JCB India Ltd. vs Union of India

Rajive Bhalla, J.—The petitioner prays for issuance of a writ in the nature of certiorari quashing the proviso to Section 35(1) of the Central

Excise Act, 1944 (hereinafter referred to as the ""Act""), show cause notice No. CE-20/demand/4/JCB/R-VII/04/4730, dated 3-3-2005 issued to

the petitioner for recovery of Rs. 34,03,468/-; order dated 25-1-2006, whereby demand of duty and penalty have been imposed and order dated

8-12-2008, whereby the petitioner''s appeal has been dismissed. Counsel for the petitioner submits that the petitioner was served 13 show cause

notices relating to demand of duty on FOC Kits for various periods. The assessment orders pertaining to periods 1-4-2002 to 31-3-2003 and 1-

4-2003 to 31-1-2004 were remanded by the CESTAT, on 28-10-2009 2010 (251) ELT 433 , to the Adjudicating Authority, for adjudication,

afresh. After remand, the Additional Commissioner has dropped proceedings not only with respect to these show cause notices, but also with

respect to show cause notices for the periods 1-4-2002 to 31-3-2003, 1-4-2003 to 31-1-2004, 1-2-2008 to 31-12-2008, 1-1-2009 to 31-12-

2009 and 1-1-2010 to 30-11-2010 by holding that the petitioner is not liable to pay duty on FOC kits. Appeals with respect to notices for the

period 1-7-2004 to 31-12-2004, 1-1-2005 to 31-3-2005, 1-4-2005 to 30-6-2005, 1-7-2005 to 28-2-2006, 1-3-2006 to 31-8-2006, 1-9-

2006 to 28-2-2007, 1-3-2007 to 31-1-2008 are pending before CESTAT.

The appeal, in the present case, pertaining to show cause notice and assessment order for the period 1-2-2004 to 30-6-2004, was dismissed

by the Appellate Authority as barred by limitation. The appeal filed before the CESTAT was dismissed as withdrawn. The delay in filing the appeal

was occasioned as the assessment order was never served upon the petitioner and was only made available on 9-7-2007. The appeal was filed

within limitation from date of receipt of a copy of the order and, therefore, could not be dismissed as barred by time. It is further submitted that as

the respondents have themselves dropped similar show cause notices, delay in filing the appeal, before the Appellate Authority, may be condoned

and the matter may be remitted for adjudication afresh. Counsel for the petitioner further submits that in view of peculiar facts and circumstances of

this case, particularly as similar show cause notices have been dropped by the Adjudicating Authority and this fact is not denied or contested by

the respondents, the interest of justice requires that power be exercised under Article 226 of the Constitution of India to grant relief to the

petitioner. Counsel for the petitioner relies upon the judgments in Raja Jagdambika Pratap Narain Singh Vs. Central Board of Direct Taxes and

Others, ; J.K. Industries Ltd. v. Union of India - 2008 (223) E.L.T. 372 (Rajasthan) and Texcellence Overseas Vs. Union of India, ).

Counsel for the respondents submits that the writ petition is misconceived and deserves to be dismissed as the petitioner has concealed material

facts. The constitutional validity of Section 35(1) of the Act has been affirmed by the Hon''ble Supreme Court in D.R. Industries Ltd. and Another

Vs. Union of India (UOI) and Others, and various High Courts by holding that there is no power with the Appellate Authority to condone delay

beyond the period prescribed by the Act. The Hon''ble Supreme Court has held in M/s. Shanti Alloys (2010 (255) E.L.T. A48 (S.C.)) that the

period of limitation, prescribed by the Act, cannot be varied. It is further submitted that the Order-in-Original, was delivered to the petitioner

through speed post on 27-1-2006, by speed post booking slip No. 792069757, duly received by the petitioner, on 28-1-2006. The petitioner has

made false averments, in the petition, as well as in letters that a copy of the order was not received till a photostat copy was supplied on 9-7-2007.

