2017 (11) TMI 830 - HC - Central Excise

Manufacture - According to the department, the input i.e. Partially Oriented Yarn (POY) and the final product i.e. yarn were two distinct products having different names, characteristics and use and therefore, the process amounted to a manufacturing activity - Held that - The Supreme Court has however entertained the department s appeal to the limited extent of deciding whether circular issued by CBEC providing that the proceedings be kept in call book is in conformity with the provisions of section 37B of the Central Excise Act. It can thus be seen that the judgment of the High Court rendered in identical facts is not disturbed by the Supreme Court insofar as its main impact on quashing the show cause notice and the order-in-original is concerned. Even without going into the question whether the circular of CBEC was valid or not, the judgment of the Division Bench in case of Siddhi Vinayak would apply in the present cases. In all cases, the department had issued SCN sometime in the year 2000. These proceedings were kept in call book without intimating the noticees. Without service of any further notices on the petitioners, the order-in-original came to be passed by the adjudicating authority - petition allowed - decided in favor of appellant.

Summary

Issues:
Challenging order-in-original dated 28.2.2017 and show cause notice dated 27.6.2000. Department's contention on manufacturing activity due to lack of registration and records. Delay in adjudication for 17 years. Legality of keeping cases in call book. Violation of natural justice principles.

Analysis:
1. The petitioners, engaged in textile business, challenged the order-in-original dated 28.2.2017 and the show cause notice dated 27.6.2000. The dispute arose from the department's claim that the process of Draw Winding of yarns conducted by the petitioners amounted to manufacturing activity without proper registration or maintenance of central excise records.

2. The main ground of challenge by the petitioners was the significant delay of 17 years in adjudicating the matter. The petitioners argued that the department proceeded ex parte against them without ensuring proper service of notices, violating the principles of natural justice.

3. The department justified the delay by stating that similar issues were pending before the Tribunal, and cases like these were kept in the call book under government directives. The concept of the call book involved suspending cases from further hearing under specific circumstances.

4. Referring to a similar case, the Division Bench of the High Court highlighted the statutory provisions governing adjudicatory proceedings under section 11A of the Act. The judgment emphasized the importance of adhering to time limits set by the legislature for determining excise duty, stating that cases should be decided promptly unless restrained by a higher forum.

5. The High Court held that keeping cases in the call book for an extended period without notifying the parties was contrary to statutory requirements and violated principles of natural justice. The court ruled in favor of the petitioners, quashing the show cause notices and order-in-original due to the unlawful delay and lack of communication regarding the status of the cases.

6. The Supreme Court entertained the department's appeal regarding the validity of the circular issued by CBEC on keeping cases in the call book. However, the main impact of the High Court's judgment on quashing the show cause notices and orders-in-original remained undisturbed by the Supreme Court, emphasizing the importance of timely adjudication and adherence to natural justice principles.

7. Consequently, all show cause notices and order-in-originals issued in similar cases were set aside by the High Court, emphasizing the significance of timely adjudication, proper communication with parties, and upholding principles of natural justice.