2023 (1) TMI 639 - AT - Central Excise

Violation of principles of natural justice - Inordinate Delay in adjudicating the Show Cause notices - Compounded levy scheme - determination of annual capacity of the furnace, installed in the factory of appellant, as 9600 MT - it is alleged that the appellant during the period of dispute has paid excise duty on the actual production, which is less than the amount of INR 5 lakh - violation of legislative mandate provided under Section 11A(11) of the Excise Act or not. HELD THAT - The impugned order is in gross violation of the mandate of limitation prescribed in Section 11A(11) of the Central Excise Act. Section 11 A(11), which was introduced vide Finance Act, 2011, provides that where a show cause notice is issued under sub-section (4) or sub-section (5) of Section 11 A, provides for determination of the amount of duty, etc. within one year from the date of the show cause notice. The impugned orders have been passed in violation of the provisions of Central Excise Act. As such, the appeals are allowed and the impugned orders are set aside.

Summary

Issues:
1. Delay in adjudicating the show cause notices
2. Violation of principles of natural justice and procedural fairness
3. Legislative mandate provided under Section 11A(11) of the Excise Act

Analysis:
1. Delay in Adjudicating the Show Cause Notices:
The appellant, engaged in manufacturing M. S. Ingots, opted to pay excise duty under a compounded levy scheme. The Commissioner determined the annual capacity of the furnace and fixed the excise duty liability. However, the Department issued show cause notices alleging underpayment of excise duty, demanding differentials along with interest and penalty. The appellant disputed the demands in their reply, but no further action was taken for twenty years. The delayed adjudication was deemed violative of natural justice principles.

2. Violation of Principles of Natural Justice and Procedural Fairness:
The appellant argued that the delayed adjudication, after more than two decades, was unjustified and against procedural fairness. Citing precedents like Parle International Ltd. and Maxcare Laboratories Ltd., the appellant contended that such delays result in denial of natural justice. The appellant sought to set aside the demands based on these grounds.

3. Legislative Mandate under Section 11A(11) of the Excise Act:
The show cause notices were issued under Section 11A of the Excise Act, which mandates time limits for adjudication. The provision introduced in 2011 sets a time limit for officers to adjudicate such notices. The appellant argued that the 20-year delay in adjudication violated this legislative mandate. Precedents like Siddhi Vinayak Syntex Pvt. Ltd. and GPI Textiles Limited were cited to support the argument that such delays render the adjudication bad in law.

In the final judgment, the Tribunal found the impugned orders to be in violation of the limitation prescribed in Section 11A(11) of the Central Excise Act. The orders were deemed to have been passed contrary to the provisions of the Act, leading to the allowance of the appeals and setting aside of the impugned orders. The appellant was granted consequential benefits in accordance with the law, highlighting the importance of adherence to statutory timelines in adjudication processes.