2015 (8) TMI 1335 - HC - Central Excise

Demand of duty - clearance of the waste and scrap - sale without raising bills - whether demand was barred by limitation under section 11A(1) - extended period of limitation - Held that - The assessee did not show as to why there was some sale without raising any bills, as evidenced from file Number 15. Therefore, we are of the considered view that the original authority and the appellate authority were right in holding on a question of fact that there was intention to evade payment of duty. Without carefully appreciating the above facts, the Tribunal came to a conclusion, devoid of any material, that there was no intention to evade payment of duty. Therefore, the second question of law has to be answered in favour of the Revenue. Once the second question of law is answered in favour of the Revenue, it evolves as a corollary that the Revenue is entitled to invoke sub-section 4 of section 11A and seek the benefit of extended period of limitation from the relevant date. Therefore, the first question of law should also be answered in favour of the Revenue.

Summary

Issues involved:
Challenge to demand of duty on grounds of limitation under section 11A(1) of the Central Excise Act, 1944.

Analysis:
The appellant, the Revenue, filed an appeal under section 35G of the Central Excise Act, 1944, challenging a CESTAT order that set aside a demand of duty on the basis that the demand was time-barred under section 11A(1) of the Act. The appeal raised questions regarding the invocation of the extended period of limitation, intent to evade payment of duty on waste and scrap, and the availability of modvat credit to cover the duty demand. The case involved an assessee engaged in windmill manufacturing who cleared ferrous waste and scrap without duty payment during a period when the exemption was rescinded. The authorities issued a show cause notice, leading to a demand for duty. The Commissioner (Appeals) upheld the demand, but the CESTAT found the demand beyond the ordinary limitation period, leading to the appeal. The High Court analyzed the provisions of section 11A(1) and (4) concerning the time limit for duty demands based on fraud, collusion, misstatement, suppression of fact, or contravention with intent to evade duty.

The Court noted that the show cause notice alleged suppression of facts and intent to evade duty, supported by evidence of selling scrap without raising bills. The assessee's response feigned ignorance of the duty exemption withdrawal and claimed surplus credit if modvat credit was taken. The Court found that the authorities were correct in determining intent to evade duty based on the evidence, contrary to the Tribunal's conclusion. Consequently, the Court held in favor of the Revenue on the question of intent to evade duty, allowing the invocation of the extended limitation period under section 11A(4). This decision led to the conclusion that the Revenue could benefit from the extended limitation period, thereby upholding the duty demand. The Court also clarified that since the Tribunal had ruled in favor of the Revenue on the merits, the third question of law did not require consideration. Therefore, the Court allowed the civil miscellaneous appeal, setting aside the Tribunal's order and restoring the original authority and appellate Commissioner's decisions.

In summary, the High Court's judgment addressed the issues of time limitation under section 11A of the Central Excise Act, 1944, specifically focusing on the invocation of the extended period based on intent to evade duty. The Court analyzed the evidence of suppression of facts and intent to evade duty, ultimately ruling in favor of the Revenue and upholding the duty demand. The decision emphasized the importance of factual findings in determining intent to evade duty and the applicability of the extended limitation period in such cases.