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 interest and penalty. The petitioner became aware of proceedings only in 2017 when personal hearing notices were issued, nearly 10 years after the original notice. HC held that adjudication after 15 years violated Section 11A(11) of Central Excise Act, 1944, which mandates determination within six months to two years depending on case type. The inordinate delay was fatal to validity and caused prejudice, rendering the proceedings time-barred.

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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.

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