Back
2007 Supreme(Mad) 2478
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. A.P. SHAH & THE HONOURABLE MR. JUSTICE P. JYOTHIMANI
Madurai Power Corporation (Pvt) Limited & Others
Versus
The Deputy Commissioner of Central Excise & Others
W.P. Nos.45294 of 2002 & 40902 to 40904 of 2005 & M.P. Nos. 43903 to 43905 of 2005
Decided On : 08-08-2007
R. Raghavan, R. Venkatavaradhan Mr. Arvind P. Datar senior counsel, Advocate. For the Respondents:V.T. Gopalan, Addl. Solicitor General assisted, P. Bhuvaneswari and assisted, K. Ramakrishna Reddy Mr. Raja Kalifulla Govt. Pleader assisted by Mr. V.R. Thangavelu Govt. Advocate, Mr. C. Ramesh, Mr. S.N. Kirubanandam, Advocates.
The main legal point established in the judgment is that the issuance of show cause notices under Section 11-A for recovery of duties not levied or paid requires the cancellation or rejection of the Annexure-I certificate by following the procedure under Section 35E. Additionally, the benefit of the extended period of limitation under the proviso to Section 11-A is only applicable in cases of willful suppression of facts.
Headnote:
Central Excise Act - Electricity Generation - Section 5-A(1), Section 11-A, Section 26-A of the Central Excise Act, 1944 - The court discussed the exemption from excise duty for the use of power generation by the electricity undertakings and the eligibility of the petitioners for exemption under Notification No.3/2001. The court also examined the validity of the show cause notices issued to the petitioners and the applicability of Section 11-A for recovery of duties not levied or paid.
Fact of the Case:
The petitioners, engaged in electricity generation, were issued show cause notices demanding payment of excise duty for the procurement of Low Sulphur Heavy Stock (LSHS) for power generation. The petitioners contended that they were eligible for exemption under Notification No.3/2001 and challenged the legality of the show cause notices.
Finding of the Court:
The court found that the show cause notices were issued without jurisdiction as the Annexure-I certificate, allowing procurement of goods without payment of duty, had not been cancelled or rejected by following the procedure under Section 35E. The court also held that the notices were barred by limitation as there was no willful suppression of facts to warrant the benefit of the extended period of limitation under the proviso to Section 11-A.
Issues: The issues involved the eligibility of the petitioners for exemption under Notification No.3/2001, the validity of the show cause notices, and the applicability of Section 11-A for recovery of duties not levied or paid.
Ratio Decidendi: The court held that the show cause notices were issued without jurisdiction as the Annexure-I certificate had not been cancelled or rejected by following the procedure under Section 35E. The court also found that the notices were barred by limitation as there was no willful suppression of facts to warrant the benefit of the extended period of limitation under the proviso to Section 11-A.
Final Decision: The writ petitions were allowed, and the impugned show cause notices were quashed. The court granted leave to appeal to the Supreme Court and ordered no costs to be paid by the petitioners.
A.P. Shah, C.J.
1. Writ Petition No. 45294 of 2002 is filed by Madurai Power Corporation (Pvt.) Limited. Different petitioners file the other writ petitions. But, since the issues involved in all the writ petitions are identical all these writ petitions have been heard together and are being disposed of by this common order.
.2. Madurai Power Corporation (Pvt.) Ltd., i.e., petitioner in W.P.No. 45294 of 2002 is engaged in generation of electricity through its generating station situate at Paravai Village, Madurai. The company requires Low Sulphur Heavy Stock (LSHS) for using the same as the primary fuel in the generation of electricity. Notification No.3/2001 came to be issued under Section 5-A(1) of the Central Excise Act, 1944 whereby Low Sulphur Heavy Stock (LSHS) and Furnace Oil (FO) were exempted from excise duty for the use of power generation by the electricity undertakings owned by or controlled by the Central Government, or any State Government or any State Electricity Board or any Local Authority or a person licensed under Part II of Indian Electricity Act, 1910, to supply electrical energy or a person who has obtained sanction under Section 28 of Indian Electricity Act, 1910, to engage in the business of supplying electrical energy, except those who produce electrical energy not for sale, but produce it for their own consumption. The petitioner company applied for exemption from duty under the said Notification and a Registration Certificate was issued by the Competent Authority for procurement of LSHS at concessional duty for generating electricity in favour of the petitioner vide Registration No. AACCM7661 CX M0001 (RC No.1/2001) dated 11.05.2001 and 15. 2001. The Competent Authority thereafter issued Annexure-I certificate in favour of the petitioner allowing the petitioner to remove the goods at concessional duty on execution of B-8 security bond and on furnishing a bank guarantee. Based on this Annexure-I certificate, the petitioner has been procuring LSHS without payment of duty from various installations of Indian Oil Corporation Limited.
.3. A show cause notice dated 07.02.2002 was issued to the petitioner company by the Assistant Commissioner of Central Excise, Madurai-I Division, Madurai asking the company to show cause as to why Annexure-I certificate dated 30.08.2001 (as amended on 30.12.2001) issued to the company for procurement of LSHS should not be cancelled and as to why the exemption granted under Notification No.3/2001 should not be denied to the company as the company is not eligible for exemption under Notification No.3/2001. The petitioner submitted a reply dated 18.02.2002 contending inter alia that as the petitioner by virtue of Section 26-A of the Electricity Supply Act, 1948 has satisfied all the conditions for issue of license under Part-II of the Indian Electricity Act, 1910, it must be deemed to possess a license under Part-II of the Indian Electricity Act, 1910 without the same being issued and that the company being under the control of the Tamil Nadu State Electricity Board is entitled to claim exemption. A personal hearing was granted by the Assistant Commissioner of Central Excise wherein the petitioner company through its counsel made submissions. However, no orders were passed in respect of these proceedings initiated vide show cause notice dated 7. 2002. Thereafter, the Assistant Commissioner of Central Excise, Madurai-I Division, Madurai issued another notice dated 14. 2002 on the same ground requiring the petitioner company to show cause as to why Annexure –I issued in terms of Notification No.3/2001 should not be cancelled. The petitioner company filed reply to the said notice, and the said proceedings remain pending in the files of the respondent. The Deputy Commissioner of Central Excise issued yet another show cause notice dated nil (received on 12. 2002) calling upon the petitioner to show cause as to why the excise duty amounting to Rs.20,80,69,750/- (Rupe
