M/S Quality Zinc PVT.LTD. Th Its Director Sh. Nikhil Arora vs. Principal Commissioner Central GST And Central Excise And Ors.

Held

The High Court held that the petitioner's claim for refund under Section 11B of the Central Excise Act, 1944, should have been decided before any action was taken as per the impugned show cause notice. The Court observed that the refund application remained undecided, and the Additional Commissioner proceeded to recover the amount by issuing the show cause notice. While the petitioner was heard and an order was passed, the Court found that the adjudication did not meet the requirement of Section 11B, as no such adjudication was apparent from the order. Consequently, the Court quashed the show cause notice and the order in original. The amount in dispute was to be reversed and kept in FDR with the Additional Commissioner. The matter was remanded to the Principal Commissioner to consider and dispose of the refund application within four weeks. If the refund application was decided against the petitioner, the Additional Commissioner was free to proceed according to law.

Facts

The petitioner, M/s Quality Zinc Pvt. Ltd., manufactures zinc oxide using slag, ash, residues, and scrap as raw materials. They had been availing an exemption under notification no. 56/2002-C.E. and had paid excise duty on the raw materials, later taking credit for it. The petitioner claimed they were unaware of a 2016 circular exempting such waste materials from duty and had erroneously paid duty. They filed an application for refund under Section 11B of the Central Excise Act, 1944. However, instead of deciding the refund application, the Additional Commissioner (Respondent No. 2) issued a show cause notice dated 13.07.2018, followed by an order in original dated 28.03.2019, adjudicating proceedings. The petitioner had previously challenged the show cause notice in another writ petition, which was permitted to be withdrawn with liberty to file a composite petition. This current petition challenges both the show cause notice and the consequential order.

Key Issues

1. Whether the Court should quash the show cause notice dated 13.07.2018 and the consequential order in original dated 28.03.2019, passed by the Additional Commissioner (Respondent No. 2), as illegal, arbitrary, and contrary to the principles of natural justice, considering the petitioner had filed an application for refund under Section 11B of the Central Excise Act, 1944. Petitioner's contention: The petitioner argued that their application for refund under Section 11B ought to have been decided first. They contended that the issuance of the show cause notice and the subsequent adjudication proceedings were premature and illegal as the refund claim remained undecided. They relied on the principle that a refund application should be adjudicated before any recovery action is initiated. Revenue's contention: The judgment does not record any specific arguments made by the revenue or state. It is noted that the petitioner had been heard and given an opportunity to reply to the show cause notice, and the adjudicating authority had passed a reasoned order.