2020 PLRonline 5109

Mentha & Allied Products Ltd through its Authorised Representative Satya Naraian v. Commissioner, Central Goods & Service Tax, Chandigarh, 2020 PLRonline 5109

punjab and haryana HIGH COURT

Before: Justice Jaswant Singh and Justice Sant Parkash.

M/s Mentha & Allied Products Ltd through its Authorised Representative Satya Naraian

Versus

Commissioner, Central Goods & Service Tax, Chandigarh

CWP No.11990-2020 and  CWP No.36547-2019

04.12.2020

Central Excise Tariff Act, 1985 (5 of 1986) Section 11(A)  –  Section 11A(11) of the Act provides that Cental Excise Officer shall determine the amount of duty within six months in case notice has been under Sub-section 1 thereof, whereas in the case of fraud, collusion, etc., the period prescribed is one year. No doubt, the words ‘where it is possible to do so' have been used, however, that will not stretch the period to decades as is in the cases in hand – The notices in the present cases having been issued more than decade back and the proceedings having not been concluded within reasonable time, the same deserves to be quashed. [Para 12, 14]

Mr. Jagmohan Bansal, advocate, for the petitioner in CWP-11990-2020. Mr. Amrinder Singh, Advocate for the petitioner in CWP-36547-2019. Mr. Tajender Joshi, Senior Standing counsel for the respondents-UOI. Mr. Anshuman Chopra, Advocate for the respondent No.2 in CWP No.36547 of 2019.

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Sant Parkash, J.  – The aforesaid      presence             is             being     recorded             through                video conferencing since the proceedings are being conducted in virtual court.

• This order shall decide aforementioned two writ petitions as they involve similar and identical questions of law and facts. Both the petitions seek issuance of a writ in the nature of certiorari, quashing Show Cause Notices dated 20.05.2010 (Annexure P-1 in CWP No.11990 of 2020) and 03.02.2011 (Annexure P-4 in CWP No.36547 of 2019).
• For reference to facts, file of CWP No.11990-2020 is being taken up.
• The petitioner-Firm is engaged in the manufacturing  of Menthol BP/USP, Dementholised Peppermint Oil, Anethole etc. falling under Chapter heading 29, 33 and 39 of the Schedule of the Central Excise Tarriff Act, 1985 and availing Cenvat credit on inputs as per Central Excise Act, 1944 (for short, „1944 Act‟) read with Cenvat Credit Rules, 2004 (for short `Rules'). It is case of the petitioner that on the basis of intelligence, the office of the Central Excise Commissionerate, Meerut-II, initiated an investigation against the petitioner – firm alleging that without actual receipt of goods, it has availed cenvat credit on inputs on the basis of fake invoices issued by J & K based seller. On the basis of investigation, the respondent – department concluded that during 2005-06 to 2008-09, the petitioner purchased their raw material from J & K based manufacturer who did not purchase any crude Mentha oil from the farmers. The respondent vide Show Cause Notice dated 20.05.2010 (Annexure P-1) called upon the petitioner to show cause as to why cenvat credit already availed should not be denied and rebate claim should not be recovered.
• The matter of J&K based supplier reached Tribunal. Vide order dated 28.08.2018 (P-5), the Tribunal dropped the proceedings against the supplier. The Department has filed CEA No.8/2020 before Jammu and Kashmir High Court, which is still pending and there is no stay of order passed by the Tribunal.
• Learned counsel for the petitioner submits that show-cause notice was issued on 20.05.2010 and a period of more than 10 years has elapsed, still it has not been adjudicated upon without any fault on the part of the petitioner. He has placed reliance on Section 11 A of the 1944 Act which deals with recovery of duty not levied or not paid or short levied or short paid or erroneously refunded. Sub section (11) thereof provides that as far as possible in normal cases, the proceedings should be concluded within a period of six months, whereas in the case of fraud, collusion etc., the period prescribed is one year. In the case in hand, the proceedings are pending for the last more than 10 years.
• Learned counsel has further submitted that though the respondent – Department filed CEA No.8/2020 on 16.01.2020 before  Jammu and Kashmir High Court against decision dated 28.08.2018 passed by the Tribunal but filing of appeal at a belated stage would have no significance.
• In support of his pleas, learned counsel has placed reliance on Siddhi  Vinayak  Syntex  Private  Limited  vs  Union  of  India  2017  (352) E.L.T. 455; Special Leave Petition (C) No. 18214 of 2017 – Union of India and others vs M/s Siddhi Vinayak Syntex Private Limited, decided on 28.07.2017; Parimal Textiles vs. Union of India, 2018(8), GSTL 361 and that of Hon‟ble Supreme Court in State of Punjab vs. Bathinda District Co-op. Milk P. Union Limited, 2007(217) ELT 325.
• Per contra, learned counsel for the respondent has submitted that show cause notice dated 20.05.2010 was issued by the Commissioner, Customs & Central Excise Commissionerate, Meerut-II which was pending since long. Show cause notice was issued to the petitioner on the basis of investigation conducted by Central Excise Commissionerate, Meerut-II. The provisions of Section 11-A of the Act only provide that order should be passed within the period prescribed, as far as possible. There is no definite time limit prescribed. In any case, the petitioner will not suffer any prejudice as he will be afforded due opportunity before passing order against him. The matters which were transferred to the call book have now been taken up in view of the revised Circular No. 1023/11/2016-CX dated 8.4.2016 and thereafter notices had been issued to the petitioner for hearing.
• We have heard learned counsel for the parties and perused the record.

