2024 (11) TMI 398 - HC - Central Excise

Challenge to actions on the part of the respondent CIL in issuance of respective debit notes - recovery of amounts on account of arrears of central excise duty and corresponding VAT/CST from 01.03.2011 to 28.02.2013 against the coal purchase from the CIL by the petitioners - failure to provide details - appropriating from other transactions carried out between the CIL and the petitioners - HELD THAT - One aspect is very clear that the petitioners herein have not assailed as to whether the stowing excise duty as well as the royalty would form a part of the transaction value on which the central excise duty is liable to be paid. Under such circumstances, what transpires from the materials on record, as well as the submissions so made by the learned counsels appearing on behalf of the parties is that the CIL is trying to recover certain amounts from the petitioners by issuance of these debit notes along with the enclosures. It is relevant to take note of the submissions of the learned counsel for the petitioners wherein it was emphasized that basing upon the debit notes and the enclosures, the respondent CIL is trying to recover from other transactions carried out by the petitioners with the CIL. This Court is of the opinion that the issuance of the debit notes along with the enclosures can at best be construed to be demands made by the CIL upon the petitioners. If such demands are rejected and the petitioners refuse to pay, the same would result in a dispute between the respondent CIL and the petitioners. This Court is of the opinion that by issuance of a debit note, the CIL cannot recover such amounts from other transactions. However, in terms with Clause 11.12 of the Spot E-Auction Scheme 2007, it is the opinion of this Court that if the CIL wants to recover such amounts, the said amounts can be recovered by the process mandated in the said Scheme i.e. by way of Arbitration - Petition disposed off.

Summary

Issues:
Challenge to actions of respondent CIL in issuing debit notes for arrears of central excise duty and VAT/CST against coal purchases. Interpretation of Spot E-Auction Scheme 2007. Legality of CIL's recovery methods. Applicability of Central Excise Act, 1944. Dispute resolution mechanism under Clause 11.12 of the Scheme.

Analysis:
The High Court addressed a batch of writ petitions challenging the respondent CIL's actions in demanding payment for arrears of central excise duty and VAT/CST against coal purchases made between 01.03.2011 to 28.02.2013. The petitioners contended that the demands were baseless and lacked specific details, alleging arbitrary imposition by CIL through debit notes. On the other hand, CIL argued that the increase in central excise duty was due to the inclusion of stowing excise duty and royalty in the transaction value, which the petitioners had to pay. The Court considered arguments from both sides.

The petitioners claimed that CIL's recovery attempts were illegal and involved appropriation from unrelated transactions, contrary to the Spot E-Auction Scheme 2007. The Court noted that while the petitioners did not contest whether stowing excise duty and royalty should be included in the transaction value for central excise duty, the debit notes lacked clarity on how the demanded amounts were calculated for the specified period.

The Court opined that CIL's recovery through debit notes could not extend to amounts from other transactions and should follow the arbitration process outlined in Clause 11.12 of the Scheme. It emphasized that each e-auction sale constituted a distinct transaction, prohibiting cross-transaction recoveries. Therefore, the Court directed that if CIL wished to recover the disputed amounts, it must do so through arbitration as per the Scheme.

In conclusion, the Court disposed of the writ petitions, highlighting the need for disputes to be resolved through arbitration as per the Scheme. It allowed CIL to pursue recovery through arbitration while excluding the period of litigation from the limitation period. The judgment clarified the limitations on CIL's recovery methods and reinforced the importance of adhering to the Scheme's dispute resolution mechanism.