2005 (3) TMI 148 - HC - Central Excise

Issues Involved:
1. Entitlement to exemption under Notification No. 25/70-C.E.
2. Validity of the fresh demand for Rs. 3.1 crores.
3. Requirement of clearance from the High Powered Committee for litigation.
4. Timeliness of the appeal before the Commissioner (Appeals).
5. Legality of the demand notice without prior show cause notice.
6. Applicability of Section 11A of the Central Excise Act regarding time-barred demands.

Issue-wise Detailed Analysis:

1. Entitlement to exemption under Notification No. 25/70-C.E.:
The appellant, a Public Sector Undertaking engaged in manufacturing fertilizers, claimed the benefit of exemption under Notification No. 25/70-C.E. for the period from 5-3-1976 to 29-2-1977. Initially, the Assistant Collector allowed the exemption, but the Department issued a show cause notice on 7-6-1976, denying the exemption. The matter went through various judicial levels, and the Supreme Court eventually held on 20-1-1994 that the mixture manufactured by the appellant did not satisfy all the conditions prescribed by the notification, thus denying the benefit.

2. Validity of the fresh demand for Rs. 3.1 crores:
After the Supreme Court's decision, the Assistant Collector demanded Rs. 8.94 crores, which was contested and subsequently settled at Rs. 4.84 crores with interest. The dispute was treated as closed in 1995. However, on 5-2-1998, the Department demanded an additional Rs. 3.1 crores, which the appellant argued was not based on any show cause notice or assessment order, thus questioning its validity.

3. Requirement of clearance from the High Powered Committee for litigation:
The appellant, being a Public Sector Undertaking, needed clearance from the High Powered Committee before filing any appeal. The Committee refused permission to approach the Supreme Court but advised filing an appeal before the Commissioner (Appeals). This requirement stems from several Supreme Court decisions emphasizing in-house conciliation to avoid litigation between government bodies.

4. Timeliness of the appeal before the Commissioner (Appeals):
The appellant filed an appeal before the Commissioner (Appeals) on 27-10-1998, which was dismissed as time-barred. The appellant argued that the time taken to obtain clearance from the High Powered Committee (92 days) should be excluded from the limitation period. The Court agreed, noting that the appeal was filed within 169 days (excluding the 92 days), which is within the permissible 180 days.

5. Legality of the demand notice without prior show cause notice:
The appellant contended that the demand notice dated 5-2-1998 was illegal as it was not preceded by a show cause notice, which is a legal requirement. The Supreme Court has emphasized that demands without notice or hearing are invalid. The appellant also argued that the show cause notice must detail the claim, documents relied upon, and the computation of the demand amount, which was not done in this case.

6. Applicability of Section 11A of the Central Excise Act regarding time-barred demands:
The appellant argued that the fresh demand was time-barred under Section 11A of the Central Excise Act, as the dispute related to a period long past and there was no deliberate suppression of facts by the appellant. This issue was raised before the Commissioner but was not addressed.

Conclusion:
The Court set aside the orders of the learned single Judge, CEGAT, and the Commissioner of Central Excise (Appeals), and remanded the matter to the Commissioner (Appeals) for a fresh order on merits. The impugned demand was stayed until the Commissioner (Appeals) made a decision. The appeal was allowed, and the matter was remanded without costs.

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