2020 (2) TMI 2 - AT - Central Excise

Closure of proceedings on the ground that appellant has waived their right to a written show cause notice - appellant deposited the demand with interest and penalty under protest to buy peace - CENVAT Credit - paper invoices/fake documents - no inputs received - the bone of contention between the appellant and the DGCEI is that the settlement is not in the proper legal spirit, neither it is out of free consent and have further exposed the appellant to adverse inference particulary under the other tax laws and also as a matter of business repute - HELD THAT - In the facts of the present case, in view of the non acceptance of the allegation of the DGCEI by the appellant, as to non receipt of the inputs in question, we hold that the purported waiver vide communication dated 20.07.2016 is bad and illegal and is not enforceable against the appellant. Due to non agreement with the allegation of the DGCEI by the appellant, the DGCEI was bound to issue show cause notice and thereafter proceed in accordance with law. It has been provided in the CBEC circular / clarification dated 18.08.2015 that the letter of closure should be issued by an officer equivalent to the adjudicating authority. Further, quantification of the demand can only be communicated to an assessee once an investigation gets completed. Further, as per CBEC clarifications, a letter of closure is required to be issued without a separate adjudication order. Thus, the said closure dated 29.07.2016 is equivalent to an adjudication order, for all practical purposes. Thus, even instructions dated 18.08.2015 of CBEC have also been circumvented by ADG, DGCEI by issuing the closure letter, instead of a show cause notice, there being non acceptance of the allegation of the Revenue by the appellant / assessee. The impugned letter of closure dated 29.07.2016 is bad and illegal and the same is accordingly set aside. The said closure letter is neither in the spirit of the CBEC‟s circular/ clarification dated 18.08.2015 and is evidently in violation of the provisions of Section 11 A(4) read with Section 11 AC (1)(d). Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Alleged inadmissible CENVAT credit claimed by the appellant.
2. Coercive actions by DGCEI during the investigation.
3. Legality of the settlement under Section 11AC(1)(d) of the Central Excise Act, 1944.
4. Communication of closure of proceedings by DGCEI.
5. Requirement and waiver of show cause notice.
6. Maintainability of the appeal against the DGCEI communication.

Detailed Analysis:

1. Alleged Inadmissible CENVAT Credit:
The appellant, engaged in manufacturing various products, was investigated by DGCEI for allegedly claiming inadmissible CENVAT credit on inputs due to irregularities by suppliers. DGCEI's investigation revealed that the appellant received invoices without actual receipt of goods, leading to a demand of ?95,38,33,657/- in duty, interest, and penalty.

2. Coercive Actions by DGCEI:
The appellant alleged that DGCEI officers conducted searches at residential and factory premises, seized personal items, and coerced the appellant into making deposits without issuing a show cause notice. The appellant claimed that statements were recorded under duress, and deposits were made to avoid harassment and business disruption.

3. Legality of the Settlement under Section 11AC(1)(d):
The appellant, under pressure, opted for a settlement by depositing the disputed amount, interest, and penalty, seeking closure of proceedings under Section 11AC(1)(d) of the Central Excise Act. However, the appellant later contested the settlement, arguing that the payments were not voluntary and that they had never admitted to fraud or non-receipt of goods.

4. Communication of Closure of Proceedings by DGCEI:
DGCEI issued a letter on 29.07.2016, stating that the appellant had settled the duty liability and waived the right to a show cause notice. The appellant argued that this letter contained misstatements, as they had never admitted to non-receipt of inputs and that the closure was limited to civil liability without addressing criminal proceedings.

5. Requirement and Waiver of Show Cause Notice:
The appellant contended that a show cause notice was mandatory under Section 11A(4) of the Act in cases involving fraud or suppression. They argued that the CBEC instructions allowing waiver of the show cause notice could not override statutory provisions. The Tribunal agreed, stating that the waiver was invalid as the appellant had not accepted the allegations.

6. Maintainability of the Appeal Against the DGCEI Communication:
The Tribunal held that the DGCEI's letter dated 29.07.2016, which purportedly closed the proceedings, was appealable as it had grave civil consequences and amounted to an adjudication order. The Tribunal found that the appellant had been coerced into the settlement and that the DGCEI's actions were not in accordance with the law.

Conclusion:
The Tribunal set aside the DGCEI's communication dated 29.07.2016, holding it to be illegal and not in compliance with statutory provisions. The Tribunal directed the Revenue to issue a show cause notice within three months, allowing the appellant to contest or settle the matter as per the law. The appeal was allowed with consequential benefits.