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TMI Blog2012 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ances giving rise to the present writ petition are that the Central Government by Notification No. 30/2006-C.E. (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-C.E. (N.T.), dated 30-12-2006, the Central Government also introduced Rule 12AA in C.C. 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of C.E. Rules, 2002 and 12AA of the C.C. Rules, 2004 made under C.E. Act, 1944 listing out the type of facilities to be withdrawn, restrictions to be imposed and deterrent action to be taken, in case prima facie evidence of evasion of duty and violation of Cenvat Rules are found out and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 4-11-2009, Officers of Central Excise, Bhubaneswar-II Commissionarate searched the factory and office premises of the petitioner which resulted in recovery and resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case do not warrant any action under Notification No. 32/2006. Personal hearing was conducted on 18-2-2010 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. (N.T.). 4. While the matter stood thus, the Finance Bill, 2010 was placed in the Parliament on 26-2-2010 introducing an amendment to Section 37 of the Central Excise Act authorizing to make Rules to provide for withdrawal of facilities or imposition of restrictions in case of evasion of duty or misuse of Cenvat Credit. On 8-5-2010 Presidential assent was received to the Finance Bill, 2010 as Act No. 14 of 2010. 5. On 21-7-2010 Member (CX) authorized by the Board passed the impugned order under Annexure-1. By the said order the facility of monthly payment of excise duty provided under Rule 8(1) of the C.E. Rules, 2002 was withdrawn and the petitioner was required to pay excise duty for each consignment at the time of removal of goods from 26-7-2010 to 31-12-2010. Payment of excise duty by utilization of Cenvat Credit as provided under Rule 3(4) of the C.C. Rules, 2004 was ordered to be sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 11A(1) of the Act. Therefore, any order passed under Notification No. 32 of 2006 concluding evasion of duty and consequential stoppage of monthly duty payment or restrictions on use of Cenvat Credit before issuance of notice under Section 11A(1) of the Act is derogatory to the provisions of Section 11A of the C.E. Act. Hence, any provision made under Rules in derogation to the provisions of the Act is bound to be struck down. In support of his contention Mr. Pangari placed reliance in the case of Laghu Udyog Bharati v. Union of India, AIR 1999 SC 2596 = 1999 (112) E.L.T. 365 (S.C.) = 2006 (2) S.T.R. 276 (S.C.)]. The C.E. Rules, 2002 and C.C. Rules, 2004 have been notified under Section 37 of the Act to carry out the provisions of C.E. Act, 1944. They can regulate the procedural aspects, but they cannot take away the substantive rights conferred under the C.E. Act. Thus Notification No. 32/2006 notified under the Rules and affecting the substantive rights of the tax payers is not sustainable. The Notification No. 32/2006 infringes substantive statutory rights given under Rule 8(1) of the C.E. Rules, 2002 and Rule 3(4) of the C.C. Rules, 2004. Action contemplated under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the working capital of the petitioner. The rule and notification do not provide any time limit for which restriction has to be imposed. The Central Excise Officer, who exercises power u/s. 11A of the Act is subordinate to the Members of the Board and shall be prejudiced against the petitioner in view of the finding of the Chief Commissioner and action of the Member of the Board. Placing reliance in the case of Hiren Aluminium Ltd. v. Union of India, 2009 (234) E.L.T. 578 (Bom.), it is argued that the Bombay High Court has stayed the operation of an order passed by the Member (CX) under Notification No. 32/2006-C.E. (N.T.) pending examination of the issue whether the said Rules 12CC and 12AA are ultra vires the provisions of the Act. 8. Per contra, Mr. P.K. Ray, learned Senior Advocate appearing on behalf of the opp. party-Excise Department vehemently argued that the restrictions as per order dated 21-7-2010 (Annexure-1) are only for the period from 26-7-2010 to 31-10-2010 which has already expired. A reading of the Notification No. 32/2006 dated 30-12-2006 in Explanation (i), it is clarified that a person, against whom the order under sub-para (3) of para 4 has been passed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of restriction being from 26-7-2010 limiting it to five months has commenced much after the notification i.e. 8-5-2010 and the restrictions operate after the incorporation of the same into the Act having the force of law. Therefore, the action of the Board cannot be questioned on the ground that the Board was unauthorized to impose such restrictions under Rule 12 C.C. of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 and cannot be challenged on the ground of being ultra vires. In support of his contention, Mr. Ray placed reliance on the judgment of the Apex Court in the case of Asst. Collector of Central Excise v. Ramakrishna Kulwant Rai, 1989 (41) E.L.T. 3 (S.C.). According to Mr. Ray, modern State in exercising its sovereign power of taxation has to deal with complex factors relating to the object to be taxed and restrictions to be imposed. Further placing reliance on the decision of the Apex Court in the case of Bhavesh D. Parish and others v. Union of India and Another, (2000) 5 SCC 471, (para-23, 24 and 30), it is argued that the machineries of the State would not work if it were not allowed a little play in its joints. Concluding argument, Mr. Ray submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer, for dealing with evasion of duty or misuse of CENVAT credit." 12. According to the petitioner, prior to insertion of clause (xiiia), the Central Government had no power to make Rule 12CC of the C.E. Rules, 2002 or Rule 12AA of the C.C. Rules, 2004 and issue subsequent Notification No. 32/2006-C.E. (N.T.), dated 30-12-2006. The contention of the opposite parties-department is that by exercising power under sub-section (1) of Section 37 of the Act, the above two Rules were framed and the said notification was issued. If this contention of Mr. Ray is accepted then there is no need at all to insert clause (xiiia) in sub-section (2) of Section 37 of the Act by the Finance Bill, 2010. Insertion of clause (xiiia) in sub-section (2) of Section 37 itself shows that the legislature has never vested such power in the Central Government under sub-section (1) of Section 37 of the Act. 13. The Apex Court in the case of B. Pravakar Rao v. Desari Panakala Rao and Others, AIR 1976 SC 1803, held that the rules cannot go beyond the sections of the Act. In Laghu Udyog Bharati (supra), the Apex Court held that a provision made under the Rules in derogation to the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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