2007 (8) TMI 284 - HC - Central Excise

Registration Certificate was issued by the Competent Authority to petitioner for procurement of LSHS at concessional duty for generating electricity as per Notification 3/2001 - Competent Authority thereafter issued Annexure-I certificate held that dept. is not justified in invoking section 11A unless Annexure-I Certificate is cancelled by the Competent Authority by following procedure u/s 35E sections 35E & 11A should be read harmoniously since there is no suppression, demand time barred

Issues Involved:
1. Eligibility for Excise Duty Exemption under Notification No. 3/2001.
2. Jurisdiction and Validity of Show Cause Notices under Section 11A of the Central Excise Act, 1944.
3. Applicability of Extended Limitation Period under Proviso to Section 11A.
4. Requirement to Follow Section 35E Procedure.

Issue-wise Detailed Analysis:

1. Eligibility for Excise Duty Exemption under Notification No. 3/2001:
The primary issue revolves around whether the petitioner companies, engaged in power generation, qualify for excise duty exemption on Low Sulphur Heavy Stock (LSHS) under Notification No. 3/2001. The petitioners argued that they are under the control of the Tamil Nadu State Electricity Board (TNSEB) and thus eligible for exemption. They contended that their operations were fully controlled by TNSEB through Power Purchase Agreements (PPAs), and that they possess a "deemed licence" under Section 26-A of the Electricity Supply Act, 1948. The respondents countered that the petitioner companies are private entities not owned or controlled by the Central or State Government, and hence do not qualify for the exemption.

2. Jurisdiction and Validity of Show Cause Notices under Section 11A of the Central Excise Act, 1944:
The petitioners challenged the show cause notices issued under Section 11A, arguing that these notices were arbitrary, illegal, and without jurisdiction. They contended that once an order is passed under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 (2001 Rules), it could only be rectified through the appeal mechanism under Section 35E(2) of the Central Excise Act. The respondents maintained that the show cause notices were in conformity with Section 11A, which allows recovery of duties even if non-levy or short-levy occurred due to any approval, acceptance, or assessment.

3. Applicability of Extended Limitation Period under Proviso to Section 11A:
The petitioners argued that the extended period of five years under the proviso to Section 11A was not applicable as there was no wilful suppression of facts. They contended that all material facts were disclosed to the authorities, and the removal of goods was in accordance with the approved classification list. The respondents needed to establish fraud, collusion, or wilful misstatement to avail the extended limitation period, which they failed to do.

4. Requirement to Follow Section 35E Procedure:
The court examined whether the procedure under Section 35E, which allows the Commissioner of Central Excise to review and set aside orders, was rendered nugatory by the amended Section 11A. It was held that Section 11A and Section 35E operate in different fields and must be read harmoniously. The court concluded that the department must follow the procedure under Section 35E to cancel the Annexure-I certificate before invoking Section 11A for recovery of duties.

Conclusion:
The court allowed the writ petitions, quashing the impugned show cause notices. It held that the issuance of the notices was without jurisdiction as the department failed to follow the procedure under Section 35E to cancel the Annexure-I certificate. Additionally, the court found that the extended period of limitation under the proviso to Section 11A was not applicable as there was no wilful suppression of facts by the petitioners. The court granted leave to appeal to the Supreme Court.

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