Research › Search › Judgment

Rajasthan High Court · body

2007 DIGILAW 1916 (RAJ)

Banswara Syntex Ltd. v. Union of India

2007-10-04

DEO NARAYAN THANVI, P.B.MAJMUDAR

body2007
P.B. Majmudar, J.—In all these three petitions since the circular which is under challenge is common, these petitions are taken up together and with the consent of learned counsel for the parties, the same are decided by this common order. 2. In each of these cases, the petitioner is challenging the show cause notice issued by the Department by which the petitioner Company was required to show cause as to why the duty of excise, interest and penalty should not be imposed upon the petitioner under Rule 25 of the Central Excise Rules, 2002. 3. As per the said show cause notice issued to one of the petitioners RSWM in D.B. Civil Writ Petition No. 1242/2007, the petitioner Company is engaged in manufacture of cotton yarn and Man Made Yarn of Synthetics and artificial staple fibers classifiable under Chapters 52, 54 and 55 of the First Schedule to the Central Excise Tariff Act, 1985, and appear to have not paid duty of excise amounting to Rs. 2709213/- (CENVAT Rs. 2656091/- + Education Cess Rs. 53122/-) on their finished goods, by wrongly availing the benefit of Notification No. 30/2004 CE dt. 09.07.2004, during the period from 01.11.2005 to 31.03.2006. Details of the same is annexed alongwith the show cause notice at Annex. “A”. It is alleged that the petitioner Company wrongly availed the benefit of CENVAT and, therefore, liable for reversal of such credit. The petitioner without even replying to the said show cause notice, straightway approached this Court by filing the present writ petitions. This Court while admitting the appeal passed the following order: “Learned counsel for the petitioner points out that after issuance of show cause notice, the Central Board of Excise and Custom has issued a circular on 01.02.2007 issuing directions which results in sealing the defence taken by the petitioner before the adjudicating authority because of the binding nature of the circular of the adjudicating authority. He, therefore, contends that for challenging the validity of notification dt. 01.02.2007 which effectively closes the defence and its adjudication by the adjudicating authority leaves him no option but to invoke extraordinary jurisdiction of this Court as the proceedings through the regular course have been infructuated by the aforesaid circular.” 4. The petitions are opposed by the Department on various grounds. It has been pointed out by learned counsel for the respondents Mr. V.K. Mathur as well as by Mr. The petitions are opposed by the Department on various grounds. It has been pointed out by learned counsel for the respondents Mr. V.K. Mathur as well as by Mr. Rajesh Joshi that the petitioners have filed these writ petitions at show cause notice stage while the authority is yet to adjudicate the matter finally after considering the reply. It is vehemently contended by learned counsel for the respondents that the circular dt. 01.02.2007 is clarificatory in nature and the same is not issued to dilute the law laid down by the Supreme Court as alleged by the petitioners as the show cause notice has been issued prior in time and it is issued mainly on the ground that the petitioners have wrongly taken the benefit of credit by taking shelter of the notification dt. 01.02.2007. It is also submitted that in this view of the matter, this writ petitions deserve to be dismissed and this Court should not exercise its extraordinary jurisdiction while entertaining this petition at show cause notice stage. Learned counsel for the respondent Department further submitted that it is a case where the petitioners have wrongly availed the credit, and therefore, after adjudicating the matter, it is for the authority to consider whether any order for reversal of credit and consequential benefit of penalty etc. is required to be passed. It is submitted that no case is made out for quashing the show cause notice and that powers of this Court are very limited as regards interference at the show cause notice stage is concerned. 5. Mr. Johari on the other hand submitted that the adjudicating authority will be bound by the subsequent circular, and therefore, there is no sense in going back to the authority by giving reply. It is further submitted that the petitioner company has not wrongly availed the credit, and therefore, the same is not required to be reversed. It is further submitted that the circular in question is under challenge, therefore, this Court can interfere even at the show cause notice stage. 6. We have heard the learned counsel for the parties. We have also gone through the papers. 7. It is not in dispute that the petition is filed at the show cause notice stage. It is further submitted that the circular in question is under challenge, therefore, this Court can interfere even at the show cause notice stage. 6. We have heard the learned counsel for the parties. We have also gone through the papers. 