HC quashes show cause notice after 12-year delay in excise duty proceedings under Section 11(b) CEA

HC quashed show cause notice issued after 12-year delay in excise duty proceedings. Court held that under Section 11(b) of CEA, respondents must determine duty within two years, and despite internal circular allowing call book maintenance, proceedings beyond reasonable time limits are barred by limitation. Department failed to provide intimation to petitioner regarding call book maintenance, and 12-year delay without petitioner's fault caused serious prejudice, making continuation unjustifiable.

---

---

Issues Involved:
1. Whether the proceedings are barred by limitation.
2. Whether the delay in adjudication is justified.

Summary:

Issue 1: Whether the proceedings are barred by limitation.

The petitioner, a manufacturer of Cold Rolled Stainless Steel (CRSS) Sheets and Coils, was issued a Show Cause Notice (SCN) on 09.03.2011 by the first respondent, proposing to demand excise duty of Rs. 11,29,864/- on milk cans cleared from 2005-06 to May 2008, along with interest and penalty. The petitioner replied on 25.04.2011, asserting that milk cans are subject to Nil rate of duty as per Notification No.10/2003 - CE 01.03.2003. After a lapse of 12 years, a personal hearing notice was issued on 11.03.2023. The petitioner contended that the delay in adjudication is unreasonable and violates Section 11A(2A) of the Central Excise Act, 1944, which prescribes a time limit for determining the amount of duty. The court examined Section 11A(11) of the Act, which mandates that the Central Excise Officer should determine the amount of duty within two years where it is possible to do so. The court concluded that the delay of more than 12 years is inordinate and violates the principle of timely adjudication as stipulated in various circulars and judicial precedents.

Issue 2: Whether the delay in adjudication is justified.

The respondents argued that the delay occurred because the matter was kept in the Call Book pursuant to a departmental circular and that there was no statutory obligation to inform the petitioner about this transfer. The court noted that no intimation was provided to the petitioner regarding the transfer to the Call Book. The court referred to the judgment of the Bombay High Court in Raymond Ltd. v. Union of India [2019 (368) ELT 481 (Bom.)], which held that long delays in adjudication without informing the concerned party are unjustifiable and violate principles of natural justice. The court emphasized that the internal circulars of the department cannot override the statutory provisions and that the delay in this case is unacceptable.

Conclusion:

The court held that the proceedings are barred by limitation and unjustifiable due to the inordinate delay of 12 years. Consequently, the Show Cause Notice dated 09.03.2011 was quashed.

---