As the petitioner had not shown sufficient cause for delay of one year and seven months in filing the appeal, the appeal was rightly dismissed. The

writ petition should be dismissed as power under Article 226/227 of the Constitution of India cannot be exercised to override the period of

limitation prescribed by the Act. Counsel for the respondents places reliance on the following judgments:- Singh Enterprises Vs. Commissioner of

Central Excise, Jamshedpur and Others, ; Commissioner of Customs and Central Excise Vs. Hongo India (P) Ltd. and Another, ; D.R. Industries

Ltd. and Another Vs. Union of India (UOI) and Others, ; Delta Impex Vs. Commissioner of Customs, ; M.R. Tobacco Pvt. Limited Vs. Union of

India (UOI) and Others, ; Aradhana Industries Pvt. Ltd. v. Union of India, 2005 (191) E.L.T. 119 (Gujarat); Hardeep Synthetic Mills Pvt. Ltd.

Vs. Union of India (UOI), and M/s. Raj Chemicals Vs. Union of India and Others, . It is further submitted that dropping of similar show cause

notices is involved in the above cases.

We have heard counsel for the parties, perused the pleadings, the impugned orders, show cause notices, appended with the petition and all

relevant facts necessary for adjudication of this case. It would be necessary to point out that counsel for the petitioner has not addressed arguments

on the vires of Section 35(1) of the Act.

Before considering the arguments, it would be appropriate to narrate relevant facts. A show cause notice dated 24-4-2003, for the period 1-4-

2002 to 31-3-2003 was served, calling upon the petitioner to pay duty on FOC Kits, on which Cenvat credit has been availed, followed by

another show cause notice dated 23-4-2004 for the period 1-4-2003 to 31-1-2004. The petitioner filed replies but, vide a common order, dated

15-10-2004, the matter was decided against the petitioner. The petitioner filed two separate appeals before the Commissioner (Appeals), which

were dismissed. The appeals filed before the CESTAT were allowed on 28-10-2009 by remanding the matter on the issue whether the value of

FOC Kits is included in the price of goods sold by the petitioner. A relevant extract from the order reads as follows:-

We have carefully considered the submissions from both sides. Merely because the spare parts/extra spare parts in the name of kits have been

supplied along with excavator loaders, they do not become part and parcel of the excavator loaders. The Department''s contention that the said

spares have not been used in the manufacture of final products deserves to be accepted. At the same time, the submission of the learned Advocate

that after charging duty on the composite price at rate applicable to the excavator loader, demanding separately duty on the value of the spares is

double taxation is valid. In whatever manner the invoices are prepared, the fact remains that from 1-3-2002, the appellants have supplied spares

along with excavator and the overall price remained the same. To say that spares are supplied free of cost is a misnomer, as the spares are not

available for free distribution for any person who does not buy the Hydraulic excavator. From the date when the spare parts are supplied, there is

a reduction in the price of the excavator loaders. Therefore we are of the considered opinion that the excavator loader along with standard fitments

and accessories would be assessed separately and the duty liability or the Cenvat credit on the kits should be determined separately. In other

words, the total value requires to be apportioned between the value of excavator and value of spare parts/extra spare parts. This exercise has not

been done by the original authority. To enable the same, we set aside the orders of the lower authorities and remand the matter to the original

authority to consider the matter afresh and to determine the value of excavator and to determine the duty liability/Cenvat credit to be reversed on

the excavator inputs and spares/extra spares supplied as per Rules 3 & 4 of the Cenvat Credit Rules. The original authority will consider me matter

afresh after granting reasonable opportunity of hearing to the appellant.

In the facts and circumstances of the case, we do not find that this is a case involving any intention to evade excise duty. Therefore, no penalty is

warranted and accordingly, the same is set aside.

The appeal is allowed by way of remand on the above terms.

After remand, show cause notices for the periods 1-4-2002 to 31-3-2003 and 1-4-2003 to 31-1-2004 were dropped on merits vide common

order dated 25-1-2011. A relevant extract from the order reads as follows:-

In view of the legal position set out in various judicial pronouncements cited supra, I find that where the Central Excise duty paid is more than the

Cenvat credit availed; no further duty liability arises on part of the assessees. In the instant case also. I find that the notice availed Cenvat credit on

the inputs. The show cause notices were issued proposing recovery of the Central excise duty/Cenvat credit attributed to such inputs which were

cleared by the notice as Free of Cost kits. Hon''ble CESTAT, while remanding the matter back for de novo adjudication set out the guidelines to

apportion the composite value charged in the sale invoices into two parts viz. Value of Excavator loader and value FOC kit. It was further directed

to determine the duty liability of the notice, if any, after apportioning the composite value. As discussed supra and in view of the legal

pronouncements cited above and also the report submitted by the jurisdictional Deputy Commissioner of Central Excise, Division-II, Faridabad. I

find that upon apportioning the composite value between the Excavator Loader and FOC Kit, appropriate duty of Central Excise has been found

to be paid on the FOC kits and the matter becomes revenue neutral and no further duty/Cenvat credit liability arises on part of the notice.

