M/S Daulat And Co. vs. The Union Of INDIA

Held

The Court held that the reliance on the judgment in "J.K. Spinning & Weaving Mills Ltd. & Anr. vs. Union of India & Ors." was misconceived. The Court noted that this judgment primarily dealt with Rules 9 and 49 of the Central Excise Rules, 1944, and did not consider cases involving fraud. The Court found that the allegations against the petitioners involved fraud, collusion, wilful misstatement, and suppression of facts, as they presented themselves as manufacturers, supplied goods, collected GST, and the alleged suppliers were not genuine. In cases of fraud, the limitation period of five years under Section 11A(4) of the Act would apply, calculated from the date the fraud is revealed, and the bar of limitation would not be applicable. The Court cited several Supreme Court judgments, including "Bhor Industries Ltd. vs. Commissioner of Central Excise, Mumbai," "Shrisht Dhawan v. Shaw Bros.," "S.P. Chengalvaraya Naidu v. Jagannath," and "Chittaranjan Das v. Durgapore Project Ltd.," to emphasize that fraud vitiates all solemn proceedings and that the principle of finality of litigation cannot be used to perpetuate fraud. Therefore, the Court found no grounds to entertain the writ petition.

Facts

The petitioners, M/s Daulat And Co. and Mr. Kamal Kishore Agarwal, challenged a show cause notice dated 20.06.2025 issued under Section 11A of the Central Excise Act, 1944. They contended that the notice was beyond the limitation period and improperly issued under the Excise Act, as they were traders and not manufacturers. The notice pertained to the financial years 2018-2019 up to 2021-2022. The petitioners claimed to have received goods from other manufacturers, but these alleged manufacturers were not paid GST, nor were invoices issued in their names. The authorities alleged that the petitioners presented themselves as manufacturers, supplied goods, collected GST, and that the so-called suppliers were fictitious.

Key Issues

1. Whether the show cause notice dated 20.06.2025, issued under Section 11A of the Central Excise Act, 1944, is barred by limitation, considering the period from FY 2018-2019 to FY 2021-2022. 2. Whether the show cause notice could be issued under the Central Excise Act, 1944, to the petitioners who claim to be traders and not manufacturers. Petitioner's Arguments: The petitioners argued that any notice issued after five years from the relevant date under Section 11A of the Act is invalid. They relied on the Supreme Court judgment in "J.K. Spinning & Weaving Mills Ltd. & Anr. vs. Union of India & Ors." to support their claim regarding the limitation period. Revenue's Arguments: The revenue's arguments are not explicitly detailed in the provided text, but the court's findings suggest that the revenue alleged fraud, collusion, wilful misstatement, or suppression of facts by the petitioners, which would extend the limitation period under Section 11A(4) of the Act.