By TIOL News Service

PATNA, MAR 19, 2015: A search was conducted by the officers of DGCEI and the discoveries made during the investigation revealed that the petitioner was indulging in evasion of central excise duty by removing finished product i.e. Non-Alloy Steel Ingots without issuing statutory invoice and without payment of central excise duty.

Consequent there to proceedings were initiated in terms of notification 5/2012-CX(NT) dated 12.03.2012 and which culminated in and order dated 09.12.2013 passed by the Member, Central Board of Excise and Customs directing that the facility of monthly payment of excise duty for the petitioner is withdrawn for four months, and the facility of availing the CENVAT credit be denied for the same period.

The said order is challenged in a Writ petition. In that very context, the petitioner has challenged Rule 12 AAA of the CCR, 2004 and Rule 12 CCC of the CER, 2002 as being ultra vires the provisions of the Central Excise Act and the Constitution of India.The contention of the petitioner is that the mentioned rules and the consequential notifications insofar as they enable the hearing of the matter arising out of the show cause notice, by one authority and passing of the order by another, cannot be sustained in law. It is also urged that the order impugned in the writ petition is violative of principles of natural justice since the relevant documents were not furnished, and adequate opportunity was not given.

After hearing both sides, the High Court proceeded to examine as to whether rules that are challenged in the writ petition suffer from any legal infirmity.

It was also noted that no serious arguments as such were advanced, regarding challenge to the rules.

The High Court explained the scheme of payment of central excise duty on monthly basis and the concept of CENVAT credit, in minimalistic terms, and after extracting the rules 12CCC of CER, 2002 and 12AAA of CCR, 2004 and summarizing the contents therein observed -

++ The petitioner is unable to convince this Court that the rules, referred to above, are contrary to any specific provisions of Central Excise Act or for that matter the Constitution of India. Except taking a vague, general and espacious plea, no specific grounds are urged nor any precedent cited. We, therefore, do not find any merit in the contention of the petitioner, in this behalf.

In the matter of the submission that the very concept of administrative determination is deviated from, in this case, and it leads to a situation where the authority, which heard the arguments, does not take decision and vice versa , the High Court after adverting to the apex court decisions cited by the petitioner observed -

++ We came across several hurdles in the instant case in the context of applying the principle enunciated by the Supreme Court. Firstly, the petitioner did not participate in the proceedings at all, except that it addressed two communications, taking exception to the very initiation of the proceedings, pleading one ground or the other. It did not participate in the hearing that was arranged on 23.07.2012. Therefore, it becomes seriously doubtful as to whether it is open for the petitioner to raise that contention at all.

++ Even otherwise, the proposition advanced by the petitioner can be tested on the touchstone of known principles of law. Two aspects need to be kept in mind. The first is whether the authority issues a show cause notice, hears the submissions, objections or arguments of the parties, and thereafter it submits the gist of the arguments to a higher authority, where the actual decision is taken. The second is an instance where the authority, who issues the show cause notice, and hears the concerned party, forms an opinion by itself and passes an order, but in compliance of the requirement in law, it submits the order passed by it, to a higher authority for verification as to the propriety or legality. While the judgment of the Supreme Court in the case of Gullapalli Nageshwara Rao covers the first category of cases, the case on hand falls into the second category .

The High Court extracted the communications made by the petitioner wherein it was insisted that the respondents should not proceed further; the hearing fixed be avoided by withdrawing the Show cause notice dated 14.05.2013.

The High Court thereafter remarked -

++ One does not expect such type of correspondence or response from a manufacturer, who is facing penal proceedings under the Act and Rules.

++ The respondent has precisely mentioned the documents which they intend to rely upon. It is not the complaint of the petitioner that any documents, over and above what was mentioned in the show cause notice, are relied upon. In fact that eventuality would arise only when an order is passed taking into account the documents which are not mentioned in the show cause notice. The tone and tenor of the correspondences undertaken by the petitioner discloses its intention not to participate in the proceedings, at any cost. One cannot just stretch the purport of principles of natural justice, to the extent pleaded by the petitioner.

Holding that there is no merit in the Writ Petition, the same was dismissed.

In passing: Incidentally, here are some interesting snippets about the earlier rules 12AA & 12CC which were substituted on 12.03.2012 by new rules 12AAA of CCR, 2004 & 12CCC of CER, 2002.

++ In the case of Dhariyal Chemicals vs. Union of India - 2008-TIOL-710-HC-Ahm-CX, the Gujarat High Court dismissed the challenge to the vires of Rule 12CC of the CER, 2002 and the notification issued thereunder.

++ In Hiren Aluminium Ltd. vs. Union of India - 2009-TIOL-83-HC-Mum-CX, such an order issued by the CBEC Member was held to be arbitrary and hence stayed and in the case of Vinay Wires & Poly Products Pvt. Ltd. - 2010-TIOL-102-HC-DEL-CX , the order was set aside as no effective opportunity of hearing was given.

++ In Saviton Metplast (P) Ltd - 2010-TIOL-882-HC-P&H-CX though the provisions were not struck down, the order of withdrawing the facility of monthly payment was quashed.

++ In Aryan Ispat and Power Pvt Ltd v UOI - 2011-TIOL-499-HC-ORISSA-CX , the High Court held that Rule 12CC of the CER and Rule 12AA of the CCR and Notification No. 32/2006-CENT dated 30.12.2006, were not valid prior to 8.5.2010, when Section 37 was amended.The Supreme Court admitted the Revenue appeal in January 2012.

Fore more see DDT 1814

(See 2015-TIOL-674-HC-PATNA-CX)