In view of the above discussions and findings, I pass the following order.

I drop the proceedings against M/s. JCB India Limited, 23/7, Mathura Road, Ballabgarh initiated under the five show cause notices, referred at

para 1 above.

A perusal of the order reveals that the Adjudicating Authority has held that no duty is payable or penalty imposable on FOC Kits as upon

apportioning the composite value between the excavator loader and FOC Kits appropriate duty of Central Excise has been paid on the FOC Kits,

the matter becomes revenue neutral and no further duty, Cenvat credit liability arises on the part of the notice (petitioner).

Admittedly, notices for the period 1-2-2008 to 31-12-2008, 1-1-2009 to 31-12-2009, 1-1-2010 to 30-11-2010 have also been dropped by

holding that duty is not payable on FOC Kits sold along with JCBs machines. However, proceedings arising from similar show cause notices

pertaining to periods ranging from 1-7-2004 to 31-12-2004, 1-1-2005 to 31-3-2005, 1-4-2005 to 30-6-2005, 1-7-2005 to 28-2-2006, 1-3-

2006 to 31-8-2006, 1-9-2006 to 28-2-2007 and 1-3-2007 to 31-1-2008 are pending in appeals before the CESTAT.

The dispute, in the present case, relates to the same demand of duty on FOC kits sold along with JCBs machines but with respect to show

cause notice dated 3-3-2005, relating to the period 1-2-2004 to 30-6-2004. The petitioner filed a reply to the show cause notice. The Assessing

Authority, vide order dated 25-1-2006, confirmed a demand of Rs. 34,03,468/- and imposed a penalty of Rs. 44,03,468/-. The petitioner

received a letter u/s 11AB of the Act, dated 21-9-2006, demanding duty and penalty along with interest, by reference to order dated 25-1-2006.

The petitioner replied that it has no knowledge of the assessment order. The petitioner addressed a letter dated 9-10-2006 praying for supply of a

copy of the order. The Superintendent, replied vide letter dated 5-2-2007 that as per postal records, the order was delivered to the petitioner on

28-1-2006. The petitioner addressed another letter dated 1-3-2007, to the Superintendent, with a copy to Assistant Commissioner and Deputy

Commissioner, making reference to the letters and prayed for supply of a certified copy. The Superintendent, addressed two letters dated 8-5-

2007 and 15-5-2007 to the petitioner stating that the order has already been delivered and in proof thereof, attached a photostat copy of a

receipt, issued by postal authorities. The petitioner, thereafter, wrote a letter dated 15-5-2007, praying for supply of a certified copy of order

dated 25-1-2006. The Superintendent wrote a letter dated 20-6-2007 asking the petitioner to make payment. The petitioner addressed another

letter dated 25-6-2007 giving reference to the earlier correspondence and again made a request for supply of a copy of the order. The

Superintendent addressed letter dated 9-7-2007, furnishing details of the record of postal authorities and supplied a photocopy of the adjudicating

order, attested by him.

Upon receipt of a copy of the order, the petitioner filed an appeal on 24-8-2007, before the Commissioner (Appeals). The appeal was

dismissed as barred by limitation of one year and seven months on the ground that the appellate authority has no jurisdiction to condone delay

beyond thirty days. The petitioner filed an appeal before the CESTAT which was dismissed as withdrawn to avail remedy.

A perusal of Section 35 of the Act and the proviso appended thereto, leaves no ambiguity as to legislative intent that an appellate authority

cannot condone delay beyond a period of 30 days. The Appellate Authority, therefore, rightly dismissed the appeal as delay whether on the

ground that a similar show cause notice has been dropped or on the ground that appeals arising from similar show cause notices are pending,

cannot be condoned.

The question, however, that calls for an answer is whether in view of order passed by the Adjudicating Authority, dropping similar show cause

notices, the demand notice, the assessment order and the show cause notice relating to the period 1-2-2004 to 30-6-2004 can be quashed in

exercise of power under Article 226 of the Constitution.

