Imposition of Excise Duty on Incineration of Lean Gas used in Generation of Electricity: Calcutta HC Quashes Ex Parte Order [Read Order]

The Calcutta High Court quashed an exparte order passed in the matter concerning the imposition of excise duty on incineration of Lean Gas used in the generation of electricity.

The Petitioner, M/s Himadri Speciality Chemical & Anr, is a manufacturer of “Carbon Black” since March 27, 2009. On March 29, 2016, respondent concerned issued a show cause notice under Section 11A of the Central Excise Act, 1944 primarily on the ground that since the said gas is used in the generation of electricity, which is subject to Nil rate of duty and non-excisable and/or exempted goods under the Central Excise Act, the said gas is marketable and therefore, excisable.

The Petitioner filed the present writ petition challenging the validity and/or legality of the said show cause notice. During the pendency of the present writ petition, the respondent authority concerned proceeded with the adjudication proceeding in spite of repeated request of the petitioner.

During the pendency of the present writ petition, the respondent authority concerned proceeded with the adjudication proceeding in spite of repeated request of the petitioner. The petitioner prayed for repeated adjournments and to keep the proceedings in abeyance till the disposal of the writ petition yet the adjudicating authority passed an order during pendency of this writ petition raising a demand of Rs. 20,61,27,457/-.

Challenging the impugned order-in-original, petitioner submitted that there is no finding in the order-in-original that the said gas satisfies the twin test of manufacture and marketability in order to attract levy under Section 3 read with Section 2 (d) of the Central Excise Act and that there is no finding that the said gas was manufactured and cleared by the petitioner to attract levy.

The petitioner further submitted that it is no longer res integra that the expression “suppression” used in Section 11A of the Central Excise Act being accompanied by strong words like “fraud” or “collusion” would have to be construed strictly. Mere omission to give correct information is not suppression of facts. The burden to prove suppression of facts is cast upon the Revenue. The department cannot take a view contrary to the Circular being No. 35/88 dated December 22, 1988 wherein it was clearly held that the said gas is not excisable.

A Single Bench of Justice Md Nizamuddin observed that “Tt appears from record that several opportunities were given to the petitioner to file objection/reply to the impugned show cause notice and for hearing before passing the impugned adjudication order, but since it is the case of the petitioner that it had immediately filed this writ petition against the impugned show cause after receipt of same, petitioner thought it proper to not to give any reply to the same or to participate in the impugned proceeding and all the legal and factual points in challenging the impugned show cause and adjudication order it has taken in this writ petition, supplementary affidavit, and in course of hearing of the same against the impugned show cause notice and order-in-original could not be taken before the adjudicating authority, I am inclined to set aside the aforesaid impugned ex parte adjudication.”

To Read the full text of the Order CLICK HERE

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