2022 (11) TMI 1393 - HC - Central Excise

Contravention of time limitation - personal hearing notice dated 20.10.2020 scheduling adjudication in respect of the impugned SCNs - Section 11A (11) of CEA - HELD THAT - The consistent position since 1985 (vide Circular No. 223/8/85-CX.6 dated 21.03.1985) is that the determination of duty, under sub-Section 10, shall be completed within six months from date of notice, where it was possible to do so. The present case falls under sub-section 1 of Section 11A, and thus, the applicable time limit would be, as far as possible, six months from date of notice. Even if one were to accede to the position that the statutory period of six months was elastic and admitted of some flexibility, the excess of time, over and above six months must be justifiable and reasonable. As to whether the phrase under sub-section (11) being 'where it is possible to do so' would stand justified by the sequence of events that have been noted in the matter, the categoric conclusion is that it does not. There are admittedly, absolutely no circumstances warranting or justifying the pendency of the SCNs on the call book for 21 long years. The Gujarat High Court in the case of SIDDHI VINAYAK SYNTEX PVT LTD. VERSUS VERSUS UNION OF INDIA 2 2017 (3) TMI 1534 - GUJARAT HIGH COURT , considered the case of delay ranging up to 15 years in that case and had set aside all SCNs as being unreasonably and unduly belated. The Bench has also expressed the view that the concept of the call book, created by the Central Board of Excise and Customs, and transfer of pending cases to the call book, is contrary to the statutory mandate. Such transfer provides for an extrastatutory period of limitation, impermissible and contrary to law. The SCNs in the present case have been issued in 2001 and there has been areference to the call book immediately thereafter. Para 9.4 of the 2017 Circular requires a formal communication to be issued to the noticee informing them that the case has been transferred to the call book. This requirement does not flow from the earlier Circulars - the petitioner has been in touch with the Assessing Officer requesting timely adjudication of the SCNs and on 13.06.2003 there was a communication issued by the respondents to the effect that the demands under the SCNs are based on audit objections that are pending closure. The officer states that 'show cause notices will be decided on merits at the appropriate time'. In the present cases, the hearing notices have been issued for the first time only in 2020. The notices also provide no clarity as to whether the contest on the audit objections continues, has been resolved or whether the matters have merely been revived by the assessing authority. There has been considerable and unacceptable delay on the part of the respondents to have revived the SCNs issued originally in 1999, in 2020 - the impugned proceedings are barred by limitation. The challenge to the same is upheld - Petition allowed.

Summary

Issues Involved:
1. Bar of Limitation
2. Audit Objections
3. Transfer to Call Book
4. Delay in Adjudication

Detailed Analysis:

1. Bar of Limitation:
The petitioner, a unit of Steel Authority of India Limited, challenged six show cause notices (SCNs) on the ground of limitation under Section 11A(11) of the Central Excise Act, 1944. The SCNs were issued between 1999 and 2001, and the petitioner argued that the delay in adjudication contravened the statutory time limits. The court noted that the statutory period for completion of proceedings was six months from the date of the notice, as far as possible, under sub-section (11) of Section 11A. The court concluded that the pendency of the SCNs for over 21 years was unjustifiable and unreasonable, thus barring the proceedings by limitation.

2. Audit Objections:
The audit objections were raised on the grounds of shortfall in demand and incorrect dropping of proceedings. The court examined the detailed objections and the responses provided by the assessing authorities. The objections included issues such as duty short demanded for coin blanks and MODVAT credit availed for exempted final products. The court found that the assessing authorities had defended their positions but noted that the audit objections led to the issuance of SCNs on a protective basis.

3. Transfer to Call Book:
The SCNs were transferred to the call book between 1999 and 2001, following the completion of the statement of fact verification (SFV). The court referred to various circulars issued by the Board, which provided for the transfer of cases to the call book under specific circumstances, including contested audit objections. However, the court emphasized that such transfer should not be used to protract proceedings indefinitely. The court highlighted that the 2017 Circular had removed contested audit objections from the categories warranting transfer to the call book, recognizing the potential for unjustified delays.

4. Delay in Adjudication:
The court scrutinized the delay in adjudication, noting that the hearing notices were issued for the first time only in 2020. The court observed that there was no commitment from the authority on when the proceedings would be closed, despite communication in 2003 indicating that the SCNs would be decided on merits at the appropriate time. The court concluded that the delay of over two decades was unacceptable and that the revival of the SCNs in 2020 was unjustifiable.

Conclusion:
The court upheld the challenge to the SCNs on the ground of limitation and quashed the impugned proceedings. The writ petitions were allowed, and the connected miscellaneous petitions were closed. The court emphasized the need for timely adjudication and criticized the use of the call book to indefinitely delay proceedings.