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2009 (11) TMI 284 - HC - Central ExciseRecovery of dues- default in payment of duty- Action taken to recover interest as duty paid belatedly and by using Cenvat Credit instead of PLA. Department relied on Rule 8(3A) of Central Excise Rules 2002. Dispute relating to entitlement to availment of Cenvat Credit during of default from 01.06.2006 to 14.06.2006. impugned case not one of recovery of duty defaulted but eligibility to avail Cenvat credit during default. Rule 14 of Cenvat Credit Rules 2004 for recovery of credit applicable and section 11A of Central Excise Act 1994 specifically made applicable as per said rule. Show Cause Notice required but procedure under section 11A not followed. Impugned action of attachment not sustainable and order quashed. Writ Jurisdiction- Alternative remedy- Statutory provisions entitling hearting by way of show cause notice. Mandatory procedure not followed. Writ jurisdiction invokable.
Issues Involved:
1. Retrospective application of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002. 2. Legality of the demand for duty and interest by the respondent. 3. Applicability of Section 11 and Section 11(A) of the Central Excise Act, 1944. 4. Requirement of a show cause notice under Section 11(A) before recovery of duty. 5. Invocation of the jurisdiction of the High Court under Article 226 of the Constitution of India. Issue-wise Detailed Analysis: 1. Retrospective application of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002: The petitioner contended that the amended sub-rule (3A) of Rule 8, which came into force on 1-6-2006, should not apply retrospectively to defaults that occurred before this date. The respondents argued that since the default continued beyond 30 days, the petitioner was not entitled to avail Cenvat credit from 1-6-2006 until the due amount was paid. 2. Legality of the demand for duty and interest by the respondent: The demand for Rs. 1,63,24,762/- with interest was challenged by the petitioner as illegal and arbitrary, arguing that the duty liability for the period between 1-6-2006 and 14-6-2006 was discharged from the Cenvat account due to adequate credit availability. The respondents maintained that the petitioner, being in default beyond 30 days, was not entitled to utilize the Cenvat credit and should have paid the duty in cash. 3. Applicability of Section 11 and Section 11(A) of the Central Excise Act, 1944: The respondents asserted that Section 11 of the Act, which allows recovery of sums due to the government, was applicable in this case, not Section 11(A), which deals with recovery of duties not levied or paid. The petitioner argued that the normal period of limitation for recovery under Section 11(A) is one year, and without a show cause notice, the action taken was not justified. 4. Requirement of a show cause notice under Section 11(A) before recovery of duty: The petitioner argued that a show cause notice was mandatory under Section 11(A) before any recovery action. The respondents contended that for defaults under sub-rule (3A) of Rule 8, Section 11(A) was not applicable, and therefore, no show cause notice was required. The court examined the provisions of Sections 11 and 11(A) and sub-rule (3A) of Rule 8, concluding that Section 11(A) was indeed applicable, necessitating a show cause notice. 5. Invocation of the jurisdiction of the High Court under Article 226 of the Constitution of India: The petitioner invoked the jurisdiction of the High Court under Article 226, arguing that the respondents violated the principles of natural justice by not issuing a show cause notice. The court held that the petitioner was entitled to invoke the jurisdiction of the High Court without first availing the alternative remedy of appeal, given the respondents' failure to follow mandatory procedures. Conclusion: The court concluded that the respondents failed to follow the mandatory procedure prescribed under Section 11(A) of the Act, which required issuing a show cause notice before recovery of duty. The impugned order of attachment was quashed, and the respondents were given liberty to initiate fresh action by following the procedure prescribed in Rule 14 of the Cenvat Credit Rules, 2004. The writ petition was allowed.
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