2007 (12) TMI 346 - AT - Central Excise

Summary

Issues involved: Interpretation of circular u/s 11A of the Central Excise Act, 1944 regarding retrospective application, unjust encroachment of rights, and belated issuance of Show Cause Notice.

Interpretation of Circular u/s 11A of the Central Excise Act, 1944:
The appellant argued that the circular issued by CBEC on 20th January, 2003, should not disentitle them from availing benefits for the period between 1-9-97 to 31-3-2000, as the Department was already aware of their manufacturing operations. They contended that retrospective curtailment of rights through a circular is unjust and illegal, creating chaos and encroaching on their settled position. The Tribunal held that substantial law did not intend to take away vested rights retrospectively through a circular, especially when the activities were known to the Revenue before the circular was issued. The Tribunal also emphasized that a circular cannot abrogate rights and should not put an assessee in an adverse situation.

Unjust Encroachment of Rights:
The appellant further argued that resorting to Section 11A of the Central Excise Act, 1944, for recovery of the demand was unjust, especially when the Department had knowledge of their manufacturing operations as early as 1974. They relied on a previous Tribunal decision to support their contention that the delay in issuing the Show Cause Notice, post the circular, rendered the impugned order unsustainable due to lack of jurisdiction at the material period. The Tribunal agreed that the belated action by the Revenue, based on a change of opinion post-circular, was unjust and could lead to unending litigation.

Belated Issuance of Show Cause Notice:
The Revenue argued that the appellant was liable to duty as per the circular dated 20-1-2003, which clarified the dutiability of certain goods. However, the Tribunal found that the circular, issued after the impugned period of 1-9-1997 to 31-3-2007, did not rescue the Revenue as it appeared confiscatory and was issued much later. The Tribunal emphasized that the appellant's activities were known to the Revenue well before the circular was issued, and any attempt to reopen the matter based on a change of opinion would lead to prolonged litigation. Ultimately, the Tribunal ruled in favor of the appellant on both limitation and merit grounds, highlighting the belated nature of the Revenue's action and the unjust encroachment on the appellant's vested rights under the statute.