2016 (6) TMI 72 - HC - Central Excise

Demand of duty based on the circular dt.21-11-2001 - Circular has been examined by the Larger Bench of the Tribunal - Fate of the judgment of Larger Bench of the Tribunal - Circular dt.21-11-2001 which was the source of raising demand against the present petitioner & a subject matter of challenge in the instant proceedings came to be withdrawn by the department keeping in view order of the Larger Bench of the Tribunal by their subsequent circular no.870/08/2008- CX dt.16-5-2008. Held that - after taking note of the circular dt.16-5-2008 of which we have made a reference and the very source of the circular dt.21-11- 2001 which stands withdrawn, in our considered view the demand raised by the Adjudicating Authority vide order dt.8-3-2002 does not hold good and deserves to be quashed. It is brought to our notice that a office note no.1/2016 has been issued from the office of Commissioner, Central Excise, Jaipur dt.26-2-2016 entrusting the senior officers to personally brief the department counsel. It is expected that henceforth necessary steps will be taken by the department to assist the Court in the light of the office note no.1/2016 dt.26-2-2016. Therefore, the order of the Adjudicating Authority impugned is hereby quashed & set aside. - Decided in favour of petitioner

Summary

Issues:
Challenge against show cause notice based on circular dt.21-11-2001 raising demand for duty on exempted final product by manufacturers producing both dutiable and exempted goods without separate accounts for inputs. Validity of order raising demand passed by Adjudicating Authority. Compliance with order of Larger Bench of Tribunal regarding circular dt.21-11-2001. Withdrawal of circular dt.21-11-2001 by department and subsequent circular no.870/08/2008-CX dt.16-5-2008. Quashing of demand raised by Adjudicating Authority. Lack of assistance from respondent's counsel regarding Tribunal's order.

Analysis:
The petition challenged a show cause notice issued by the Central Excise Commissionerate based on a circular from 2001, which demanded duty on exempted final products by manufacturers who did not maintain separate accounts for inputs of dutiable and exempted goods. The Adjudicating Authority passed an order raising the demand without interim protection for the petitioner's rights. Subsequently, the petitioner sought an amendment after challenging the validity of the Adjudicating Authority's order.

During the hearing, the petitioner's counsel highlighted a Tribunal's order from 2006, stating that the department had complied with it, making it applicable in general. The petitioner argued that the demand should be quashed in light of this Tribunal's order. However, the respondent's counsel failed to provide information on the department's actions regarding the Tribunal's order, leading to the Court's intervention.

The Court, upon finding no assistance from the respondent's counsel, called upon the Commissioner of Central Excise & Customs to provide clarity on the matter. The Commissioner informed the Court that the circular from 2001, which was the basis of the demand against the petitioner, had been withdrawn by a subsequent circular in 2008 following the Tribunal's order. The Court noted the withdrawal of the 2001 circular and concluded that the demand raised by the Adjudicating Authority in 2002 was no longer valid and should be quashed.

Additionally, the Court highlighted an office note issued in 2016, directing senior officers to brief the department counsel properly for future cases. The Court allowed the writ petition, quashed the Adjudicating Authority's order from 2002, and did not award any costs. The judgment emphasized the importance of departmental compliance with legal directives and the need for proper assistance to the Court in such matters.