2022 (8) TMI 1090 - HC - Central Excise

Inordinate delay on the part of respondents in adjudicating 16 Show Cause Notices - breach of principles of natural justice - classification of goods - electrical grade insulating papers - to be classified under Chapter heading 48.11 or Chapter heading 85.46 of the Central Excise Tariff Act - applicability of N/N. 64/88 dated 1st March 1988 as amended by N/N. 54/89 dated 1st March 1989 - HELD THAT - After 31 years, petitioner having approached this Court impugning the show cause notice, cannot be made to suffer an order to facilitate conclusion of the proceedings which, because of the inordinate delay in its conclusion, is most likely to work out prejudicial to them. It would only be reasonable for petitioner to proceed on the basis that department was not interested in prosecuting the show cause notices and had abandoned it. If respondents wanted to keep the show cause notices alive, they should have strictly followed the instructions given in the CBE C circular dated 10th March 2017 referred to in paragraph 10 of RAYMOND LIMITED VERSUS THE UNION OF INDIA THROUGH THE MINISTRY OF FINANCE AND ANR. 2019 (8) TMI 962 - BOMBAY HIGH COURT , where CBE C has directed the officers of the department to formally communicate to the party that the notices which have been issued to them, are being transferred to the call book. This circular only states the obvious because one would have expected the state even in the absence of such a circular, to formally issue such communication to a party. In this case, the show cause notices were kept in the call book not at the instance of petitioner, but by the revenue of its own accord. After having kept it in the call book, no intimation / communication was sent by respondent no.2 pointing out that the show cause notices had been kept in the call book. If only had been so communicated, petitioner would have been put to notice that the show cause notices are still alive and would be subject to adjudication after the show cause notices are retrieved from the call book on the dispute which led to keeping it in the call book, being resolved. Admittedly, this has not been done. Petition disposed off.

Summary

Issues Involved:
1. Inordinate delay in adjudication of show cause notices.
2. Classification dispute of the product under the Central Excise Tariff Act.
3. Principles of natural justice and procedural fairness.
4. Department's communication and handling of show cause notices in the call book.
5. Prejudice to the petitioner due to the delayed adjudication.

Detailed Analysis:

1. Inordinate Delay in Adjudication of Show Cause Notices:
The petitioner, engaged in manufacturing electrical grade insulating papers, approached the court to quash 16 show cause notices due to an inordinate delay in adjudication. The earliest notice dated back to 10th October 1991, and the latest to 4th April 1994. The petitioner argued that such a delay breached principles of natural justice and was contrary to law declared by various courts.

2. Classification Dispute of the Product:
At the relevant time, the petitioner's product was classified under Chapter heading 48.11 of the Central Excise Tariff Act 1985. However, the respondents contended that it should be classified under Chapter heading 85.46. This classification dispute led to multiple show cause notices and adjudications over the years. Initially, the Assistant Collector approved the classification under Chapter heading 48.11, but subsequent notices and orders challenged this classification.

3. Principles of Natural Justice and Procedural Fairness:
The petitioner argued that the delay in adjudicating the show cause notices was a breach of natural justice. The court noted that the delay hampered the petitioner's ability to defend itself, as relevant documents were not available, and employees familiar with the case had left the organization. The court emphasized that delayed adjudication without fault on the petitioner's part impinges on procedural fairness.

4. Department's Communication and Handling of Show Cause Notices in the Call Book:
The respondents claimed that the show cause notices were transferred to the call book due to pending matters before the Tribunal. However, the court found that the respondents failed to provide timely intimation to the petitioner about this transfer. The only document indicating this transfer was dated 14th October 2020, long after the notices were issued. The court criticized the respondents for not disclosing the exact date of transfer and for not following the instructions in the CBE & C circular, which required formal communication to the petitioner.

5. Prejudice to the Petitioner Due to the Delayed Adjudication:
The court acknowledged that the revival of show cause notices after such a long gap prejudiced the petitioner. The petitioner reasonably believed that the proceedings were abandoned. The court cited similar cases where delayed adjudication was deemed a breach of natural justice. The court held that the respondents should have informed the petitioner about the status of the show cause notices and the reasons for keeping them in the call book.

Conclusion:
The court quashed and set aside the 16 show cause notices due to the inordinate delay in their adjudication, which breached principles of natural justice and procedural fairness. The court emphasized that the state must act transparently and communicate effectively with parties involved in such proceedings. The petition was disposed of with no order as to costs.