2015 (10) TMI 567 - HC - Central Excise

Challenge to the show cause notice - SCN propose to deny the CENVAT Credit prior to the date of registration while demand duty for such period - Duty demand u/s 11A(5) read with Rule 14 - Held that - No doubt that this Court would not have ordinarily entertained the petition which challenges the show cause notice. In ordinary course,the parties could have been directed to file reply to show cause notice and adjudicating authority could have been permitted to take decision in accordance with law. However, it is noticed that the show cause notice expressed in contravention of the statutory provision, this Court could not have been powerless under the article 226 of the Constitution of India to entertain a petition challenging the show cause notice, which is ex facie illegal. Show cause notice is issued on the premise that the Petitioners were not entitled for obtaining cenvat credit amounting to ₹ 20,78,77,048/ . In effect the show cause notice proceeds on the premise that the cenvat credit sought to be credited by the petitioner prior to the date of registration was inadmissible in law. The show cause notice therefore demands as to why the said amount should not be recovered from the Petitioner and as to why interest and penalty should not be levied. Perusal of Section 32 M would reveal that the very order of settlement passed under Section 5 of Section 32F shall be conclusive as to the matters stated therein and no matters covered by such order shall be reopened in proceedings. The only exception is that it can be done save as provided in this chapter. Nothing has been pointed out by the learned Counsel for the Revenue, which would permit the issue which is already concluded by the order passed by the learned Settlement Commission to be reopened again. - Interim relied granted.

Summary

Issues:
Challenge to show cause notice demanding inadmissible Cenvat Credit, interest, and penalty under Central Excise Act, 1944.

Analysis:
The Petition challenges a show cause notice demanding inadmissible Cenvat Credit, interest, and penalty under the Central Excise Act, 1944. The Petitioner argues that a previous show cause notice was resolved before the Settlement Commission, relying on judgments supporting their claim for Cenvat Credit even without registration. The Petitioner cites the Karnataka High Court's judgment and Settlement Commissioner's decisions in their favor. The Revenue argues that the petition is premature as it only challenges the show cause notice, which is distinct from the previous settlement. However, the Court finds the show cause notice to be illegal due to contravention of statutory provisions, allowing the petition to be entertained under Article 226 of the Constitution of India.

The Court examines Section 32 M of the Central Excise Act, which states that settlement orders shall be conclusive, preventing matters covered in the order from being reopened unless permitted by law. The impugned show cause notice pertains to the same period and issue as the settled matter before the Settlement Commissioner. The notice questions non-payment of duty before registration, which the Petitioner accepted but contended they were entitled to Cenvat Credit. The Settlement Commissioner's order favored the Petitioner's claim for utilizing Cenvat Credit, which the Tribunal upheld. The show cause notice demands recovery of inadmissible Cenvat Credit, interest, and penalty, contrary to the settled matter, thus violating Section 32 M.

The Court grants ad-interim relief in favor of the Petitioner and expedites the hearing due to the significance of the issue involved. The judgment highlights the importance of upholding settled matters and preventing their reopening without valid legal grounds, as provided under the relevant statutory provisions.