M/S. Sunrise Remedies PVT. LTD. vs. Union Of INDIA

Held

The Court held that the petition succeeds and is allowed. The primary ground for quashing the impugned order was the unreasonable and unexplained delay in adjudication proceedings. The Court noted that the show-cause notice was issued in 2006 and remained dormant for a considerable period, even after being retrieved from the 'Call Book' in 2009. The department failed to provide any justification or explanation for this prolonged delay. The Court reiterated the principle that adjudication proceedings must be concluded within a reasonable time, and failure to do so vitiates the proceedings. The Court found that the petitioner was not responsible for the delay. Regarding the issue of personal hearings, the Court stated that it was not necessary to probe further as the order was being quashed on the ground of delay. The argument of alternative remedy raised by the respondent was rejected because the proceedings themselves were vitiated by the delay. The Court quashed and set aside the Order-in-Original and the show-cause notice. The Court did not expressly leave any issue undecided.

Facts

The petitioner, M/s. Sunrise Remedies Pvt. Ltd., challenged an Order-in-Original dated 25.05.2018, issued on 30.05.2018, by the respondent, the Commissioner of Central Excise, Ahmedabad III. This order followed a show-cause notice dated 14.08.2006, issued after a delay of nearly eleven years. The petitioner, engaged in manufacturing medicaments, availed SSI exemption for its own goods and paid duty on branded goods manufactured for loan licensees. The show-cause notice proposed recovery of duty for the period 2001-02 to 2005-06, based on the department's view that clearances for loan licensees, even if cleared on payment of duty, should be included in the SSI exemption limit calculation. The petitioner argued that its case was covered by a previous High Court decision in Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India. The petitioner also contended that the case was transferred to the 'Call Book' in 2007 without their request or knowledge and retrieved in 2009, remaining dormant for about nine years before adjudication.

Key Issues

1. Whether the Order-in-Original passed after an unreasonable delay of nearly eleven years from the issuance of the show-cause notice is liable to be quashed and set aside on the ground of delay in adjudication proceedings, as per the principles laid down in Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India? 2. Whether the adjudication proceedings, which remained dormant for a significant period after retrieval from the 'Call Book' without any justification or explanation from the department, are vitiated? 3. Whether the impugned order is liable to be set aside on the ground of breach of principles of natural justice due to alleged non-issuance of proper notices for personal hearings as prescribed under Section 37C of the Central Excise Act, 1944? Petitioner's arguments: The petitioner argued that the delay in adjudication was unreasonable and illegal, rendering the order without jurisdiction. They contended that the case was transferred to the 'Call Book' without their request and remained dormant for an extended period, and no justification was provided for this delay. They also argued that personal hearings were held without proper notice under Section 37C, violating principles of natural justice. They relied on the precedent set in Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India. Revenue's arguments: The respondent department contended that an alternative remedy was available against the impugned order and that there was no breach of principles of natural justice.