1992 (10) TMI 93 - HC - Central Excise

Summary

Issues Involved:
1. Violation of Notification No. 208/83 dated 1-8-1983.
2. Non-compliance with the principles of natural justice.
3. Violation of Section 11A of the Central Excises and Salt Act, 1944.

Summary:

1. Violation of Notification No. 208/83 dated 1-8-1983:
The petitioners, Rockweld Electrodes India Ltd. and Advani Oerlikon Ltd., manufacture electrodes using steel wire rods as raw materials. They contend that the input steel wire rods are exempt from duty per Notification No. 208/83 dated 1-8-1983. The respondents, however, argue that the steel wire rods received by the petitioners are cleared without payment of duty under the said notification, making them ineligible for MODVAT credit. The respondents maintain that the petitioners have misunderstood the Government of India's Order dated 7-4-1986, which does not allow credit on inputs on which duty has not been paid.

2. Non-compliance with the principles of natural justice:
The petitioners allege that they were not given an opportunity to be heard before the respondents decided to hold that no credit on their inputs is available. The respondents counter that the petitioners were informed of their ineligibility for deemed credit facilities through multiple letters and had ample time to respond. The Court, referencing previous judgments, emphasizes that any quasi-judicial order must conform to the principles of natural justice, including the right to a fair hearing.

3. Violation of Section 11A of the Central Excises and Salt Act, 1944:
Section 11A mandates that a notice must be served within six months (or five years in cases of fraud, collusion, etc.) to show cause why the duty should not be paid. The Court finds that even though Rule 57-1 (before its amendment) did not explicitly require a notice, the principles of Section 11A still apply. The respondents failed to issue a proper show cause notice within the stipulated time, thus violating Section 11A. The Court quashes the demand notices and allows the respondents to proceed afresh by issuing proper show cause notices in accordance with the law.

Conclusion:
The Court quashes the orders against the petitioners due to non-compliance with the principles of natural justice and Section 11A of the Act. The respondents are allowed to reissue notices following the correct legal procedures. The challenge to the validity of Notification F. No. B. 22/5/86-TRU, dated 7-4-1986, is dismissed as no specific arguments were advanced.