2018 (1) TMI 531 - HC - Central Excise

Validity of demand / show cause notice - SCN issued based on audit objections - Benefit of N/N. 29/88 Central Excise dated 01.3.1988 - Clearance of Tablets - Held that - Admittedly, the reason for impossibility of adjudicating the show cause notices cannot be put against the assessee, as the Department was contesting the audit objections. Therefore, this Court is convinced that the reasons contained in the counter affidavit as well as in the additional counter affidavit do not justify the action in keeping the impugned show cause notices pending without being adjudicated for 22 years. Merely because an audit party had raised an objection, ipso facto, that cannot be the sole reason for issuing the show cause notices, as the Adjudicating Authority is a Quasi Judicial Authority and is legally bound to adjudicate the case independently and judiciously taking into consideration the audit objections by the CERA/CRA, reply of the Department, reply of the party, relevant legal provisions, case laws on the subject and relevant circulars of the Board, if any. Petition allowed.

Summary

Issues:
Challenge to show cause notices dated 14.11.1995 and 09.12.1995 - Maintainability of writ petitions against show cause notices - Recovery of duties under Section 11A of the Central Excise Act, 1944 - Delay in adjudication of show cause notices - Justification for delay in adjudication - Application of legal principles in adjudication process - Compliance with Circulars issued by Central Board of Excise and Customs.

Analysis:
The petitioner, a pharmaceutical company, challenged show cause notices dated 14.11.1995 and 09.12.1995 seeking to deny the benefit of an exemption notification. The Revenue objected to the maintainability of the writ petitions, arguing that the petitioner should participate in a personal hearing before contesting the matters on merits. However, the Court noted the significant delay from the issuance of notices in 1995 to the proposed adjudication in 2017, questioning the propriety of such delayed action by the Department.

The Revenue contended that the time limit under Section 11A of the Central Excise Act, 1944, for recovery of duties is flexible based on feasibility, justifying the delayed adjudication. However, the Court emphasized that the Department's actions lacked transparency and failed to inform the petitioner about the reasons for the delay, especially regarding the transfer of the case to the Call Book and subsequent administrative proceedings.

The Court highlighted legal precedents emphasizing the importance of timely adjudication, stating that proceedings should not be unduly delayed without valid reasons. It noted that the Department's reliance on audit objections as the sole basis for the show cause notices was insufficient, as the Adjudicating Authority must independently consider all relevant factors before issuing such notices.

Moreover, the Court criticized the Department for not adhering to Circulars issued by the Central Board of Excise and Customs, particularly regarding communication of decisions post personal hearings. It found the Department's justifications for the delay unconvincing and ruled in favor of the petitioner, quashing the impugned show cause notices due to the unjustifiable 22-year delay in adjudication.

In conclusion, the Court allowed the writ petitions, emphasizing the importance of timely adjudication, transparency in administrative actions, and adherence to legal principles and Circulars. The judgment underscored the necessity for independent and judicious decision-making by Adjudicating Authorities in compliance with statutory provisions and established legal norms.