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Judgment
Hon'ble Shri Justice Narendra Kumar Vyas
Since common question of law and facts are involved in both the writ petitions, they are heard analogously and are being disposed of by this common order. For better understanding WPT No. 89/2018 is treated as lead case.
This petition has been filed by the petitioner under Article 226 of the Constitution of India assailing the show cause notice F. No. IV(06)Enq/CEx/JSPL-CENVAT/15/2016/P/Bill/2227 dated 16.02.2018 (Annexure P/1) issued by respondent No. 2/ Principal Commissioner, Central Tax and Central Excise, Raipur whereby show cause notice for recovery of excise duty under Section 11A, interest under Section 11AA, penalty under Section 11AC(1)(a) and penalty under Rule 25 of the Central Excise Rules, 2002, in connection with the alleged liability to pay central excise duty on goods manufactured and cleared by the petitioner on job-work basis, has been issued. The show cause notice further directs the petitioner to submit reply within 30 days of receipt of the notice. The notice further provides opportunity to the petitioner to file reply/ explanation for alleged violation as detailed in the show cause notice and submit all the evidence which they intend to rely in support of their defence.
The brief facts as reflected from records are that the petitioner is engaged in manufacturing of various steel products, including steel wire rods, rebar/TMT, bent rebar, round bars and angles and registered with the Central Excise Department, Ranchi. The petitioner company namely JSPL (for short “the JSPL, Raigarh”) which is separately registered with the jurisdictional Central Excise Commissionerate, Raipur. On 05.02.2016, JSPL Raigarh submitted an application before the jurisdictional Assistant Commissioner of Central Excise, Raipur seeking permission to remove inputs from its factory premises at Raigarh to the petitioner’s unit at Patratu, Jharkhand to clear certain inputs for manufacturing of iron and steel products on job-work basis stating that the central excise duty leviable on the goods manufactured at the petitioner’s factory under the job-work arrangement would be paid by the petitioner.
The Assistant Commissioner, Customs, Central Excise and Service Tax, Raigarh, vide order dated 11.02.2016, granted the requisite permission for the financial year 2015–16, subject to certain conditions, including payment of appropriate central excise duty. A similar application submitted by JSPL Raigarh on 16.03.2016 for the subsequent financial year which was also allowed vide order dated 28.03.2016 and according to the petitioner, both orders attained finality and were neither challenged nor withdrawn or modified by the department.
According to the petitioner, pursuant to the aforesaid permissions, JSPL Raigarh cleared inputs to the petitioner under job-work challans during the period from 10.03.2016 to 08.11.2016. During this period, a total quantity of 4,45,339.450 metric tonnes of inputs, valued at Rs. 10,21,50,91,258/-, was transferred to the petitioner’s unit at Jharkhand. From these inputs, the petitioner manufactured finished goods weighing 3,82,518.773 metric tonnes, valued at Rs. 11,41,46,22,133/-, and paid central excise duty amounting to Rs. 1,42,68,36,345/- on the finished goods so manufactured and cleared. On 16.02.2018, respondent No. 2 issued the show cause notice to the petitioner’s industry at Raigarh, Chhattisgarh as well as the industry at Patratu, Jharkhand demanding central excise duty as already detailed by this Court in forgoing paragraphs, hence this petition has been preferred by the petitioner challenging the said show cause notice.
Respondents No. 2 to 4 have filed return raising the preliminary objection about maintainability of the writ petition against the show cause notice contending that the show cause notice has been issued to the petitioner in accordance with the law and the petitioner has sufficient opportunity to defend the case by participating in the proceeding. It has also been contended that by issuing show cause notice, no legal or statutory right has been infringed which may be a ground to entertain this petition under Article 226 of the Constitution of India and to substantiate this submission, he has referred to the judgment of Hon’ble the Supreme Court in case of Union of India Vs. Bajaj Tembo Ltd. [1997 (94) ELT 285 SC] & Trade Tax Officer Sarahanpur Vs. Royal Trade Company [(2005) 11 SCC 518]. So far as merit of the case is concerned, it has been contended that the duty in case of job work, the principle manufacturer has to pay the duty and the industry which is performing the job work, is not required to pay the duty. It has been further contended that the permission on which the petitioner is relied upon was granted to the principal manufacturer only and not to the job work industry which is doing job work. It has also been contended that the finished goods are required to have been cleared after payment of appropriate Central Excise Duty by the principal manufacturer i.e. M/s JSPL, Raigarh and not by M/s JSPL, Patratu. Thus, there is no illegality in issuing the show cause notice and would pray for dismissal of the writ petitions.
