2022 (9) TMI 318 - HC - Central Excise

Adjudication of SCN within a time limitation - recovery of Central Excise Duty alongwith interest and penalty - HELD THAT - Even where the statue does not prescribe a time limit for adjudication, a show cause notice must be adjudicated upon within a reasonable time - Though reasonable time is flexible and would depend upon the facts and circumstances of each case, since the object of issuing a show cause notice is to secure and recover public revenue, larger public interest requires that revenue authorities act diligently and expeditiously when adjudicating the same. Adjudication proceedings, delayed for more than a decade (for no fault of answering party and without putting answering party on notice for the reason of delay), defeats the very purpose of issuing show cause notice/s and such delayed adjudication is bad in law - An answering party who does not hear from the authorities for more than 10 years after issuance of show cause notice and submission of reply thereto is justified in taking the view that the reply had been accepted and the authorities had given a quietus to the matter. Maintainability of petition - availability of alternative remedy - HELD THAT - Even though the remedy of Appeal is available, Petitioner is not required to exercise this alternate remedy in the facts and circumstances of the present case. The present Writ Petition is maintainable as the challenge in the present Writ Petition arises on account of the contravention of the rules of procedural fairness by Respondent. This conduct of Respondent as already held by us has resulted in grave prejudice being caused to Petitioner and amounts to a violation of the principles of natural justice. Thus, the present Writ Petition is squarely maintainable and Petitioner does not have to be relegated to the remedy of Appeal even though available. Petition allowed.

Issues Involved:
1. Validity of show cause notices issued by Respondent No. 3 to Petitioner.
2. Validity of the order dated 30th March, 2022 passed by Respondent No. 3 against Petitioner.
3. Delay in adjudication of the show cause notices.
4. Jurisdiction of Respondent No. 3 to continue proceedings after a long delay.
5. Impact of procedural fairness and principles of natural justice on the adjudication process.
6. Availability and appropriateness of alternate remedies.

Issue-wise Detailed Analysis:

1. Validity of Show Cause Notices:
The show cause notices issued by Respondent No. 3 between 2008 and 2009 alleged that the Petitioner had contravened provisions of the Cenvat Credit Rules, 2004, and demanded Central Excise Duty along with interest and penalty. Petitioner replied to the notices in 2008 and submitted the required information. However, after a lapse of 13 years, Respondent No. 3 fixed a personal hearing in 2021, which led to the impugned order confirming the demand duty. Petitioner argued that the show cause notices had become stale due to the inordinate delay and should be withdrawn.

2. Validity of the Order Dated 30th March, 2022:
Petitioner contended that the impugned order was bad in law as it was based on stale show cause notices. The order confirmed a demand duty of Rs. 1,65,12,218/- along with interest amounting to 200% of the duty amount. Petitioner argued that Respondent No. 3 ignored their contentions and failed to consider the judgments cited, which rendered the order perverse and indicative of a deliberate non-application of mind.

3. Delay in Adjudication of the Show Cause Notices:
Petitioner highlighted that there was a complete silence from Respondents for over a decade and that the proceedings were suddenly revived after 13 years. The delay was not attributable to the Petitioner, and they were not informed that the notices were transferred to the call book. The judgments in Parle International Limited vs. Union of India and Raymond Ltd. vs. Union of India were cited, emphasizing that delayed adjudication defeats the purpose of issuing show cause notices and violates principles of natural justice.

4. Jurisdiction of Respondent No. 3 to Continue Proceedings After a Long Delay:
Petitioner argued that Respondent No. 3 did not have jurisdiction to continue the proceedings due to the long delay. The relevant records were destroyed, and the concerned officers were no longer employed, causing grave prejudice to the Petitioner. The judgments in Parle and Raymond were cited, which held that delayed adjudication without informing the party and without justifiable reasons is bad in law.

5. Impact of Procedural Fairness and Principles of Natural Justice on the Adjudication Process:
The court held that the delay in adjudication impinged on procedural fairness and violated principles of natural justice. The failure to inform the Petitioner about the transfer of notices to the call book and the sudden resurrection of the notices after over a decade caused irretrievable prejudice. The principles laid down in Parle and Raymond were applied, emphasizing that delayed adjudication should not be allowed as it causes serious prejudice to the parties involved.

6. Availability and Appropriateness of Alternate Remedies:
Respondents argued that the Petitioner had an alternate remedy by way of statutory appeal. However, the court found this contention misplaced, as the primary challenge was the adjudication of stale show cause notices, which contravened procedural fairness and natural justice. The court held that the extraordinary jurisdiction under Article 226 was rightly invoked, and the Petitioner did not need to be relegated to the remedy of appeal.

Conclusion:
The court allowed the Petition, quashing the impugned notices and the impugned order. It was held that the adjudication of the show cause notices after an inordinate delay was bad in law, violated principles of natural justice, and caused grave prejudice to the Petitioner. The court emphasized the need for revenue authorities to act diligently and expeditiously and to keep the answering party informed about the status of show cause notices.

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