TMI Blog2012 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... B.N. Mahapatra, J.]. This writ petition has been filed for declaring Rule 12CC of the Central Excise Rules, 2002 (for short, C.E. Rules, 2002 ), Rule 12AA of the Cenvat Credit Rules, 2004 (for short, C.C. Rules, 2004 ) and Notification No. 32/2006-C.E. (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 the Notification. 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-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 to invoke the provisions of the Notification 32/2006-C.E. (N.T.), dated 30-12-2006 and impose restrictions in terms of that notification. On 2-2-2010 the petitioner received another letter from opp. parties intimating him that the Chief Commissioner has permitted him to file his reply by 15-2-2010 and personal hearing was fixed to 18-2-2010. Opp. parties by letter dated 5-2-2010 (Annexure-7) intimated the petitioner to collect photocopies of the seized records/documents. The petitioner submitted his representation to the Chief Commissioner on 15-2-2010 pointing out, inter alia that copies of the documents seized in course of search on 4-11-2009 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 18-2-2010 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE Rules, 2002, or the C.C. Rules, 2004. The Notification No. 32/2006 dated 30-12-2006 affects the substantive right of tax payers. The said notification has not been notified under the Central Excise Act, rather it has been notified under Rules 12CC of Central Excise Rules, 2002 and 12AA of the C.C. Rules, 2004 which are ultra vires the provisions of the Act. The Notification No. 32/2006 dated 30-12-2006 suffers from various fundamental defects and violates the substantive statutory rights of the petitioner and other manufacturers. In case the Revenue is prima facie satisfied on the basis, of investigation that any particular tax payer evades a duty, the Revenue is required to proceed for determination of evasion as provided under 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as under the scheme of the notification there is no right of appeal. 7. It is further argued that the impugned order passed under Annexure-1 is not sustainable in law as there is no material on record to prima facie indicate that the petitioner has evaded payment of Central Excise duty up to Rs. 10 lakhs. Rs. 2,26,000/- was paid under protest and not paid voluntarily. The petitioner was not supplied with all documents seized in Panchanama to enable him to make effective representation. The impugned order is too harsh, excessive and punitive and has the effect of temporary closure of industry of the petitioner inasmuch as 80% of the duty is paid by using Cenvat Credit. Stoppage of use of Cenvat Credit has seriously affected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er providing for in particular and without prejudice to the generality of the foregoing power . Thus, this section did not require that the enumerated rules would be exhaustive. Any rule, if it could be shown to have been made to carry into effect the purpose of the Act would be within the rule making power. Chapter-2 of the Act deals with Levy and Collection of Duty i.e., Sections 3 and 3A categorically states notwithstanding anything contained in Section 3 as may be relevant it is of the opinion that it is necessary to safeguard the interest of revenue specify by notification in the Official Gazette. Amendment to Section 37 by the act of Parliament received the assent of the President on 8-5-2010. The operational period 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 771). The rules referred to in Section 37(2) of the C.E. Act are authorized by and/or made under the provisions of Section 37(1) of the C.E. Act. The provisions of Section 37(2) are not restrictive. 11. Admittedly, in the present case by the Financial Bill, 2010, an amendment was brought to sub-section (2) of Section 37 of the Act, after clause (xiii) and the following clause was inserted which runs as follows; (xiiia) provide for withdrawal of facilities or imposition of restrictions (including restrictions on utilization of CENVAT credit) on manufacturer or exporter or suspension of registration of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 37 of the Act authorizing the Central Government to make Rule 12CC of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 and notification No. 32/2006-C.E. (N.T.), dated 30-12-2006 prior to insertion of clause (xiiia) in sub-section (2) of Section 37 of the Act. Had the legislature given such power under sub-section (1) of Section 37 of the Act, it should not have inserted clause (xiiia) in sub-section (2) of Section 37 of the Act by the Finance Bill, 2010. 16. In view of the above, we are of the considered view that the Central Government has made the Rules 12CC of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 in the year 2006 without any authority of law which power was vested in the Central Government in the year 2010 by inserting clause (xiiia) in sub-section (2) of Section 37 and therefore, the two Rules are ultra vires the Central Excise Act, 1944. Consequently, Notification No. 32/2006-C.E. (N.T.), dated 30-12-2006 issued in pursuance of Rule 12CC of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 is not sustainable in law. 17. In view of our above findings, the impugned Order No. 38/2010-M (CX)/DA dated 21st July, 2010 passed pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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