Similar issue, as involved in both the petitions, has been answered by this Court vide judgment dated 02.08.2018 rendered in CWP No.10530 of 2017 titled “M/s GPI Textiles Limited vs. Union of India & others‟, wherein while dealing with all the aforesaid pronouncements relied upon by the petitioner as also the provisions of Act, the following has been observed as under:-

• “12. Relevant provisions of Section 11A (1), (4) and (11) of the Act are reproduced hereunder:-
  • “Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-
  • Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of  duty,-
  • the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;
  • the person chargeable with duty may, before service of
    • notice under clause (a), pay on the basis of,-
    • his own ascertainment of such duty; or
• duty ascertained by the Central Excise Officer,
• the amount of duty along with interest payable thereon under section 11AA.
• xx                xx           xx
• (4) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by the reason of-
• fraud; or
• collusion; or
• any wilful mis-statement; or
• suppression of facts; or
• contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice.
• xx           xx           xx
• 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);
• within one year from the date of notice, where it is possible to do so, in respect of cases falling under sub- section (4) or subsection (5).”
• Similar issue was considered by Gujarat High Court in M/s Siddhi Vinayak Syntex Private Limited's case (supra). Judgments of different High Courts were referred to and it was summed up that delay in conclusion of proceedings pursuant to show cause notices after a long gap without proper explanation, is unlawful and arbitrary. The Court further examined the fact as to whether transfer of proceedings to call book in view of circular dated 14.12.1995 can be said to be a reasonable explanation. The opinion expressed was that the mandate of law cannot be diluted by issuing circular especially when there is no power to issue such directions regarding transfer of cases to call

               book. Relevant paras 23 and 24 thereof are extracted below:-

“23. Insofar as the show cause notice in the instant case  is concerned, the same has been issued under section 11A of the Act. Proceedings under section 11A of the Act are adjudicatory proceedings and the authority which decides the same is a quasi-judicial authority. Such proceedings are strictly governed by the statutory provisions. Section 11A of the Act as it stood at the relevant time when the show cause notice came to be issued, provided for issuance of notice within six months from the relevant date in ordinary cases and within five years in case where the extended period of limitation is invoked. Section 11A thereafter has been amended from time to time and in the year 2011, various amendments came to be made in the section 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) –