Learned counsel appearing for the petitioner would submit that the impugned show cause notice dated 16.02.2018 has been issued by respondent No. 2 without jurisdiction, as the petitioner’s manufacturing unit is situated at Patratu, Ranchi and the finished goods in question were manufactured and cleared from the said unit. He would further submit that the jurisdiction to examine the levy and payment of central excise duty in respect of the goods manufactured and cleared by the petitioner industry at Patratu would lie with the competent Central Excise authority at Ranchi and the Commissionerate at Raipur has no jurisdiction to initiate proceedings against the petitioner in this regard. He would further submit that JSPL, Raigarh, had obtained specific permissions from the jurisdictional authority vide orders dated 11.02.2016 and 28.03.2016 for removal of inputs to the petitioner’s unit at Jharkhand for undertaking manufacturing activities on a job-work basis. The petitioner, acting upon the said permissions, manufactured and cleared the finished goods and duly discharged the central excise duty amounting to Rs. 1,42,68,36,345/- and despite the grant of such permissions and payment of duty by the petitioner, respondent No. 2 has issued the impugned show cause notice proposing to demand duty from JSPL, Raigarh, while simultaneously proposing to impose a penalty upon the petitioner under Rule 25 of the Central Excise Rules, 2002 which is illegal.
He would further submit that the permissions granted by the competent authority were neither challenged nor withdrawn or modified by the department, therefore, the respondents cannot disregard the said permissions without examining their legal effect as the duty has already been paid by the petitioner. He would further submit that the objection regarding jurisdiction goes to the root of the matter and warrants interference by this Court under Article 226 of the Constitution of India and would pray for setting aside the impugned show cause notice issued to the petitioner. To substantiate this submission, he would refer to the judgment rendered by Hon’ble the Supreme Court in case of Amadeus India Pvt. Ltd vs Pr. Commr. of Central Excise, ST & Central Tax [2019 (25) G.S.T.L. 486 (Del.)], Zawar Mines vs. Union of India & Ors., 2026 (5) TMI 1515, Collector of Central Excise, Baroda vs. M.M. Khambhatwala [1996 (84) E.L.T. 161 (S.C)], Ujagar Prints, etc. vs Union of India [1988 (38) E.L.T. 535 (S.C.)], Ujagar Prints, etc. vs Union of India [1989 (39) E.L.T. 493 (S.C.)], Empire Industries vs Union of India [1985 (20) E.L.T. 179 (S.C.)], Mohan Breweries & Distilleries Ltd. vs CTO, Madras & Ors., 1997 (9) TMI 500-SC, Commissioner of C. Ex., Bolpur, vs. Ratan Melting & Wire Industries [2008 (231) E.L.T. 22 (S.C.)], Bengal Iron corporation vs. Commercial tax officer [1993 (66) E.L.T. 13 (S.C.)], Commissioner of Central Excise, Bhopal vs. Minwool Rock Fibres Ltd [2012 (278) E.L.T. 581 (S.C.)], Rochiram & sons. Vs. Union of India [2008 (226) E.L.T. 20 (S.C.)].