7. It is not in dispute that the petition is filed at the show cause notice stage. This Court normally would not like to interfere at such a stage unless it is found that the authority which issued the notice has no jurisdiction to issue such notice. In this connection, reference is required to be made to the decision of Hon’ble Supreme Court in the case of Trade Tax Officer, Saharapur vs. Royal Trading Co. reported in (2005)11 SCC 518 wherein it is observed by the Hon’ble Supreme Court as under: “1. These appeals are against the judgment of the Allahabad High Court dt. 21.01.2000. The respondent Company were clearing their gods (sic goods) on the basis that they were leather sheets within the meaning of Section 14 of the Central Sales Tax Act. A show-cause notice was issued to them claiming that the items cleared by them were not leather sheets and that a higher duty was required to be paid. The respondents filed a writ petition challenging the issuance of the show-cause notice. The High Court ignoring the well-settled law that against a mere issuance of a show-cause notice a Court should be reluctant to interfere, purported to go into the facts and quashed the show-cause notice in a mechanical way. In our view, the approach of the High Court was entirely wrong. All that had been done was that a show cause was issued. After the respondents filed their reply, the notice may have been dropped or if the reply was not satisfactory based on the reply further inquiries could have been made by the appellants. Adjudication proceedings must not be stalled in the manner done by the High Court.” 8. In our view, this is not a case in which this Court would like to interfere with the proceedings at the show cause notice stage. The authority is bound to adjudicate the proceedings in accordance with law and Mr. Mathur, counsel for Union of India has also submitted that the authority will take decision strictly in accordance with law without being influenced by administrative instructions, if any. The authority is bound to adjudicate the proceedings in accordance with law and Mr. Mathur, counsel for Union of India has also submitted that the authority will take decision strictly in accordance with law without being influenced by administrative instructions, if any. In our view, therefore, this Court would not like to intercept the proceedings at show cause notice stage. 9. Even the show cause notice was issued prior to circular dt. 01.02.2007 and the authority accordingly is directed to take appropriate decision strictly in accordance with law and as per the evidence available on record. In our view, by approaching at show cause notice stage, the petitioner has tried to stall the proceedings since a considerable period. 10. Learned counsel Mr. Joshi however submitted that the credit has wrongly been availed by the petitioners and in support of his contention he has placed reliance on M/s. Amrit Paper vs. Commissioner of Central Excise, Ludhiana; 2006 AIR SCW 3894 wherein the Apex Court has held that the manufacturer availing credit as provided by exemption notification, at the time of clearance of goods and thereafter, he suo motu reversed it and paid the duty to avail exemption after several months when he claimed refund of Modvat credit, he would not be entitled to exemption. However, in our view, this aspect is also required to be considered by the adjudicating authority while taking final decision. Suffice it to say that this is not a case in which this Court would like to exercise its extraordinary jurisdiction by quashing the show cause notice itself. 11. Mr. Johari has relied on the decision of the Supreme Court in Commissioner of Central Excise, Mumbai-I vs. M/s Bombay Dyeing & Mfg. Co. Ltd., Appeal (Civil) No. 1767/2007 decided on 08.08.2007 wherein the Supreme Court has set aside the decision of the Department by holding that the reversal of the credit is impermissible. In the said judgment, the Supreme Court in Para 8 held as under: “There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product namely grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product namely grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-CE, the requirement was that exemption on grey fabrics was admissible subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item No. 1 of the table to notification No. 14/2002-CE would apply and accordingly the grey fabrics would attract nil rate of duty.” 12. It is, however, required to be noted that the aforesaid decision is in connection with a particular circular and so far as the facts of the present case are concerned, from a reading of the show cause notice itself, it cannot be concluded that the show cause notice has been issued without any basis or without any reason. It is for the authority to consider whether in the facts and circumstances of the case, the aforesaid ratio is applicable. 13. In view of the aforesaid discussion, the writ petitions have no substance and the same are dismissed with costs which is quantified at Rs. 25,000/- each and each of the petitioner shall deposit the same before the adjudicating authority within a period of two weeks from today. * * * * *