M/S Shree Sai Vamika Industries vs. The Union Of INDIA And 4 Ors

Facts

The petitioner, M/s Shree Sai Vamika Industries, a partnership firm, challenged a demand-cum-show cause notice dated 01.01.2021 issued by the Assistant Commissioner, Central GST, Guwahati. This notice sought recovery of Central Excise duty. The petitioner had availed area-based exemption under Notification No. 32/99-CE dated 08.07.1999, which was later amended. Subsequently, under Notification No. 20/2008-CE dated 27.03.2008, the petitioner applied for a special rate for value addition. The Supreme Court, in Union of India –vs- VVF Limited, restored the notification dated 27.03.2008, which had been set aside by various High Courts. The petitioner contends that their application for a special rate was not decided before the demand notice was issued, and the impugned notice seeks recovery of duty refunded pursuant to an interim order of the Supreme Court.

Held

The Court held that the respondent authorities were indeed required to decide the petitioner's application for a special rate before proceeding with the recovery. The Court noted that in similar writ petitions (WP(C) No. 1644/2021 and WP(C) No. 2089/2021), co-ordinate benches had directed the department to first consider the special rate applications pending before the authorities and then re-decide the matter afresh, keeping demand notices in abeyance. The Court found no reason to deviate from this established position, especially since no appeal or review was filed against those orders. The Court made the interim order dated 30.03.2021 absolute, directing respondent No. 2 to expeditiously consider and dispose of the petitioner's special rate application after affording an opportunity of hearing. The impugned notices dated 01.01.2021 and 22.01.2021 were to remain in abeyance until a decision on the special rate application. The Court explicitly stated that the authorities should decide the application on merit and not reject it on technical grounds like limitation. The question of the legality of the impugned notices was left undecided.

Key Issues

1. Whether the respondent authorities were required to decide the petitioner's application for a special rate under Clause 3(1) of Notification No. 20/2008-CE dated 27.03.2008, prior to issuing the impugned demand-cum-show cause notice dated 01.01.2021 for recovery of Central Excise duty? Petitioner's Contention: The petitioner argued that Clause 3(1) of Notification No. 20/2008-CE provided a legal right to manufacturers to apply for a special rate, and the authorities were duty-bound to consider such applications before initiating recovery proceedings. Failure to do so renders the demand notice bad in law. They relied on orders from co-ordinate benches in similar matters (WP(C) No. 1644/2021, WP(C) No. 2089/2021, WP(C) No. 740/2022) where matters were remanded for deciding the special rate application. Revenue's Contention: The judgment records no specific argument from the revenue or State regarding this issue, other than their issuance of the impugned notice.