Article 226 of the Constitution, confers power to issue writs and orders as may be necessary subject, however, to any prohibition enacted by

Article 226 of the Constitution or judicial precedents. A Court, may, in the exercise of this power, issue a writ or order, even where the order is

appealable or the appeal has been dismissed as barred by time, provided the impugned order or proceedings have perpetuated injustice or would

lead to a miscarriage of justice. We draw support for our conclusion from a judgment of the Gujarat High Court in D.R. Industries Limited v.

Union of India case (supra), where after rejecting the prayer for condonation of delay beyond the period of limitation prescribed under the Act, it

was held as follows:-

As regards the contention that there may be extra-ordinary cases where assessees may not be in a position to challenge the order of the

adjudicating authority before the Commissioner (Appeals) within a period of 90 days from the date of communication of the order, we are of the

view that in such extra-ordinary cases where an assessee can show extra-ordinary circumstances explaining the delay and also gross injustice done

by the adjudicating authority, the assessee may invoke the writ jurisdiction of this Court. Hence, in cases where the assessees have suffered gross

injustice and they could not file appeals before the Commissioner (Appeals) within a period of 90 days from the date of communication of the

Order-in-Original on account of circumstances beyond their control, such assessee can invoke the powers of this Court under Article 226 of the

Constitution but, of course, not as a matter of right.

A similar view was taken in Senior Superintendent of Post Office Vs. Union of India, .

We are conscious of the prohibition enacted by Section 35F of the Act against condoning delay beyond 30 days, but proceed to consider

whether the dropping of similar show cause notices, served upon the petitioner, is sufficient to issue a writ in favour of the petitioner.

The respondents do not deny that a total of 13 show cause notices, including notice impugned in this writ petition, were served upon the

petitioner, raising demands for duty and penalty u/s 11AB of the Act with respect to FOC Kits supplied along with an excavator, The notices

relate to the following periods:-

1-4-2002 to 31-3-2003

1-4-2003 to 31-1-2004

1-2-2004 to 30-6-2004 (present case)

1-7-2004 to 31-12-2004

1-1-2005 to 31-3-2005

1-4-2005 to 30-6-2005

1-7-2005 to 28-2-2006

1-3-2006 to 31-8-2006

1-9-2006 to 28-2-2007

1-3-2007 to 31-1-2008

1-2-2008 to 31-12-2008

1-1-2009 to 31-12-2009

1-1-2010 to 30-11-2010

Notices for the period 1-4-2002 to 31-3-2003, 1-4-2003 to 31-1-2004, 1-2-2008 to 31-12-2008, 1-1-2009 to 31-12-2009 and 1-1-

2010 to 30-11-2010, have been dropped whereas appeals with respect to show cause notices for the period 1-7-2004 to 31-12-2004, 1-1-

2005 to 31-3-2005, 1-4-2005 to 30-6-2005, 1-7-2005 to 28-2-2006, 1-3-2006 to 31-8-2006, 1-9-2006 to 28-2-2007, 1-3-2007 to 31-1-

2008 are pending before the CESTAT. Counsel for the respondents is unable to deny that show cause notices referred to above, relate to the

same controversy, i.e., FOC Kits, and have been dropped by the adjudicating authority pursuant to a fresh adjudication ordered by the CESTAT.

It is not denied that no further appeal has been filed against the order of CESTAT or the order passed by the adjudicating authority, dropping the

notices.

The dropping of similar show cause notices relating to similar demands for duty has led to an anomalous situation. The petitioner would be

liable to pay duty and penalty with respect to the impugned notice but with respect to similar show cause notices, would not be liable to pay duty

and penalty. The dropping of similar show cause notices, by the Adjudicating Authority, in our considered opinion, is sufficient to grant relief to the

petitioner and direct adjudication of the show cause notice, afresh.

In view of what has been recorded hereinabove, the writ petition is allowed; the impugned assessment order dated 25-1-2006 (Annexure P-

4), order dated 8-12-2008 (Annexure P-11) passed by the Commissioner of Central Excise (Appeals), are set aside and the matter is remitted to

the Adjudicating Authority to decide show cause notice dated 3-3-2005 (Annexure P-3), afresh and in accordance with law. The respondents

would be at liberty to point out any distinguishing feature between the case in hand and the cases already decided by the Adjudicating Authority.

Parties are directed to appear before the Adjudicating Authority on 12-11-2013.