1980 (7) TMI 110 - HC - Central Excise

Show Cause Notice issued after six months was barred by limitation - Cause of action - Date for accrual - Interpretation

Summary

Issues:
1. Interpretation of Section 40(2) of the Central Excises and Salt Act.
2. Application of limitation period to proceedings initiated against the petitioner.
3. Validity of penalty and duty levied on the petitioner for alleged contravention of Central Excise Rules.

Analysis:
1. The petitioner, a licensee under the Central Excises and Salt Act, received a show cause notice for clearing matches without payment of duty. The petitioner challenged the correctness of the order on grounds of limitation and merits, citing Section 40(2) of the Act. The contention was whether Section 40(2) applied to all persons or only to Central Government officers. The Supreme Court clarified that the section applies to any individual or person, encompassing illegal omissions and infractions of statutory requirements.

2. The judgment in Loganatha v. Secretary to the Govt. of India highlighted the importance of the limitation period under Section 40(2). It emphasized that the cause of action for evasion of duty arises when the act is detected, and the proceedings must be initiated within six months from that date. The judgment established that the date of checking and detection triggers the limitation period, preventing the department from resurrecting a dead cause of action beyond the prescribed time limit.

3. The court found that the proceedings against the petitioner were initiated after the expiration of the six-month period under Section 40(2), rendering them barred by limitation. The impugned order levying penalty and duty was quashed, and the writ petition was allowed. The judgment reaffirmed the principles outlined in previous cases, emphasizing the need for timely initiation of legal proceedings for infractions under the Act.