2015 (6) TMI 299 - HC - Central Excise

Denial of MODVAT Credit - Whether the Tribunal was justified in holding that the department s circulars issued giving powers to issue show cause notice under Rule 57-I of the Central Excise Rules, 1944 to the Assistant Collector and Collector can be given effect to the same being executive and advisory in nature and not issued under the provision of Rule 233 (wrongly mentioned as 33 in the question of law framed) of the Rules - Held that - Officers of the department cannot in violation to the circular proceed to take action by saying that the circular is only advisory in nature or that it is not a circular issued under the statutory rule i.e. Rule 233. Once we find that the legal position in this regard is well settled, then we have to hold that in the light of the circular issued by the Board clarifying the position with regard to who is the proper officer as defined under Section 2(b) of the Act, the departmental authorities are duty bound to follow the circular. - It is not known as to how the Tribunal could take a different view from the one taken by it in an appeal filed by the same assessee on 17-10-2000 in the case of Bharat Heavy Electricals Ltd. v. Commissioner of Central Excise, Indore (2000 (10) TMI 374 - CEGAT, NEW DELHI). Once it is found that the show cause notice is issued by an unauthorized person, we have to hold that the entire action initiated is unsustainable, void ab initio and stands vitiated. - Superintendent could not issue the show cause notice in relation to the recovery of Modvat credit after disallowing it and it was only the Assistant Collector or Collector who could issue the notice. Whether the Tribunal is justified in arriving at the conclusion that the department s circulars have no legal sanctity as they have not been issued in accordance with Rule 33 of the Rules - When a departmental circular is issued by the Board, it would be in accordance to the power available to the Board under Section 37B and until and unless it is not shown that the circular is contrary to any law laid down by the Supreme Court or judgment of High Court, the same shall be binding on all the officers of the Excise Department and only on the ground that the circular is not issued under Rule 233 of the Rules, the officer cannot refuse to follow the circular by saying that it is only advisory in nature. All the circulars issued by the Board in its administrative and executive jurisdiction are binding on the officers of the Board until and unless it can be shown that they are contrary to any law laid down by Supreme Court or High Court with regard to the subject matter of the circular. - Decided in favour of assessee.

Summary

Issues:
1. Authorization to issue show cause notice for excess Modvat credit.
2. Legal sanctity of department's circulars under Rule 33 of the Central Excise Rules.

Issue 1: Authorization to Issue Show Cause Notice
The judgment revolves around the question of whether the Superintendent of Central Excise had the authority to issue show cause notices in relation to the recovery of Modvat credit, or if it was the Assistant Commissioner or the Collector Central Excise who had the jurisdiction. The Tribunal had negated the contention raised by the assessee regarding the Superintendent's authority. The Court analyzed the circulars issued by the Department designating "proper officers" under Rule 57-I of the Central Excise Rules. The Court referred to previous judgments and highlighted that circulars issued by the Board are binding on departmental officers for maintaining consistency and discipline. The Court held that the Superintendent's issuance of show cause notices was unauthorized, void ab initio, and unsustainable, emphasizing that only the Assistant Collector or Collector could issue such notices.

Issue 2: Legal Sanctity of Department's Circulars
The second issue focused on the legal sanctity of departmental circulars under Rule 33 of the Central Excise Rules. The Court emphasized that circulars issued by the Board are binding on all officers of the Excise Department unless contrary to established law by the Supreme Court or High Court. The Court reiterated that officers cannot refuse to follow such circulars merely on the grounds of advisory nature or non-issuance under a specific rule. The judgment emphasized that circulars issued by the Board are binding until proven inconsistent with established legal principles. Consequently, the Court allowed all four appeals, quashed the show cause notices issued by the Superintendent, and declared the entire action initiated as void ab initio. All proceedings based on the quashed notices were consequently disposed of.

This comprehensive analysis of the judgment highlights the Court's detailed examination of the issues surrounding the authorization to issue show cause notices and the legal weight of departmental circulars, providing a clear understanding of the legal principles applied in the case.