M/S Kamakhya Power Solutions vs. The Union Of INDIA And 3 Ors

Facts

The petitioner, M/s Kamakhya Power Solutions, a partnership firm, challenged demand-cum-show cause notices dated December 28, 2020, and a notice dated January 27, 2021, by the CGST authorities. These notices sought recovery of Central Excise duty and led to the attachment of the petitioner's bank account. The 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 and later sought a special rate for value addition under Clause 3(1) of Notification No. 20/2008-CE. The petitioner argued that their application for a special rate was not decided before the demand notices were issued, and that the authorities were duty-bound to consider it first.

Held

The Court held that the issue raised by the petitioner, concerning the pending application for a special rate under Notification No. 20/2008-CE and the subsequent demand notices, was similar to issues dealt with by co-ordinate benches in other writ petitions. Specifically, in WP(C) No. 1644/2021 and WP(C) No. 2089/2021, the Court had directed the department to first consider the special rate applications and then re-decide the matter afresh, keeping the demand notices in abeyance. Since no appeal or review was filed against those orders, and the department had accepted those directions, the Court found no reason why similar directions could not be issued in the present case. The Court made the interim order dated April 9, 2021, absolute, directing the Commissioner, GST, to expeditiously consider and dispose of the petitioner's special rate application, affording the petitioner an opportunity of hearing. The impugned notices dated December 28, 2020, and January 27, 2021, were to remain in abeyance until a decision was passed on the special rate application. The Court clarified that the application should be decided on merits and not rejected on technical grounds. The legality of the impugned notices was expressly left undecided.

Key Issues

1. Whether the respondent authorities acted contrary to the expressed terms of Notification No. 20/2008-CE dated March 27, 2008, by issuing demand-cum-show cause notices for recovery of Central Excise duty without first deciding the petitioner's pending application for a special rate of value addition? Petitioner's arguments: The petitioner contended 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 obligated to consider such applications before initiating recovery proceedings. They argued that if the special rate was 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 co-ordinate bench orders in similar matters (WP(C) No. 1644/2021, WP(C) No. 2089/2021, WP(C) No. 740/2022) which directed the department to decide special rate applications before proceeding with recovery. Revenue's arguments: The judgment records no specific arguments made by the revenue or State.