2025 (3) TMI 1184 - HC - Central Excise

Challenge to SCN issued by the respondent u/s 11-A of the Central Excise Act - issuance of a personal hearing notice after a significant delay - HELD THAT - In the instant case though replies were sent to the impugned show cause notice dated 11.12.2007 as early as in the year 2007 itself the said replies have not been considered by the respondent in accordance with the procedure contemplated under Section 11-A(10)(11) of the Act. The respondent has failed to determine the amount of duty due from the petitioner after affording an opportunity of hearing to the petitioner and after giving due consideration to the replies sent by the petitioner to the show cause notice. Section 11-A(11) of the Act also makes it clear that the respondent shall determine the amount of duty of excise payable by the petitioner within six months from the date of notice in respect of cases falling under sub-section(1); and within two years in respect of cases falling under sub-section (4). In the case on hand the respondent has not adhered to Section 11-A(11) of the Act and till date they have failed to determine the amount of duty of excise payable by the petitioner pursuant to issuance of the impugned show cause notice dated 11.12.2007. After a lapse of more than 16 years the respondent has sent a notice of personal hearing dated 28.07.2023 to the petitioner pertaining to the impugned show cause notice dated 11.12.2007 which is not legally permissible in law. Any proceeding initiated by the respondent without authority under law has to be set aside by this Court - In the instant case personal hearing notice dated 28.07.2023 has been issued by the respondent without authority under law that too after a lapse of 16 years. Even though the learned counsel for the respondent would submit that due to an audit objection there was a delay in proceeding further after the issuance of show cause notice the said submission has to be rejected by this Court as for no fault on the petitioner they cannot be penalised without authority under law. Conclusion - The impugned personal hearing notice dated 28.07.2023 is issued in violation of the statutory provisions and without authority under law. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the respondent complied with the statutory time limits prescribed under Section 11-A(11) of the Central Excise Act for determining the amount of duty of excise payable by the petitioner following the issuance of a show cause notice.
Whether the respondent's issuance of a personal hearing notice after a significant delay is legally permissible.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compliance with Statutory Time Limits under Section 11-A(11)

Relevant Legal Framework and Precedents: Section 11-A of the Central Excise Act governs the recovery of duties not levied, not paid, short-levied, short-paid, or erroneously refunded. Sub-section 11 mandates that the determination of the amount of duty must occur within six months from the date of notice for cases under sub-section (1), and within two years for cases under sub-section (4).
Court's Interpretation and Reasoning: The Court interpreted Section 11-A(11) as imposing a clear statutory obligation on the respondent to determine the duty within the specified time frames. The Court noted that the respondent failed to adhere to these time limits, as the determination of duty was not made within the six-month period following the issuance of the show cause notice dated 11.12.2007.
Key Evidence and Findings: The evidence showed that the petitioner sent timely replies to the show cause notice, but the respondent did not proceed to determine the duty payable within the statutory period. The respondent's failure to act within the prescribed time frame was central to the Court's findings.
Application of Law to Facts: The Court applied Section 11-A(11) to the facts, finding that the respondent's inaction over 16 years constituted a violation of the statutory provisions. The respondent's argument that there is no time limit for passing the final order was rejected, as the statutory framework requires timely determination of duty.
Treatment of Competing Arguments: The respondent argued that the delay was due to an audit objection and that there was no time limit for passing the final order. The Court rejected these arguments, emphasizing the statutory requirement for timely determination and the lack of legal authority for such prolonged delay.
Conclusions: The Court concluded that the respondent's failure to determine the duty within the statutory period rendered the proceedings invalid. The show cause notice and subsequent personal hearing notice were issued without authority under law.

Issue 2: Legality of the Personal Hearing Notice Issued After Delay

Relevant Legal Framework and Precedents: The issuance of a personal hearing notice must be in compliance with procedural requirements and statutory time limits established under the Central Excise Act.
Court's Interpretation and Reasoning: The Court held that the personal hearing notice issued after a 16-year delay was not legally permissible. The statutory framework requires expeditious proceedings, and the respondent's delay violated these principles.
Key Evidence and Findings: The issuance of the personal hearing notice on 28.07.2023 was found to be procedurally flawed due to the excessive delay and lack of adherence to statutory provisions.
Application of Law to Facts: The Court applied the legal standards for timely proceedings and found the respondent's actions to be without legal authority, given the significant lapse of time.
Treatment of Competing Arguments: The respondent's justification for the delay due to an audit objection was dismissed by the Court, which emphasized that procedural compliance cannot be indefinitely postponed.
Conclusions: The Court concluded that the personal hearing notice was issued in violation of statutory provisions and lacked legal authority, leading to its quashing.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "Any proceeding initiated by the respondent without authority under law has to be set aside by this Court."
Core Principles Established: The judgment reinforces the principle that statutory time limits for determining duties under the Central Excise Act must be strictly adhered to, and any significant delay renders the proceedings invalid.
Final Determinations on Each Issue: The Court quashed both the impugned show cause notice dated 11.12.2007 and the personal hearing notice dated 28.07.2023, allowing the writ petition and closing the related miscellaneous petition.