2015 (6) TMI 370 - HC - Central Excise

Challenge to the show cause notice - Pre determination of issue - Availment of CENVAT Credit - petitioner had availed input credit based on the invoices showing purchase of materials, like Re-rollable scrap, defective HR Steel plates, Sec HR Steel plates, etc. However, those materials were not actually required for the manufacturing activities of the Unit - whether the respondent has already pre-determined the issue and whether the enquiry is an empty formality - Held that - The respondent in a very fair manner disclosed all the materials collected during the course of investigation. Nothing was withheld. In case an argument of this nature is entertained that by giving details of the violations and the evidence collected in the show cause notice as well as in the counter-affidavit, no purpose would be served by submitting to the jurisdiction of the statutory authority none of the authorities, exercising jurisdiction under various Statutes and more particularly, under the Central Excise Act, would be in a position to discharge the statutory function. Merely because the show cause notice does not contain a specific word that these are all prima facie findings, the petitioner cannot be heard to say that the respondent has decided the issue once for all and the notice is issued only as a ritual. It is not as if the order passed by the respondent is final. The Central Sales Tax Act contains hierarchy of authorities, in case final order is passed by the respondent by rejecting the explanation. The petitioner is also having a remedy of appeal before the High Court. The respondent has not determined the liability so far. The materials collected by the respondent to fix the liability are disclosed in the show cause notice. Those materials were disclosed only with a view to enable the petitioner to submit its reply - Neither the materials disclosed in the show cause notice nor the statement made in the counter-affidavit would go to show that the respondent has already applied its mind and has formed a definite opinion with regard to the violation committed by the petitioner. - petitioner has not made out a case for quashing the statutory proceedings - Decided against assessee.

Summary

Issues Involved:
1. Legality of the show cause notice issued by the Commissioner of Central Excise and Customs.
2. Alleged pre-determined mindset of the respondent.
3. Legality of the collection of Rs. 7.53 crores from the petitioner.
4. Adequacy and specificity of the charges in the show cause notice.
5. Jurisdiction and authority of the respondent to issue the show cause notice.

Issue-wise Detailed Analysis:

1. Legality of the show cause notice issued by the Commissioner of Central Excise and Customs:
The petitioner challenged the show cause notice dated 29 November 2013, issued by the Commissioner of Central Excise and Customs, Tiruchirappalli, on the grounds that it was issued with a pre-determined mind and no useful purpose would be served by holding further enquiry. The respondent argued that the findings in the show cause notice were tentative and that the respondent would consider the issue on merits and pass a reasoned order.

2. Alleged pre-determined mindset of the respondent:
The petitioner contended that the respondent had already decided to pass an order against them as indicated in the show cause notice, making the enquiry a futile exercise. The respondent denied this allegation, stating that the investigation revealed prima facie violations of the Cenvat Credit Rules, 2004, and that the findings in the show cause notice were tentative. The court held that the show cause notice cannot be termed as an expression of opinion on the merits of the matter and that the findings were tentative in nature. The court emphasized that the materials disclosed in the show cause notice were to enable the petitioner to submit an effective reply.

3. Legality of the collection of Rs. 7.53 crores from the petitioner:
The petitioner claimed that Rs. 7.53 crores was collected from them under coercion and threat. The respondent contended that it was a voluntary payment made by the petitioner to secure the return of certain documents. The court noted that the legality of the collection was not necessary to consider in view of the order passed by the Division Bench directing the refund of the amount.

4. Adequacy and specificity of the charges in the show cause notice:
The petitioner argued that the show cause notice contained a clear adjudication against them and that the charges were not specific. The court held that the charges in the show cause notice were specific and that the petitioner was provided with sufficient details to submit an effective reply. The court stated that the respondent disclosed all materials collected during the investigation to enable the petitioner to submit its defense.

5. Jurisdiction and authority of the respondent to issue the show cause notice:
The petitioner questioned the jurisdiction and authority of the respondent to issue the show cause notice. The court held that the respondent had the authority to issue the show cause notice and that the petitioner had not made out a case for quashing the statutory proceedings. The court emphasized that a writ petition does not ordinarily lie against a show cause notice unless it is issued by a person having no jurisdiction or competence to do so.

Conclusion:
The court dismissed the writ petition, holding that the petitioner had not made out a case for quashing the statutory proceedings. The court emphasized that the findings in the show cause notice were tentative and that the petitioner was provided with sufficient details to submit an effective reply. The court also noted that the respondent had the authority to issue the show cause notice and that the legality of the collection of Rs. 7.53 crores was not necessary to consider in view of the order passed by the Division Bench.