2005 (3) TMI 167 - HC - Central Excise

Issues Involved:
1. Quashing of the order dated 5th January, 2005.
2. Quashing the order dated 19th/20th April, 2004 cancelling the permission for sub-contract production.
3. Restoration of the facility of procuring goods without payment of duty.
4. Permission to sub-contract production on a job work basis.
5. Restraining harassment and investigation against the petitioner.

Issue-wise Detailed Analysis:

1. Quashing of the Order Dated 5th January, 2005:
The petitioner challenged the order dated 5th January, 2005, which demanded a bank guarantee and security for the duty involved for the goods and future procurement. The court found this order to be in direct contradiction to the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 16-12-2004, which held that the Commissioner had no authority to suspend the C.T.-III facility. The Tribunal's decision was binding and had not been challenged by the Central Excise Department. The court emphasized that the principle of judicial discipline requires that the order of the higher appellate authority should be followed unreservedly by the subordinate authorities. Consequently, the court set aside the order dated 5-1-2005 as wholly illegal, contrary to law, and without jurisdiction.

2. Quashing the Order Dated 19th/20th April, 2004:
The petitioner sought to quash the order dated 19th/20th April, 2004, which cancelled the permission to sub-contract production on a job work basis. The court noted that the petitioner had been availing the benefit of duty-free imports and procuring raw materials without payment of duty on furnishing a prescribed bond under the C.T.-III facility. The investigation for the alleged diversion of raw materials was still ongoing and had not been finalized. The court reiterated that the facility under the Central Excise Act is available to an Export Oriented Unit (EOU) until the letter of permission granted by the Development Commissioner is revoked or cancelled. The Tribunal had already ruled that there was no provision of law empowering the Commissioner of Central Excise to suspend the duty-free procurement facility. Therefore, the court found the order dated 19th/20th April, 2004, to be unsustainable.

3. Restoration of the Facility of Procuring Goods Without Payment of Duty:
The petitioner requested the restoration of the C.T.-III facility for procuring goods without payment of duty. The court observed that the Tribunal had set aside the Commissioner's order suspending the duty-free procurement facility and that the Tribunal's order was still in effect. The court directed the respondents to restore the C.T.-III facility forthwith, emphasizing that the facility cannot be suspended until the status of the petitioner as a 100% Export Oriented Unit is cancelled.

4. Permission to Sub-Contract Production on a Job Work Basis:
The petitioner sought permission to sub-contract production on a job work basis as was permitted before the order dated 19th/20th April, 2004. The court found that the petitioner had been granted permission to sub-contract production under the EXIM policy 1997-2002 and that this permission could not be arbitrarily revoked without due process. The court held that the suspension of the sub-contracting permission was unjustified and directed the respondents to permit the petitioner to continue sub-contracting production on a job work basis.

5. Restraining Harassment and Investigation Against the Petitioner:
The petitioner requested the court to restrain the respondents from harassing and conducting investigations against it. The court acknowledged that the petitioner had deposited a significant amount under protest towards the duty demanded by the Central Excise Authorities and that the investigation was still pending. The court emphasized the need for the respondents to follow due process and not to act arbitrarily. However, the court did not issue a specific direction to restrain the investigation but focused on ensuring that the petitioner's rights were protected during the ongoing investigation.

Conclusion:
In conclusion, the court allowed the writ petition, quashing the orders dated 5th January, 2005, and 19th/20th April, 2004, and directed the respondents to restore the C.T.-III facility for procuring goods without payment of duty and to permit the petitioner to sub-contract production on a job work basis. The court also emphasized the binding nature of the Tribunal's order and the need for the respondents to adhere to judicial discipline. The parties were directed to bear their own costs.

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