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

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

24. Thus, with effect from the year 2011 a time limit has been prescribed for determining the amount of duty of excise where it is possible. It cannot be gainsaid that when the legislature prescribes a time limit, it is incumbent upon the authority to abide by the same. While it is true that the legislature has provided for such abiding by the time limit where it is possible to do so, sub-section (11) of section 11A of the Act gives an indication as to the legislative intent, namely that as far as may be possible the amount of duty should be determined within the above time frame, viz. six months from the date of the notice in respect of cases falling under sub- section (1) and one year from the date of the notice in respect of cases falling under sub-section (4) or sub-section (5). 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. The legislature has wisely not prescribed a time limit and has specified such time limit where it is possible to do so, for the reason that the adjudicating authority for several reasons may not be in a position to decide the matter within the specified time frame, namely, a large number of witnesses may have to be examined, the record of the case may be very bulky, huge workload, non-availability of an officer, etc. which are genuine reasons for not being able to determine the amount   of   duty   within   the   stipulated   time   frame.

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 C.B.E. & C. 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  C.

• E. & C., 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 C. B. E. &
• 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. The concept of call book is, therefore, contrary to the provisions of the Central Excise Act and such instructions are beyond the scope of the authority of the C. B. E. & C. 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. In view of the settled legal position, as propounded by various High Courts, with which this court is in full agreement, the revival of proceedings after a long gap of ten to fifteen years without disclosing any reason for the delay, would be unlawful and arbitrary and would vitiate the entire proceedings.”
• In the aforesaid case, Gujarat High Court had set aside the order passed after a long delay in pursuance to the show cause notice issued.
• The judgment of Gujarat High Court was challenged by the revenue before Hon'ble the Supreme Court by filing Special Leave Petition (C) No. 18214 of 2017 – Union of India and others vs M/s Siddhi Vinayak Syntex Private Limited, in which notice has been issued only to the extent as to whether Circular No. 162/73/95-CX dated 14.12.1995, issued by the Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, Government of India, is in conformity/ authorized by the provisions of Section 37-B of the Central Excise Act, 1944. The order on merit has been upheld vide

order dated 28.7.2017.

1. The view expressed in M/s Siddhi Vinayak Syntex Private Limited's case (supra) was subsequently followed by Gujarat High Court in Parimal Textiles' case (supra), where again belated order passed after issuing show cause notice, was set aside.
2. Section 11A(11) of the Act provides that Cental Excise Officer shall determine the amount of duty within six months in case notice has been under Sub-section 1 thereof, whereas in the case of fraud, collusion, etc., the period prescribed is one year. No doubt, the words ‘where it is possible to do so' have been used, however, that will not stretch the period to decades as is in the cases in hand.
3. In Bhatinda District Co-op. Milk P. Union Limited's case (supra), Hon'ble the Supreme Court upheld a Division Bench judgment of this Court where opinion expressed was that where no period of limitation is provided for exercise of any power, any notice issued more than five years thereafter was held to be unreasonable.
4. For the reasons mentioned above, we find that the notices in the present cases having been issued more than decade back and the proceedings having not been concluded within reasonable time, the same deserves to be quashed.”
5. The aforesaid reproduction clearly reveals that the subject matter in the present petitions is squarely covered by the ratio of pronouncement in the case of M/s GPI Textiles Limited (supra).
6. With regard to filing of the appeal before the Jammu & Kashmir High Court against order dated 28.08.2018 passed by CESTAT, Chandigarh pertaining to supplier of the petitioners (purchaser), it is held that it would have no bearing upon the findings recorded above, keeping in view the peculiar facts & circumstances of the case and law laid down referred to above. Moreover, the Jammu & Kashmir High Court has not granted any interim order in favour of the respondent(s)/ Revenue on the appeal filed after 1 ½ year of passing of order of the Tribunal in case of supplier (seller) of goods to the petitioner (purchasers).
7. In view of the aforesaid discussion, show cause notices having been issued long back more than a decade are not sustainable in the eyes of law, and thus, deserve to be quashed. Ordered accordingly.
8. Both the petitions stand allowed accordingly.