2008 (7) TMI 685 - AT - Central Excise

Demand - time Limitation - Suppression of facts - Held that - the assessee cannot be held to have suppressed before the department anything which were within their knowledge. It appears that they had enough documentary material with them at the commencement of every fiscal, which made them believe that their prospective raw material suppliers were small tea growers - demand of duty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of benefit of Notifications for exemption from duty on processed tea, invocation of extended period of limitation, suppression of facts regarding tea growers' landholding, reliance on Agricultural Income Tax Returns, challenge to demand based on limitation.

Analysis:

The case involved M/s. Havukal Tea & Produce Co. (P) Ltd. engaged in manufacturing Black Tea. The dispute arose from the demand of duty and penalty imposed by the Commissioner based on the denial of benefit of certain Notifications granting exemption from duty to small tea growers. The appellants failed to meet the condition of procuring raw material from small tea growers to the prescribed extent, leading to the demand of duty. The challenge in the appeal was primarily on the ground of limitation.

The show-cause notice invoked the proviso to Section 11A(1) of the Central Excise Act, alleging suppression of facts by the appellants regarding the qualification of tea growers as small tea growers. The appellants claimed they believed in good faith that their suppliers were small tea growers based on documents like certificates from Village Administrative Officer and Tea Board. The Revenue relied on Agricultural Income Tax Returns showing land holdings over 10 hectares, alleging suppression by the appellants.

The appellants argued that they had documents proving the small tea grower status of their suppliers and were not aware of the information in the Agricultural Income Tax Returns. Witnesses confirmed issuing only specific certificates to the appellants, not disclosing AIT Returns. The appellants contended that the demand was beyond the normal limitation period and a portion even beyond the extended period of 5 years.

The Tribunal found merit in the appellant's argument against the demand based on limitation. The documentary evidence possessed by the appellants at the beginning of each fiscal year supported their belief in the suppliers' small tea grower status. The statutory documents like V.A.O's certificates and Tea Board's Registration Certificate carried a rebuttable presumption under the Evidence Act, which the Revenue failed to overcome with AIT Returns. The Tribunal highlighted the lack of knowledge on AIT Returns by the appellants, indicating no intentional suppression of facts.

Additionally, a letter from the Superintendent of Central Excise supported the appellants' compliance for a significant period of the dispute, further strengthening their case. Consequently, the Tribunal set aside the finding of suppression and the demand of duty based on limitation, leading to the vacating of penalties on the company and its Managing Director. The appeals were allowed with consequential reliefs.