By TIOL News Service

AHMEDABAD , MAY 15, 2017: THE CCE issued a SCN dated 3.8.1998 alleging that a certain quantity of finished product subjected to Draw Winding by the assessee attracted excise duty aggregating to Rs.1,00,75,528/-.The period is 1.4.1995 to 12.2.1998.

A reply to the SCN was filed on 15.3.2000.

In the meanwhile, the petitioner's factory was closed down and the Gujarat State Financial Corporation auctioned the properties in year 2004. The residential house of the Directors was also sold off to clear bank debts in 2002.

Nothing was heard about the SCN during this period.

In November 2015 (seventeen years after issuance of SCN), the Adjudicating Authority took up the case for adjudication but the petitioner did not receive any notice of personal hearing presumably because the factory properties and other assets of the company were sold off during the intervening period.

An adjudication order was, thereafter, passed in March 2016 confirming the duty demand but the petitioner was unaware about such adjudication order also.

It seems that,to effect recovery of the dues, the Superintendent of CE visited the office of the Registrar of Companies (ROC) and after obtaining the contact details of the Chartered Accountant who was the statutory audit at the relevant time contacted him on phone and finally a copy of the order-in-original dated 11.3.2016 was provided on 5.9.2016.

The petitioner submits that it was only upon receipt of the copy of the adjudication order that the petitioner learnt that the show cause notice dated 3.8.1998 was taken up for adjudication in November, 2015 and the proposals levelled in the show cause notice had been confirmed by the Commissioner.

Being aggrieved with this order that came as a bolt from the blue, a writ petition is filed.

On behalf of the petitioner, it is contended that the revival of the show cause notice proceedings, which were lying dormant for about fifteen years, is unreasonable and illegal, and the order, having been made after reviving the proceedings without any reason for explaining the delay, is without jurisdiction. It has also been alleged that the impugned order has been passed in violation of the principles of natural justice, as the same is an ex parte order.

In the affidavit-in-reply, the respondent department attempted to explain the delay in carrying out the adjudication proceedings thus –

+ the SCN dated 3.8.1998 issued to the petitioner company was transferred to the call book by the then Commissioner Central Excise, Ahmedabad-II on 23.3.2000, in view of the fact that in a similar case where the demand was dropped by the Surat-I Commissioner, the CBEC had reviewed the order and the Department had filed an appeal before the CESTAT.

+ the Appellate Tribunal had initially dismissed the appeal on the ground of maintainability and only after an order by the High Court (passed in Revenue appeal), the appeal was restored to the Appellate Tribunal.

+ and it was only by its order dated 18.06.2013 that the Tribunal dismissed the appeal filed by the revenue( on ground other than merits ) and which order has been accepted by the department.

+ it is after the dismissal of the revenue's appeal that the show cause notice has been retrieved from the call book on 26.4.2014, where after notices fixing personal hearing were fixed and hearing was held in November, 2015 and o-in-o was passed in March 2016 ex parte.

After considering the detailed submissions made, the High Court made observations on various issues –

Maintainability:

+ It is well settled that where there is an alternative statutory remedy available, the High Court ordinarily would not exercise its extraordinary jurisdiction under Article 226 of the Constitution, except in cases where there is violation of the principles of natural justice, or where the authority concerned lacks jurisdiction or exercises powers in excess of its jurisdiction or does not does not exercise the jurisdiction vested in it.

+ Another notable aspect of the matter is that in view of the reply filed by the respondents wherein a stand has been taken that the matter has been referred to the call book, the very validity of the circular issued by the Central Board of Excise and Customs for transferring the matters to call book, has been called in question by the petitioner, which can be done only by invoking the writ jurisdiction of this court under Article 226 of the Constitution and cannot be challenged before any of the statutory authorities under the Act. Therefore, the contention that the petition is not maintainable does not merit acceptance.

+ It is quite perplexing that when it came to service of notice to the petitioner in a proceeding which had been kept in cold storage by the respondents for a period of more than seventeen years, the respondents did not deem it fit to find the whereabouts of the petitioner with a view to afford due opportunity of hearing to it. Whereas when it came to recovery of dues pursuant to the impugned order-in-original, with a little effort, the address of the Director of the petitioner company was easily traced out by the respondents. Had such an effort been made at the stage of hearing, the entire exercise before this court could have been obviated. Be that as it may, since the notice has been displayed on the notice board in compliance with the provisions of section 37C of the Act, it cannot be said that there was no service of notice upon the petitioner .

