Suraj Innovative Technologies vs. Commissioner GST And Central Excise And Another

Facts

The petitioner, Suraj Innovative Technologies, engaged in manufacturing Boring Machines, challenges a show cause notice dated February 24, 2009, issued by the Commissioner, GST and Central Excise. The notice alleged wrongful availment of Cenvat credit amounting to Rs. 29,25,766/- on invoices from M/s Elgi Equipment Ltd., as the goods were not received at the petitioner's factory and were not in the petitioner's name. Additionally, Rs. 5,40,544/- credit was allegedly taken for compressors not received. The total disputed credit is Rs. 34,66,310/-. The petitioner replied to the notice, and a hearing was scheduled for February 26, 2010. After a decade, the respondent re-fixed the hearing for February 19, 2021. The petitioner requested an adjournment due to overseas travel, and the hearing was rescheduled for March 16, 2021. The petitioner also raised the issue of delay in adjudication.

Held

The Court allowed the petition and set aside the impugned show cause notice. The primary issue addressed was the delay in adjudication. The Court found that the case was squarely covered in favour of the petitioner by the judgments referred to, particularly the decision in M/s GPI Textiles Ltd. vs. Union of India and others. The Court noted that no interim stay had been granted by the Supreme Court in the appeals pending before it concerning similar matters. Therefore, the Court held that the prolonged delay in issuing the adjudication order was unsustainable. The Court did not explicitly rule on the merits of the Cenvat credit allegations or the SSI exemption issue, as the quashing of the show cause notice rendered these points moot. The ratio decidendi is that an inordinate and unexplained delay in adjudicating a show cause notice, especially when not stayed by higher courts, can be a ground for quashing the notice, irrespective of the merits of the allegations.

Key Issues

1. Whether the impugned show cause notice dated 24.02.2009 is liable to be quashed on grounds of delay in adjudication, considering the provisions of Section 11A of the Central Excise Act, 1944 and relevant case law? The petitioner argued that the show cause notice, issued in 2009, had been pending for over 10 years, violating the principles of natural justice and the time limits prescribed or implied under Section 11A of the Act. They relied on the Supreme Court judgment in State of Punjab vs. Bathinda District Co-op Milk P. Union Ltd. and a Division Bench judgment of the Punjab and Haryana High Court in M/s GPI Textiles Ltd. vs. Union of India and others, which were followed by this Court in several other cases. The respondents contended that the show cause notice was placed in the call book due to pending litigation before the Supreme Court in Commissioner of Central Excise, Indore vs. M/s Grasim Industries Ltd. They cited a CBEC circular dated 26.04.2016, clarifying that cases decided by the Supreme Court or High Court should be adjudicated. They argued that the delay could not be a ground to quash the notice. The respondents also raised a separate issue regarding the petitioner's eligibility for SSI exemption in financial year 2008-09, alleging short payment of duty amounting to Rs. 21.63 lacs.