By TIOL News Service

CHENNAI, APR 06, 2016: THE petitioner Company is a 100% Export Oriented Unit (EOU). A Show Cause Notice was issued to the Petitioner wherein, the respondent demanded the petitioner to show cause as to why a sum of Rs.6,15,58,731/- and Rs.2,26,52,858/- respectively should not be recovered towards component of excise duty allegedly not paid for the clearance of grey and processed fabrics from the 100% EOU during the period 1994 to 1996.

The contention of the Petitioner is that since the show cause notices were issued in respect of the periods 1994 to 1996 and 1993 to 1996 respectively, the said show cause notices were issued beyond the period of five years from the relevant date. Hence, they are liable to be set aside under Section 11A of the Central Excise Act.

Revenue contended that the proceedings have been initiated against the petitioner for the violation of the conditions of Bond dated 03.10.1996. The Bond was valid upto 10.06.2002, whereas the show cause notices were issued on 07.11.2001 and 01.11.2001 respectively.

After hearing both sides, the High Court held:

+ The show cause notices were issued by the Commissioner of Central Excise, Madurai, under the provisions of the Central Excise Act, 1944 and erstwhile Central Excise Rules 1944 and Central Excise (No.2) Rules, 2001 read with Section 38A of the Central Excise Act. Since the show cause notices were issued under the Central Excise Act, recovery of duties can be made subject to the provisions of Section 11 A. Under Section11A(5) of Central Excise Act, the Central Excise Officer, shall, within a period of five years from the relevant date, serve a notice on the person chargeable with the duty requiring him to show cause why he should not pay the amount specified in the notice. Even in both the notices, the respondent had demanded the component of excise duty for the period ending the year 1996, however, the show cause notices were issued in the month of November 2001. When that being the case, the demand made by the respondent under Section 11 A of the Central Excise Act, is clearly barred by limitation. If the contention of the respondent that the respondent is proceeding under the Bond dated 03.10.1996 is accepted, then appropriate proceedings should have been initiated under the Customs Act and not under the Central Excise Act. When the show cause notices were issued under the Central Excise Act, the contention raised by the respondent cannot be accepted.

+ Normally, the Writ Court should not interfere at the stage of issuance of show cause notices by the authorities for the reason that the authorities should provide an ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities about the absence of case for proceeding against the persons against whom the show cause notices have been issued. Where a show cause notice is issued either without jurisdiction or in an abuse of process of law, in that case, the writ Court can interfere even at the stage of issuance of show cause notice. It should be prima-facie established to be so.

Accordingly, the High Court quashed the Show Cause Notice and allowed the Petitions.

(See 2016-TIOL-690-HC-MAD-CX)