2017 (3) TMI 1534 - HC - Central Excise

Maintainability of appeal - jurisdiction - whether it was permissible for the respondents to act upon a show cause notice issued in the year 1998, after a period of seventeen years? - Manufacture - activity/process known as Draw Winding of yarns. Held that - The decision of the Bombay High Court in the case of Shirish Harshavadan Shah v. Deputy Director, Enforcement Directorate, Mumbai 2010 (1) TMI 508 - BOMBAY HIGH COURT , was relied upon wherein in the facts of the said case for a period of almost twelve years, no steps had been taken by the respondents therein to proceed with the adjudication proceedings. The court held that no fault could be attributed to the petitioners for this delay and inaction on the part of the respondents; the respondents had not alleged any malice on the part of the petitioners nor was it the case of the respondents that the petitioners therein were responsible for the delay in the proceedings. The court held that the department was not entitled to re-open old matters in this manner, the department cannot commence adjudication proceedings after such long years. Revival of proceedings after a long time gap without any proper explanation therefor, is unlawful and arbitrary. Whether the explanation put forth by the respondents for the delay in determining the duty pursuant to the show cause notice issued in 1998 can be said to be reasonable? - Held that - the respondents while consigning the matter to the call book did not deem it fit to inform the petitioner about it. Since in other cases, such proceedings had been dropped, the petitioner had reason to form a bona fide belief that the proceedings in its case had also been dropped. During the interregnum the petitioner s position has changed considerably. ln view of the fact that the factory of the petitioner company has been closed down and sold, it cannot be gainsaid that even if the petitioner was served with the notice of personal hearing, it would be difficult for it to defend the case inasmuch as in view of the lapse of time and intervening circumstances, the evidence might have been lost. - After seventeen years, the persons who were conversant with the case may not be available, documentary evidence may have been displaced. 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. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Legality of the prolonged delay in adjudication.
2. Violation of principles of natural justice.
3. Validity of transferring the case to the "call book".
4. Maintainability of the writ petition despite the availability of an alternative remedy.

Detailed Analysis:

1. Legality of the Prolonged Delay in Adjudication:
The petitioner challenged the delay in adjudicating the show cause notice issued on 3.8.1998, which was kept pending for more than seventeen years. The petitioner argued that such an inordinate delay vitiates the proceedings. The court noted that the delay was primarily due to the case being transferred to the "call book" to await the outcome of a similar case. The court emphasized that the delay was unreasonable and not justified, especially since the statutory provisions under Section 11A of the Central Excise Act prescribe a time limit for determining the duty of excise. The court held that the concept of the "call book" is contrary to the statutory mandate and the instructions to transfer cases to the call book are beyond the scope of the Central Board of Excise and Customs (CBEC)'s authority.

2. Violation of Principles of Natural Justice:
The petitioner contended that the impugned order was passed ex parte, without affording them an adequate opportunity of being heard. The court observed that the notices for personal hearing were issued in quick succession and were not served properly, as they were returned undelivered. The court found that the respondents did not make serious efforts to trace the petitioner's whereabouts for the personal hearing, which they managed to do easily when it came to recovery of dues. The court concluded that the revival of proceedings after such a long delay without proper notice was in complete breach of the principles of natural justice.

3. Validity of Transferring the Case to the "Call Book":
The respondents justified the delay by stating that the case was transferred to the call book due to a pending similar case. The court scrutinized the legality of the call book concept and found that it was not supported by any statutory provision under the Central Excise Act or the rules. The court held that the CBEC's circular providing for the call book was not issued under any authority of law and was contrary to the statutory mandate requiring timely adjudication. The court emphasized that the adjudicating authority must decide each case as it comes unless restrained by a higher forum, and the delay caused by transferring the case to the call book was unlawful and arbitrary.

4. Maintainability of the Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative statutory remedy of appeal. The petitioner argued that the impugned order was without jurisdiction and in violation of the principles of natural justice. The court noted that it is well-settled that a writ petition can be entertained in cases where there is a violation of natural justice or the authority concerned lacks jurisdiction. The court held that the writ petition was maintainable as the petitioner had demonstrated that the delay was unreasonable and the proceedings were revived without proper notice, causing prejudice to the petitioner.

Conclusion:
The court quashed and set aside the impugned order-in-original dated 11.3.2016 and the show cause notice dated 3.8.1998, ruling that the prolonged delay without proper explanation and the breach of natural justice rendered the proceedings unlawful and arbitrary. The court emphasized that the concept of the call book was contrary to the statutory provisions and the instructions issued by the CBEC were beyond its authority. The petition was allowed, and the rule was made absolute with no order as to costs.