2024 (5) TMI 933 - HC - Central Excise

CENVAT credit recovery proceedings quashed after 15-year delay violates Section 11A(11) time limits

Orissa HC quashed a show cause notice dated 10.09.2008 and subsequent order dated 04.09.2023 regarding recovery of wrongly availed CENVAT credit with ... Extended period of limitation - inordinate delay in adjudication of a show cause notice - dispute related to period 2004-05 - on the basis of a show cause notice issued on 10.09.2008 and after lapse of about 10 years from the date of issuance of show cause notice, notice for personal hearing was issued and the final Order-in-Original was passed on 04.09.2023, after a period of 15 years - recovery of wrongly availed CENVAT Credit with interest and penalty - HELD THAT:- The notice of show cause was issued on 10.09.2008, which came to the knowledge of the petitioner on 05.12.2017, when a personal hearing notice pursuant to the show cause notice dated 10.09.2008, was issued to the petitioner. The same was followed by another personal hearing notice dated 05.01.2018. It is only after issuance of these personal hearing notices, the petitioner became aware of the proceedings and obtained a copy of the show cause notice dated 10.09.2008 on 08.01.2018, i.e., after a lapse of more than 9 (nine) years from the date of show cause notice. The petitioner filed its reply indicating therein that the show cause notice was sought to be adjudicated after a considerable lapse of time, without any justification and without any communication to the petitioner during the intervening period and, thereby, the delay in adjudication of the show cause notice dated 10.09.2008 is fatal to the proceedings and subsequent issuance of notices for personal hearing after a lapse of about 10 years from the date of issuance of the show cause notice is contrary to the mandate of Sub-section (11) of Section 11A of the Central Excise Act, 1944. It is made clear Section 11A (11) of the Central Excise Act, 1944 envisages that the Central Excise Officer shall determine the amount of duty of excise under Sub-section (10) within six months from the date of notice where it is possible to do so, in respect of cases falling under Sub-section (1), i.e., where no suppression of facts etc. are alleged) and within one year (substituted by two years by the Finance Act, 2016 w.e.f. 14.05.2016) from the date of notice, where it is possible to do so, in respect of cases falling under the Sub-section (4) (i.e. where suppression of facts etc. are alleged). Therefore, both the notices for personal hearing issued to the petitioner on 05.12.2017 and 05.01.2018 under Annexure-3 (Colly.) are contrary to the mandate of Section 11A of the Central Excise Act, 1944 and thus, the adjudication of the show cause notice is barred by limitation. It is well settled in law that inordinate delay in adjudication of a show cause notice is fatal to its validity since it causes prejudice. In Jindal Steel [2016 (5) TMI 675 - ORISSA HIGH COURT], this Court, considering the question of maintainability of writ petition, held that against any decision taken by Commissioner of Central Excise as adjudicating authority, appeal lies to appellate tribunal and accordingly dismissed the writ petition with a direction to file appeal before appellate tribunal by making pre deposit of 5% of demand. This Court is of the considered view that the notice of show cause issued on 10.09.2008 under Annexure-2 and consequential personal hearing notices dated 05.12.2017 and 05.01.2018 under Annexure-3 (Colly.) issued after long lapse of 9 years from the issuance of show cause notice dated 10.09.2008 and the Order-in-Original dated 04.09.2023 under Annexure-9, whereby demand made in the show cause notice dated 10.09.2008 has been confirmed, cannot be sustained in the eye of law and the same are liable to be quashed and are hereby quashed. The writ petition is accordingly allowed. Issues Involved:1. Validity of the demand-cum-show cause notice dated 10.09.2008 and related consequential notices.2. Applicability of limitation period u/s 11A of the Central Excise Act, 1944.3. Transfer and utilization of Cenvat Credit post amalgamation.4. Maintainability of the writ petition in the presence of an alternative remedy.Summary:1. Validity of the Demand-cum-Show Cause Notice:The petitioner, M/s. Neelachal Ispat Nigam Limited, challenged the demand-cum-show cause notice dated 10.09.2008, the consequential notices dated 05.12.2017 and 05.01.2018, and the Order-in-Original dated 04.09.2023, which confirmed the demand. The petitioner argued that the show cause notice was not served until 05.12.2017, causing a delay of over nine years, which made the entire claim barred by limitation.2. Applicability of Limitation Period u/s 11A of the Central Excise Act, 1944:The Court noted that Section 11A(11) of the Central Excise Act mandates that the Central Excise Officer shall determine the amount of duty within six months or one year (substituted by two years w.e.f. 14-05-2016) from the date of notice, where it is possible to do so. The Court found that keeping the show cause notice pending for over nine years was contrary to this mandate, making the adjudication barred by limitation. The delay was deemed unreasonable, arbitrary, and violative of Article 14 of the Constitution of India.3. Transfer and Utilization of Cenvat Credit Post Amalgamation:The petitioner, post amalgamation with M/s. KMCL, was allowed to transfer the unutilized Cenvat Credit of Rs. 39,17,30,118/- with the approval of the Jurisdictional Officer. The Court observed that if the amount was transferred with the knowledge of the competent authority after being satisfied, the subsequent issuance of a show cause notice without serving a copy on the petitioner was unjustified. The Court also noted that the petitioner had raised the issue of limitation in its show cause reply, which was not considered by the adjudicating authority.4. Maintainability of the Writ Petition in the Presence of an Alternative Remedy:The Revenue argued that the writ petition was not maintainable due to the availability of an alternative remedy u/s 35-B of the Central Excise Act. However, the Court held that in the peculiar facts and circumstances of the case, where there was a statutory infraction and an inordinate delay in adjudication, it was not proper to relegate the petitioner to the alternative forum. The Court cited various judgments to support its decision that inordinate delay in adjudication is fatal to the validity of the proceedings.Conclusion:The Court quashed the demand-cum-show cause notice dated 10.09.2008, the consequential notices dated 05.12.2017 and 05.01.2018, and the Order-in-Original dated 04.09.2023, holding them unsustainable in the eye of law. The writ petition was allowed without any order as to costs.