W.P No. 23285 of 2010 · Andhra Pradesh High Court

(Per THE HON'BLE SRI JUSTICE V.V.S.RAO) The petitioner company is a manufacturer of cement. Being aggrieved by the 4th respondent’s seizure of five dumpers they filed the instant writ petition seeking a mandamus and appropriate directions. The 4th respondent seized the dumpers, the total value of which stands at Rs.7.80 Crores, on 20.8.2010. The allegation is that the petitioner claimed cenvat credit under Cenvat Credit Rules 2004 (in short ‘the Rules’) wrongly and, therefore, the dumpers were liable for confiscation. The petitioner approached the 4th respondent for release of the vehicle. An order dated 31.8.2010 was passed by the 4th respondent for release of the five dumpers on the condition of the petitioner executing B-11 bond, and furnishing bank guarantee for 25% of the value of the dumpers. The petitioner then made a representation on 26.8.2010 requesting that the bank guarantee amount be reduced.

By communication dated 31.8.2010, the 3rd respondent declined to do so. Thereafter, the 3rd respondent initiated action under Section 11AB and 11 AC of the Central Excise Act, 1944, and issued notice dated 13.9.2010 requiring the petitioner to show cause as to why Cenvat Credit, availed on the dump trucks, should not be disallowed under Rule 3 of the Rules; as to why the amount of duty of excise and education cess should not be recovered; and as to why penalty should not be imposed. A week thereafter the petitioner invoked the jurisdiction of this Court. At the stage of admission itself, the 3rd respondent filed his counter affidavit. In sum and substance, the case of the respondents, as averred in para 13 of the counter affidavit, is as follows: “the ineligible credit of CENVAT availed by the assessee are liable to be recovered as per the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to sub-section (1) of Section 11A of Central Excise Act, 1944 along with appropriate interest.

The said dump trucks on which Cenvat Credit was irregularly availed and utilized are liable for confiscation under Rule 15 of Cenvat Credit Rules, 2004 and therefore the same were seized on 20.8.2010. The issuance of show cause notice does not precede the effecting of seizure but follows the said act of seizure when such goods are liable for confiscation. The show cause notice was issued to the assessee vide O.R.No.12/2010-Hyd-III Adjn dated 13.9.2010 and the same was served on the assessee on 17.9.2010 and they were required to show cause for the proposed action to be initiated by the Department for the allegations made in the above mentioned show cause notice and an opportunity was given to them to put forth their case before the adjudicating authority. Thus the principles of natural the Respondent Department” justice were followed by This Court heard the counsel for the petitioner and the

Senior Standing Counsel for Central Excise and Customs. The controversy is very short. Whether the 4th respondent was justified in requiring the petitioner to give bank guarantee for 25% of the value of the dump trucks, in addition to execution of B- 11 Bond? While rejecting the request of the petitioner, vide their letter dated 26.8.2010, to reduce the bank guarantee amount, the 4th respondent, by communication dated 31.8.2010, declined to do so by referring to CBEC circular No.686/2/2003/CX dated 2.1.2003. As per the said circular – there is no dispute that the seized goods can be provisionally released by the adjudicating officer on condition of the assessee executing B-11 bond for an amount equal to the value of the goods seized backed by security equal to 25% of the bond amount. The CBEC circular issued under Section 37 of the Central Excise Act - it is well settled - has statutory force. Therefore, if the plea of the petitioner is accepted, it amounts to directing the adjudicating officer to act contrary to law and amounts to issuing a mandamus to ignore the law. We are, therefore, not with the petitioner. We, however, observe that the adjudicating authority may dispose of the matter within a period of eight weeks after considering the explanation/objections to be filed by the petitioner within one week from today. The writ petition, with the above observations, stands dismissed accordingly. No costs. V.V.S.RAO, J ______________ ____________________________ RAMESH RANGANATHAN,J Date: 07.10.2010 Note: Issue C.C. by 11.10.2010 B/o ASP