2019 (1) TMI 499 - HC - Central Excise

Validity of SCN - Jurisdiction - petitioner challenged the show cause notice on the ground that it is without jurisdiction, clear abuse of process of law and therefore, the revenue should be prohibited from proceeding further with the show cause notice - Article 226 of the Constitution of India - what is received by the petitioner and what is sent back by the petitioner are both petroleum gases. - Scope of exemption notifications Held that - what is to be borne in mind is that the product is petroleum gases and other gaseous hydrocarbons. If we turn to the show cause notice issued, the attempt of the revenue is that the composition of the goods received by CPCL and the goods returned to CPCL are different in its chemical composition and the product is distinguishable. - The revenue nowhere denies the fact that the product returned is a petroleum gas which should have been the only factor that is relevant. It is not a case of inherent lack of jurisdiction but an imposed restriction which has been elucidated in several decisions which were cited by Mr.Rajnish Pathiyil, learned SCGSC appearing for the revenue - we do not agree with his submission that there is an absolute and total bar for entertaining a writ petition which has been clarified by the Hon'ble Supreme Court in several decisions and when a show cause notice is challenged as being without jurisdiction or when it is a case of abuse of process of law, this Court is well justified in exercising its jurisdiction under Article 226 of the Constitution of India. Therefore, the preliminary objection raised by the revenue before us is held to be not sustainable and the finding recorded by the learned Single Bench in that regard is affirmed. The Central Government clearly understood the manufacturing process and taken into consideration that the return quantity of LPG has ultimately been cleared on payment of appropriate duty by oil Companies, the Central Government is satisfied that the burden of excise duty on the returned quantity of LPG, which was originally supplied by MRL to the writ petitioner at the price for industrial use, has fallen on the writ petitioner which is much more than the excise duty applicable on the quantity of LPG actually consumed by them. The adhoc exemption order is a clear answer to the case of the appellant. The learned Single Bench was perfectly right in entertaining the writ petition and quashing the impugned show cause notice that it has been wholly without jurisdiction. Furthermore, the learned Single Bench rightly held that they cannot upset the apple-cart and try to come to a new conclusion, that too, after a period of nearly 24 years - appeal dismissed - decided against the revenue.

Issues Involved:
1. Jurisdiction of the show cause notice.
2. Abuse of process of law.
3. Maintainability of the writ petition.
4. Interpretation of CENVAT Credit Rules.
5. Applicability of exemptions under Central Excise and GST laws.

Detailed Analysis:

1. Jurisdiction of the Show Cause Notice:
The writ petitioner challenged the show cause notice on the grounds of it being without jurisdiction and an abuse of process of law. The learned Single Bench held that the writ petition was maintainable when the show cause notice was issued without jurisdiction. The appellant contended that the show cause notice was within jurisdiction and cited several precedents to support their claim. However, the court affirmed that when a show cause notice is challenged as being without jurisdiction, the court is justified in exercising its jurisdiction under Article 226 of the Constitution of India.

2. Abuse of Process of Law:
The court examined whether the show cause notice constituted an abuse of process of law. The learned Single Bench did not delve into disputed questions of fact but focused on whether the Department had jurisdiction to issue the show cause notice after 24 years of the writ petitioner carrying on the same manufacturing activity. The court noted that the Department’s attempt to challenge the composition of goods received and returned by the petitioner was irrelevant, as the product returned was still petroleum gas, which was the only relevant factor.

3. Maintainability of the Writ Petition:
The revenue raised preliminary objections regarding the maintainability of the writ petition, which were overruled by the learned Single Bench. The court held that writ petitions are maintainable against show cause notices issued without jurisdiction or in cases of abuse of process of law. The court reiterated that there is no absolute bar on entertaining a writ petition in such circumstances, as clarified by the Hon'ble Supreme Court in several decisions.

4. Interpretation of CENVAT Credit Rules:
The court analyzed Rule 6 of the CENVAT Credit Rules, which deals with the obligation of the manufacturer of dutiable and exempted goods. The revenue contended that the petitioner did not maintain separate accounts and was liable to re-credit the amount as per Rule 14. However, the court found the revenue’s contentions misconceived, noting that the notifications for exemption made it clear that petroleum gases received and returned after extraction were exempted. The court emphasized that the Department’s decision after 23 years was unfounded, as the manufacturing process had not changed.

5. Applicability of Exemptions under Central Excise and GST Laws:
The court referred to an ad hoc exemption order issued in 1995, which exempted the quantity of LPG used in the manufacture of polybutene from excise duty. The court also considered a circular issued by the GST Council in 2018, which clarified that GST would be payable only on the net quantity of polybutylene feedstock and LPG retained for manufacturing. The court concluded that the ad hoc exemption order and the GST circular supported the writ petitioner’s case, demonstrating that the show cause notice was without jurisdiction and an abuse of process of law.

Conclusion:
The court found no grounds to interfere with the order passed by the learned Single Bench, affirming that the show cause notice was issued without jurisdiction and constituted an abuse of process of law. The writ appeal was dismissed, and the order of the learned Single Bench was upheld.

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