So far as maintainability of the writ petitions, counsel for the petitioner would submit that without mandatory consultation, the show cause notice has been issued by the respondents and there is no bar to hear the writ petition under Article 226 of the Constitution of India as it is a self imposed restrictions by the Court and when there is a strong case to invoke the extra ordinary jurisdiction, the High Court should not restrain for exercising such power provided to it by virtue of Article 226 of the Constitution of India. He would further submit that if the petitioner is directed to re-delegate and to participate in the proceeding, it will be case of palpable injustice to the writ petitioner to adopt the remedy provided by the statute. He would further submit that the show cause notice has been issued with a predetermined mind and the authorities concerned have already made up their mind by quantifying the demand and liability to be raised, as such it is predetermined and the authorities have jumped into the conclusion at the stage of show cause notice itself which is unfair, therefore, the impugned show cause notice is vitiated and liable to be quashed.
To substantiate his submission, he would refer to the judgment rendered by Hon’ble the Supreme Court in case of State of H.P and Ors. Vs. Gujarat Ambuja Cement Ltd and Ors. [MANU/SC/0421/2005], Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Ors. [MANU/SC/0664/1998], Radha Krishan Industries Vs. State of H.P. and Ors. [MANU/SC/0293/2021], Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer-cum Assessing Authority [2023 (384) E.L.T. 8 (S.C.)], Union of India Vs. Vicco Laboratories [2007 (218) E.L.T. 647 (S.C.)], Godrej Sara Lee Ltd. vs Assistant Commissioner (AA) [2009 (236) E.L.T. 425 (S.C.)], Calcutta Discount Co. Ltd. Vs. Income Tax Officers & Ors., (1961) 2 SCR 241 and the judgment rendered by this Court in case of Rajendra Kumar Jain Vs. Union of India & Ors., 2025 (9) TMI 205, Ramesh Kumar Shrivastava vs. Union of India & Ors., 2021 (4) TMI 699, M/s. Jagdamba Power & Alloys Ltd. Vs. CCE, 2024 (1) TMI 960, Jalaram Transport Vs. CCE, 2016 (5) TMI 507.
On the other hand, learned counsel for respondents No. 2 to 4 opposing the submissions made by learned counsel for the petitioner and supporting the impugned show cause notice would submit that the impugned show cause notice has been issued by the competent authority in accordance with the provisions of the Central Excise Act, 1944, and the rules framed thereunder and reiterated the submission made in the return to justify the show cause notice as firstly there being no strong case is made out by the petitioner calling for an interdiction of the show cause notices at the stage of issuance itself. Secondly, plain reading of the contents of the show cause notice itself would show that the nature of allegations leveled against the petitioner is quite serious in nature. Thirdly, at this juncture, it would not be proper, legal and justifiable for the writ Court to exercise its extraordinary writ jurisdiction to throttle the proceedings at the stage of issuance of the show cause notices itself. He would further submit that nothing prevents the petitioner to enter appearance before the respondent authorities and submit detailed reply. As such the present petitions are premature at this stage and would pray for dismissal of the writ petitions. To substantiate his submission he would refer to the judgment rendered by Hon’ble the Supreme Court in case of Commissioner of Income Tax, Gujarat Vs. Vijaybhai N. Chandrani [(2013) 14 SCC 661].
This Court vide order dated 15.12.2022 had directed the respondent authorities to continue with the proceedings and also directed the petitioner to participate in the proceedings and also directed the respondents not to pass a final order till the matter is taken up for hearing by this Court. In view of the interim order passed by this Court, no final order has been passed by the respondent authorities.
I have heard learned counsel for the parties and perused the documents placed on record with utmost satisfaction.
From submissions made by the parties, the Point emerged for determination for this Court is:-“Whether the writ petition against the show cause notice is maintainable or not?”
To appreciate this Point, this Court has to consider the submissions made by the parties and also to briefly survey the law on the subject.
