ARYAN ISPAT AND POWER PVT. LTD. REPRESENTED BY SRI BRIJENDRA KUMAR CHANDRAKAR Vs. UNION OF INDIA (UOI) AND ORS.

JUDGEMENT

(1.) This writ petition has been filed for declaring Rule 12CC of the Central Excise Rules, 2002 (for short, CE Rules, 2002 ), Rule 12AA of the Cenvat Credit Rules, 2004 (for short, CC Rules, 2004 ) and Notification No.32/2006-CE (N.T.) dated 30.12.2006 (for short, Notification ) issued by the Central Government ultra vires the provisions of the Central Excise Act, 1944 (for short, C.E. Act ) and the Constitution of India and for striking off those two Rules and theNotification. The further prayer of the petitioner is to set aside the impugned order No.38/2010-M (CX)/DA dated 21st July, 2010 passed under above notification dated 30.12.2006 (Annexure-1).

(2.) Bereft of unnecessary details, the facts and circumstances giving rise to the present writ petition are that the Central Government by Notification No.30/2006-CE (N.T.) dated 30.12.2006 introduced Rule 12CC in CE Rules, 2002 enabling it to impose by notification certain restrictions and to withdraw facilities in certain types of cases of evasion of duty. By Notification No.31/2006-CE (N.T.) dated 30.12.2006, the Central Government also introduced Rule 12AA in CC Rules, 2004 enabling it to impose by notification certain restrictions in respect of misuse of Cenvat Credit. Consequently, a composite Notification No.32/2006-C.E. (N.T.) dated 30.12.2006 was issued in exercise of powers under the aforesaid Rules 12CC of CE Rules, 2002 and 12AA of the CC Rules, 2004 made under C.E. Act, 1944 listing out the type of facilities to be withdrawn, restrictions to be imposed and deterrent action to be taken, in case prima facie evidence of evasion of duty and violation of Cenvat Rules are found out and Procedure to be adopted before withdrawal of facilities.

(3.) On 04.11.2009, Officers of Central Excise, Bhubaneswar-II Commissionarate searched the factory and office premises of the petitioner which resulted in recovery and resumption of alleged incriminating documents. The officers conducted physical stocktaking of finished goods and recorded shortage of 220 M.T. of sponge iron. The petitioner deposited Rs.2.26 lakhs under protest towards duty liability on the alleged unaccounted stock of 220 M.T. of sponge iron. On the basis of scrutiny of seized documents it was alleged that petitioner had received unaccounted iron ore in the factory and on average, taking consumption production ratio as the basis, it was further alleged that there was suppression of production of 11089.73 M.Ts of sponge Iron during April, 2006 to December, 2007 which resulted in alleged evasion of Central Excise Duty to the tune of Rs.93 lakhs. The petitioner received notice dated 11.12.2009 under Annexure-4 from the office of the Commissioner, Central Excise, Bhubaneswar-II to appear for personal hearing on 21.12.2009 before Chief Commissioner, Central Excise, Customs & Service Tax in the matter of deterrent action proposed to be taken under notification No.32/2006-C.E.(NT) dated 30.12.2006. Pursuant to the said notice, the petitioner appeared before the Chief Commissioner and submitted an application praying therein that the petitioner may be made aware of the gravamen of the charges and copies of documents relied upon by the department constituting the basis for allegations/charges be supplied to enable the petitioner to make a representation in the matter. A show cause notice dated 25.01.2010 was issued to the petitioner to submit a representation/reply, if any, to the proposal of Commissioner of Central Excise, Bhubaneswar-II contained in his letter dated 02.12.2009 to invoke the provisions of the notification 332/2006-CE (NT) dated 30.12.2006 and impose restrictions in terms of that notification. On 02.02.2010 the petitioner received another letter from opp. parties intimating him that the Chief Commissioner has permitted him to file his reply by 15.02.2010 and personal hearing was fixed to 18.02.2010. Opp. parties by letter dated 05.02.22010 (Annexure- 7) intimated the petitioner to collect photocopies of the seized records/documents. The petitioner submitted his representation to the Chief Commissioner on 15.02.2010 pointing out, inter alia that copies of the documents seized in course of search on 04.11.2009 as listed in Panchanama dated 4.11.2009 have not been supplied to the petitioner and the facts of the case do not warrant any action under notification no.32/2006. Personal hearing was conducted on 18.02.2010 by the learned Chief Commissioner, Central Excise, Bhubaneswar, who made some recommendation to the Board for imposing restrictions in terms of Notification No.32/2006-C.E.(NT).