authority to issue the show cause notice by invoking the extended period of limitation. The court referred to the Hon'ble Supreme Court's decision in Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai, which held that the alternate remedy is not a bar in cases where there is a violation of natural justice, lack of jurisdiction, or challenge to the vires of an act. The court noted that the department had accepted the classification of the product for over six years, and the monthly returns filed by the appellants were never questioned. The court held that the extended period of limitation could not be invoked as there was no material to establish willful suppression or mis-statement by the appellants.2. Classification of the Product Under the Central Excise Tariff Act:The appellants contended that the product was correctly classified under tariff sub-heading 27090000 attracting NIL rate of duty. The court observed that the adjudicating authority was largely guided by the chemical examiner's report, which did not address the queries regarding the chemical constituents and classification of the samples. The court held that the classification dispute could not be appropriately adjudicated in a writ petition and that the department should have given the appellants an opportunity to demonstrate that the process adopted did not amount to manufacture.3. Allegations of Willful Suppression and Mis-statement by the Appellants:The court found that the allegations of willful suppression and mis-statement were vague and not supported by sufficient material. The court emphasized that mere usage of terms like 'willful suppression' and 'mis-statement' is not sufficient to hold an assessee guilty. The court concluded that there was no material on record to establish these allegations, and thus, invoking the extended period of limitation was bad in law.4. Validity of the Chemical Examiner's Report:The court noted that the chemical examiner's report was submitted after a delay of more than seven months, which could affect the natural properties of the petro-product. The report did not answer the queries regarding the chemical constituents and classification of the samples. The court held that the report was of little avail and should be discarded.5. Whether the Process Undertaken by the Appellants Amounts to 'Manufacture' Under the Central Excise Act:The appellants argued that the process of distillation did not bring about a new product and thus did not amount to manufacture. The court observed that the adjudicating authority did not provide a clear basis for concluding that the process amounted to manufacture. The court held that the issue of whether the process amounts to manufacture is a technical question that requires a scientific approach and cannot be determined based on statements from the appellants' employees.Conclusion:The court allowed the appeal, set aside the order passed in the writ petition, and quashed the Order-in-Original dated 29.11.2016. The court concluded that the adjudication order was flawed, particularly on the ground of limitation, and that the writ petition was maintainable as it involved a jurisdictional question.