M/S Quality Coke Industries PVT. LTD. vs. Union Of INDIA And 2 Ors

Facts

The petitioner, M/s Quality Coke Industries Pvt. Ltd., challenged a notice dated 18.02.2021 issued by the Assistant Commissioner, CGST Guwahati, for recovery of Central Excise duty. This recovery was purportedly based on the Supreme Court's judgment in Union of India vs. M/s V.V.F Limited. The petitioner had availed area-based exemption under Notification No. 32/99-CE, which was later amended to provide for refund of duty paid in cash after exhausting CENVAT credit. Subsequently, under Notification No. 20/2008-CE, an option was given to manufacturers to apply for a special rate representing actual value addition. The petitioner applied for such a special rate. The impugned notice sought recovery of Central Excise duty refunded to the petitioner pursuant to an interim order of the Supreme Court, without first deciding the petitioner's application for a special rate.

Held

The Court held that the respondent authorities should first consider and dispose of the petitioner's pending application for a special rate. The impugned demand-cum-show cause notice dated 18.02.2021 was directed to be kept in abeyance until a decision is reached on the special rate application. The Court noted that similar issues had been dealt with by co-ordinate benches, which directed the department to decide special rate applications on their merit before pursuing recovery, with demands kept in abeyance. The Court also addressed the revenue's objection regarding the limitation period for filing the special rate application, stating that this objection had already been considered and decided by co-ordinate benches in previous cases, and the department had not preferred further appeals against those decisions. Therefore, the Court found no reason to take a different view. The authorities were directed to decide the application on merit and pass appropriate orders, and it should not be rejected on technical grounds like limitation. The legality of the impugned notice was expressly left undecided.

Key Issues

1. Whether the respondent authorities are justified in issuing a demand-cum-show cause notice for recovery of Central Excise duty without first deciding the petitioner's pending application for a special rate under Paragraph- 2.1 of Notification No. 20/2008-CE dated 27.03.2008? Petitioner's Arguments: The petitioner argued that the respondent authorities acted contrary to the expressed terms of Notification No. 20/2008-CE by seeking recovery before deciding its application for a special rate. They contended that if the special rate is accepted, it could lead to a re-evaluation of the refund amount, potentially entitling them to a higher refund or no recovery at all. They relied on orders from co-ordinate benches of the High Court that directed authorities to decide special rate applications before proceeding with recovery. Revenue's Arguments: The revenue, through the learned standing counsel for GST, raised an objection that the petitioner's application for a special rate was filed beyond the prescribed due date of 30th September of the concerned financial year, as stipulated in Notification No. 20/2008-CE.