1991 (12) TMI 65 - HC - Central Excise

Summary

Issues:
Challenge to disallowance of MODVAT credit and penalty imposition.

Detailed Analysis:
The petition challenged an order disallowing MODVAT credit of Rs. 79,38,597.50 and imposing a penalty of Rs. 5 lakhs for the clearance of 'Cephalazin' during January 1989 to August 1990. The petitioner contended that all necessary facts for availing MODVAT credit were disclosed to the department, and the application of a 5-year time period for raising demands was erroneous. The petitioner cited relevant legal precedents and urged for admission of the petition and confirmation of the ex parte ad interim stay. On the other hand, the Central Govt. Advocate argued that the petitioner had an alternative remedy of filing an appeal to CEGAT, New Delhi, and further to the Supreme Court, and that the case involved disputed facts. It was emphasized that the petitioner should exhaust the alternative remedy before approaching the High Court directly. Legal precedents were cited to support this argument (Asstt. Collector, Central West Bengal v. Dunlop India Ltd. and Others, Hindustan Burlop v. Union of India and Others, Grasim Industries Ltd. v. Assistant Collector, Titagarh Paper Mills C. Ltd. v. State of Orissa, M/s. Noble Soya House Ltd. Mandideep v. U.O.I.).

The notice dated 28/1190/3-12-90 alleged various violations by the petitioner, including misusing MODVAT credit, misdeclaration of inputs, and intentional misleading of the department. The adjudication order passed by Respondent No. 2 found that the petitioner had availed credit of inputs not used in the manufacture of the final product, used goods without requisite permission, failed to disclose certain products, and did not maintain proper records. It was concluded that the petitioner deliberately suppressed facts to avail wrong credit and evade payment of Central Excise Duty. The Collector also noted that the petitioner wrongly availed MODVAT credit for items not related to the final product.

The High Court analyzed whether there was suppression of facts justifying the extended limitation of 5 years for raising demands under Rule 57-I. It was emphasized that a writ petition under Article 226 of the Constitution of India would not be maintainable without exhausting statutory remedies unless exceptional circumstances were present. In this case, as there were no exceptional circumstances like lack of jurisdiction or fundamental rights infringement, the petition was declined. It was ordered that if the petitioner filed an appeal before CEGAT, New Delhi by a specified date, the stay order granted by the High Court would remain in force until that date. The petition was dismissed with no order as to costs.