The record of the case would reveal that a show cause notice dated 16.10.2018 (Annexure P/1) was issued to the petitioner alleging that the goods removed from job worker premises without payment of Central Excise Duty amounting to Rs. 1,42,68,36,365/- by the principal manufacturer and the same is liable to be recovered from the petitioner under Section 11 of the Finance Act, 1994 (for short “the Act, 1994”) and interest at the appropriate rate on the said amount as per Section 11AA of the Act, 1994 may not be charged and penalty as per Section 11AC (1)(a) be not imposed upon them. The show cause notice further provides that the penalty as per Rule 25 of the Central Excise Rules, 2002 be not imposed upon the petitioner. The notice further provides that the petitioner should submit all the evidence to substantiate his stand while submitting his reply and may also seek an opportunity to appear in person to make their submission before the adjudicating authority. The notice provides 30 days time to submit reply to the notice which clearly spell out that the show cause notice has not been issued with predetermined mind and all the contentions are left open which may be adjudicated by the adjudicating authority on the basis of evidence and material available with them.
From perusal of the show cause notice, it is quite vivid that it is only a show cause notice wherein the petitioner has given all opportunity to take his defence, to submit evidence to substantiate his case and to file return/reply as well as opportunity of hearing where the petitioner can take all his defence including the jurisdiction of the authority to issue show cause notice. Since the petitioner industry at Raigarh is registered with the Central Excise Commissionerate Raipur, therefore, these authorities are competent to issue show cause notice but whether alleged violation as referred to in the notice falls within the territorial jurisdiction of the authority or not can be very well agitated or objected by the petitioner while submitting reply to the show cause notice. As such the submission made by the learned counsel for the petitioner that the authority at Raipur cannot issue show cause notice, is misconceived. However, it is made clear that the violation falls within the ambit of territorial jurisdiction of Raipur or Ranchi is left open and the petitioner is at liberty to raise their objection which will be decided by the authorities, in accordance with law.
It is well settled position of law that the writ petition against the show cause notice is normally not maintainable and in some very rare and exceptional cases, the High Court can quash a charge-sheet or show cause notice if it is found to be wholly without jurisdiction or for some other reason if it is wholly illegal. It is also well settled position that ordinarily the High Court should not interfere in such a matter.
From the facts as projected and the submission made by the petitioner, it is not a very rare and exceptional case where this Court may quash the show cause notice as held by Hon’ble the Supreme Court in case of Mahanagar Telephone Nigam Ltd Vs. Chairman Central Board Direct Taxes & another [(2004) 6 SCC 431] wherein it has been held in paragraph 9 as under:-
“9.In this case this is absolutely what has happened. The Appellants wanted to approach the Court only against a show-cause-notice. It is settled law that against a show-cause-notice litigation should not be encouraged. The decision of the High Powered Committee, set out hereinabove, merely emphasizes the well settled position. It is an eminently fair and correct decision. The purpose of the decision was to prevent frivolous litigation. No right of the Appellants is being affected. It has been clarified that the Appellants could move a Court of law against an appealable order. By not maintaining discipline and abiding by the decision the Appellants have wasted public money and time of the Courts. The clarificatory order, relied upon by Mr. Andhyarujina, clarifies in Para 5 as to what is to happen if clearance is not given by the Committee. It is set out that in the absence of the clearance the proceedings must not be proceeded with. This position is further clarified in Chief Conservator of Forests' case (supra) where again this Court has held that the decision taken by such a Committee is binding on all Departments concerned and it is the stand of the Government.”
Hon’ble the Supreme Court in case of Special Director & another Vs. Mohd. Ghulam Chouse & another [(2004) 3 SCC 440] has held in paragraph 5 as under:-
“5.This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless, the High Court is satisfied that the show cause notice was totally non est in the eye of law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine, and the writ petitioner should invariably be directed to respond to the show cause notice and take all stands highlighted in the writ petition. Whether the show cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is accorded to the writ petitioner even at the threshold by the interim protection, granted. ”
Hon’ble the Supreme Court in case of Vijaybhai N. Chandrani (supra) has held in paragraph No. 12 to 14 as under:-
“12.In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels & Alloys Ltd. v. CCT, (2009) 17 SCC 547, this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows:
“3.…In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue.”
13.We are fortified by the decision of this Court in Indo Asahi Glass Co. Ltd. v. ITO, (2002) 10 SCC 444, wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations:
“5.This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them.”
