2010 (8) TMI 796 - HC - Central Excise

Whether elongated period mentioned under Section 11A of the Central Excise and Salt Act, 1944 is available to the Respondent No. l herein for demanding central excise duty for the goods cleared by the Petitioner during the period from December, 1992 to 15th March, 1995? Held that - In the instant case on the basis of the material on record, it cannot be said that there was any misstatement of facts by the Petitioners as the Department was fully aware of the activities of the Petitioners. The said material being before the Respondent No. 2 as well as before the Tribunal and, in view of the fact that the Respondent No. 2 as well as the Tribunal have not recorded a finding as regards the predicates for availing of the extended period of limitation, in our view, both the impugned orders are required to be set aside and are accordingly set aside. Since we have held in favour of the Petitioner on the point of limitation, it is not necessary for us to go into the aspect of classification of goods in question. For the aforesaid reasons, the above Petition is allowed.

Issues Involved:
1. Availability of the extended period under Section 11A of the Central Excise and Salt Act, 1944.
2. Alleged misclassification of goods by the Petitioner.
3. Entitlement to exemption under Notification No. 223/88.
4. Alleged misstatement and suppression of facts by the Petitioner.
5. Validity of the show cause notice issued beyond the prescribed period of limitation.

Detailed Analysis:

1. Availability of the Extended Period under Section 11A of the Central Excise and Salt Act, 1944:
The principal issue raised was whether the extended period mentioned under Section 11A of the CESA Act, 1944, was available to the Respondents for demanding central excise duty for the goods cleared by the Petitioner during the period from December 1992 to March 1995. The Petitioners argued that the demand was issued beyond the period of limitation prescribed in Section 11A and denied any suppression of facts or misstatement. The Court noted that for the Department to benefit from the extended period, there must be evidence of fraud, collusion, willful misstatement, or suppression of facts.

2. Alleged Misclassification of Goods by the Petitioner:
The Department alleged that the Petitioners had wrongly classified the goods under Entry CH. 7326.19 instead of Entry CHS. 8483.00 of the Central Excise Tariff. The Petitioners initially classified the products under Head 7326.90 and later under Chapter 84, claiming exemption under Notification No. 223/88. The Court found that the classification issue was secondary to the primary issue of the extended period of limitation.

3. Entitlement to Exemption under Notification No. 223/88:
The Petitioners claimed exemption under Notification No. 223/88, which the Department contested. The Department argued that the Petitioners were not entitled to this exemption due to misclassification and misstatement of the processes involved. The Court did not delve deeply into this issue, focusing instead on the limitation aspect.

4. Alleged Misstatement and Suppression of Facts by the Petitioner:
The show cause notice alleged that the Petitioners had misdeclared the products as "proof machined" and intentionally misstated/suppressed facts to evade duty. The Court examined the audit reports and correspondence between the Petitioners and the Department, concluding that the Department was aware of the Petitioners' activities. The Court found no clear findings of misstatement or fraud in the orders of the lower authorities.

5. Validity of the Show Cause Notice Issued Beyond the Prescribed Period of Limitation:
The Petitioners challenged the show cause notice on the grounds of being issued beyond the prescribed period of limitation. The Court emphasized that for the extended period of five years to apply, the conditions in Section 11A must be met. The Court found that both the Respondent No. 2 and the Tribunal failed to record clear findings of misstatement or suppression, essential for invoking the extended period.

Conclusion:
The Court held that the requirements for availing the extended period of limitation under Section 11A were not satisfied in this case. It set aside both the impugned orders, ruling in favor of the Petitioners on the point of limitation. Consequently, the Court did not address the classification issue. The Petition was allowed, and the rule was made absolute in terms of prayer clause (a).

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