Whether adjudicating SCN after 17 years permissible?

+ Consistent approach adopted by the different High Courts insofar as the delay in concluding proceedings pursuant to a show cause notice is concerned, is that revival of proceedings after a long time gap without any proper explanation therefor, is unlawful and arbitrary. [Bombay High Court in Shirish Harshavadan Shah v. Deputy Director, Enforcement Directorate, Mumbai; Hindustan Lever Limited v. Union of India (supra), R. M. Mehrotra v. Enforcement Directorate (Delhi High Court)]

Transfer to Call Book – Board Circular, legality thereof

+ It is the case of the respondents that the show cause notice has remained undecided in view of the fact that it had been consigned to the call book in view of the Circular No. 162/73/95-CX dated 14.12.1995 issued by the CBEC.

+ Under section 37B of the Act, the Central Board of Excise and Customs is empowered to issue instructions to Central Excise Officers if it considers it necessary or expedient to do so firstly, for the purpose of uniformity in the classification of excisable goods; secondly with respect to levy of duties of excise on such goods; and thirdly, for the implementation of any other provision of the Act.

+ Insofar as the concept of call book is concerned, the same evidently does not relate to uniformity in the classification of excisable goods, or to levy of duties of excise of such goods. Insofar as the implementation of any other provision of this Act is concerned, the concept of call book cannot be traced to any other provision of the Act nor does it appear to be relatable to the implementation of any other provision of the Act. Evidently, therefore, the circular dated 14.12.1995cannot be said to have been issued in exercise of powers under section 37B of the Act.

+ In view of the provisions of rule 31 of the rules, any instructions issued by the Board thereunder have to be either incidental or supplemental and consistent with the provisions of the Act and the rules.

+ In the opinion of this Court, instructions to consign a case to the call book are relatable to the adjudicatory process, and do not provide for any incidental or supplemental matters, consistent with the Act or the rules. Neither the Act nor the rules, in any manner, empower the CBEC to issue instructions to any adjudicatory authority in relation to matters pending for adjudication before it.

+ Various amendments came to be made in the section 11A(by Finance Act, 2011) including insertion of sub-section (11) which provides that the Central Excise Officer shall determine the amount of duty of excise under sub-section (10) -

(a) within six months from the date of notice where it is possible to do so, in respect of cases falling under subsection (1);

(b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under subsection (4) or sub-section (5).

+ It cannot be gainsaid that when the legislature prescribes a time limit, it is incumbent upon the authority to abide by the same. When the legislature has used the expression "where it is possible to do so", it means that if in the ordinary course it is possible to determine the amount of duty within the specified time frame, it should be so done.

+ However, when a matter is consigned to the call book and kept in cold storage for years together, it is not on account of it not being possible for the authority to decide the case, but on grounds which are extraneous to the proceedings. In the opinion of this court, when the legislature in its wisdom has prescribed a particular time limit, the CBEC has no power or authority to extend such time limit for years on end merely to await a decision in another case. The adjudicatory authority is required to decide each case as it comes, unless restrained by an order of a higher forum.

+ This court is of the view that the concept of call book created by the CBEC, which provides for transferring pending cases to the call book, is contrary to the statutory mandate, namely, that the adjudicating authority is required to determine the duty within the time frame specified by the legislature as far as possible. Moreover, as discussed hereinabove, there is no power vested in the CBEC to issue such instructions under any statutory provision, inasmuch as, neither section 37B of the Central Excise Act nor rule 31 of the rules, envisage issuance of such directions.

+ Transferring matters to the call book being contrary to the provisions of law, the explanation put forth by the respondents for the delay in concluding the proceedings pursuant to the show cause notice 3.8.1998 cannot be said to be a plausible explanation for not adjudicating upon the show cause notice within a reasonable time.

+ Thus, the delay in deciding the proceedings, that too without bringing it to the notice of the petitioner that the case was transferred to the call book and was, therefore, pending, causes immense prejudice to the petitioner.

+ The revival of the proceedings, therefore, is in complete breach of the principles of natural justice and hence, the impugned show cause notice and the order-in-original passed pursuant thereto, cannot be sustained.

The petition was allowed. The impugned O-in-O as well as the SCN were quashed and set aside.

(See 2017-TIOL-911-HC-AHM-CX)