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Issues: Whether the show cause notice dated 30 December 2020 issued without issuing a pre-show cause consultation notice (as mandated by Board circulars) was valid.
Analysis: The Court examined the applicability of Section 37B and Section 37C of the Central Excise Act, 1944 (as applied via the Central Goods and Services Tax Act, 2017) and the Master Circular dated 10 March 2017 and Circular dated 19 November 2020 which mandate pre-show cause consultations in cases of demands above Rs. 50 lakhs. The Court noted that the Board, under Section 37B, can issue binding instructions to Central Excise officers and that Section 37C prescribes modes of service of summons and notices. The Court found that the circulars require a distinct pre-consultation notice/consultation process prior to issuance of a show cause notice in specified cases and that the Department's reliance on issuing a summons or other intimation in lieu of the mandated pre-consultation notice was inconsistent with the mandatory requirements of the circulars. The Court also considered precedent of the Division Bench in Rochem Separation Systems (India) Pvt. Ltd., which quashed similar show cause notices and directed issuance of pre-consultation notices with specified timelines, and applied the same principles to the facts of the present petition.
Conclusion: The impugned show cause notice dated 30 December 2020 is quashed and set aside; the Department is directed to issue a pre-consultation notice within three weeks and complete the pre-consultation process within six weeks of receipt, after which it may take further steps. The petition is allowed in favour of the petitioner.
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