14.In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the Writ Petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act.”
Again, Hon’ble the Supreme Court in case of Union of India & others Vs. Coastal Container Transporters Association & others , [(2019) 20 SCC 446] has held in paragraphs 30 & 34 as under:-
“30.On the other hand, we find force in the contention of the learned senior counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of this Court, where writ petitions can be entertained at the show cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court.
31.The judgment of this Court in the case of Union of India & Anr. v. Guwahati Carbon Ltd. (supra) relied on by the learned senior counsel for the appellants also supports their case. In the aforesaid judgment, arising out of Central Excise Act, 1944, this Court has held that excise law is a complete code in order to seek redress in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. When there is a serious dispute with regard to classification of service, the respondents ought to have responded to the show cause notices by placing material in support of their stand but at the same time, there is no reason to approach the High Court questioning the very show cause notices. Further, as held by the High Court, it cannot be said that even from the contents of show cause notices there are no factual disputes.
32.Further, the judgment of this Court in the case of Malladi Drugs & Pharma Ltd. v. Union of India 5, relied on by the learned senior counsel for the appellants also supports their case where this Court has upheld the judgment of the High Court which refused to interfere at show cause notice stage.
33.For the aforesaid reasons, we allow this appeal and set aside the judgment and order dated 18.12.2017 passed by the High Court of Gujarat in Special Civil Application No.6679 of 2016.
34.We, however, grant four weeks’ time, to file responses/further responses to the show cause notices dated 08.10.2015 and 30.09.2015, to the respondent nos.2 and 3. On receipt of such responses from the respondents or after expiry of the aforesaid time, it is open for the appellants to consider the same on their own merits and pass appropriate orders, uninfluenced by any of the observations made by this Court in this judgment.”
Considering the law laid down by Hon’ble the Supreme Court that ordinarily a writ Court may not exercise its discretionary jurisdiction in entertaining writ petitions questioning a show cause notice unless inter alia the show cause notice being without jurisdiction or in excess of jurisdiction which is not the situation in the present case as it is neither the case of the petitioner that the authority who has issued the show cause notice lacks jurisdiction nor the show cause notice has been issued in violation of principles of natural justice, therefore, this Court does not find that any good case is made out by the petitioner calling for an interference by this Court at the show cause notice stage itself.
Consequently, the instant petitions deserve to be dismissed and accordingly, they are dismissed.
The record of the case would further demonstrate that this Court on 15.12.2022 has granted interim protection in favour of the petitioner directing the petitioner to participate in the proceedings however, the respondents are directed not to pass final order till the matter is taken up for hearing by this Court which is ordered to be listed on 27.01.2023. It has been informed by learned counsel for the respondents that in view of the interim order passed by this Court, the petitioner is participating in the proceedings as it has replied to the notice but no final order has been passed. In such situation, the competent adjudicating authority at Raipur is directed to consider and decide the petitioners' replies to the impugned show cause notices after granting them an adequate opportunity of hearing raising all their permissible defence including the objection raised by the petitioner with regard to the jurisdiction of the authority to issue show cause notice regarding alleged violations as referred to in the show cause notice, in accordance with the relevant statutory provisions and the material available on record. The petitioner is also at liberty to file additional reply if any so desired by them.
The adjudicating authority shall pass a reasoned and speaking order dealing with the objections raised by the petitioners in accordance with law. It is made clear that this Court has not expressed any opinion on the merits of the allegations contained in the impugned show cause notices or on the objection raised by the petitioner regarding jurisdiction of the respondents to issue show cause notice for alleged violation as detailed in the show cause notice. The authority shall decide the matter independently, in accordance with law without being influenced from any of the observation made by this Court while deciding these petitions.
The petitioner is directed to appear before the competent adjudicating authority at Raipur on 25th November, 2026 and thereafter on the dates as may be fixed by the authority. The authority shall proceed with the adjudication and will make all endeavour to conclude the proceedings expeditiously. The petitioner is further directed to co-operate with the adjudicating authority for early disposal of the proceedings.