The Jammu & Kashmir And Ladakh High Court has quashed the Show Cause Notice (SCN) and held that the excise department failed to decide refund claim under Section 11-B of the Central Excise Act, 1944 before taking action.
The bench of Justice Sanjeev Kumar and Justice Mohd. Yousuf Wani has observed that the claim of the petitioner for the refund in terms of Section 11-B of the Central Excise Act, 1944 ought to have been decided before taking any action as is envisaged in the show cause notice against the petitioner.
The bench noted that the application of the petitioner for refund remained undecided and instead proceeded to recover the amount, which as per the Additional Commissioner, Central GST & Central Excise was illegally utilised/withdrawn by the petitioner by issuing a show cause notice.
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Background – Refund Claim under Section 11-B
The petitioner/assessee-company is engaged in the manufacture of zinc oxide falling under Chapter 28 of First Schedule to the Central Excise Tariff Act, 1985. The petitioner is using slag, ash and residues (mainly containing zinc), zinc waste and scrap etc. falling under Chapter Heading 26201900 & 19020090 respectively as raw material.
The unit of the petitioner went into commercial production w.e.f. 03.03.2009. The petitioner having its unit established in the notified areas of J & K had been availing the facility of exemption envisaged by notification no. 56/2002-C.E. dated 14.11.2002 and was availing self credited facility as per the notification.
It is alleged that during the period from May 2009 to March 2016, the petitioner had purchased slag, ash and residue (mainly containing zinc) and zinc waste and scrap etc on payment of duty and had taken credit in their RG 23 A-Part-II account i.e. Cenvat account.
The petitioner had also utilized the same for payment of duty on clearances of finished goods from their unit during the material period.
The notification no. 56/2002-C.E. dated 14.11.2002 (as amended) is an exemption notification that exempts all goods (except cigarettes, cigars, tobacco and its products and soft drinks and their concentrates) produced in the State of J & K and specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985 and cleared from a unit located in industrial areas, from the duty of excise or additional duty of excise as the case may be, subject to certain conditions specified in the notification.
The petitioner claimed that he was availing the benefit under the aforesaid notification being unaware of the Circular of 2016 which exempted the waste material utilized in the manufacturing process from payment of excise duty and, therefore, erroneously paid the excise duty.
The petitioner claims to have moved an application for refund under
Section 11 B read with Section 35 F of the Central Excise Act, 1944 but the Respondent instead of deciding the application in accordance with law, served upon the petitioner the impugned show cause notice which was challenged by the petitioner in OWP No. 1596/2018 which was disposed of by a Coordinate Division Bench of this Court vide order dated 16.04.2019, permitting the petitioner to withdraw the writ petition with liberty to lay challenge to the show cause notice as also the proposed action, if any, taken by the respondents by filing a composite writ petition.
This is how the petitioner is before us in this petition challenging both the show cause notice and the consequential order passed by the adjudicating authority.
Conclusion – Refund Claim under Section 11-B
The court has held that the petitioner has been heard in the matter and he was given an opportunity to reply the same. The adjudicating authority has also passed a reasoned order but that does not meet the requirement of Section 11 B as no such adjudication is apparent from the reading of the order of adjudication.
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Case Details
Case Title: M/S Quality Zinc Pvt. Ltd. Versus Principal Commissioner, Central GST & Central Excise
Case No.: WP (C) No. 2094/2019
Date: 07.11.2024
Counsel For Petitioner: Mohd. Latief Malik
Counsel For Respondent: Jagpaul Singh
