2011 (3) TMI 514 - HC - Central Excise

Demand - Classification - 100% Export Oriented Units - The by-product falling under SH No. 1503.00 is chargeable to nil rate of duty under the said classification of the Central Excise Tariff and accordingly, the petitioner company was removing the said by-product at nil rate of duty in accordance with law - evasion of central excise duty by misusing the facilities provided under Notification No. 8/97-C.E., dated 1-3-1997 - The only difference, as pointed out by the learned counsel for the respondents is that in the impugned show cause notices, there is a reference to intelligence gathered by the central excise authorities and statements recorded - while issuing the present show cause notices, the same/similar set of facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities - Appeal is allowed

Issues Involved:
1. Jurisdiction of issuing show cause notices.
2. Allegations of suppression of facts or mis-statement by the petitioners.
3. Invocation of the extended period of limitation under Section 11A of the Central Excise Act, 1944.
4. Validity of earlier and subsequent show cause notices and orders.

Detailed Analysis:

1. Jurisdiction of Issuing Show Cause Notices
The petitioners challenged the show cause notices dated 2-7-2002 under Article 226 of the Constitution of India, arguing that the notices were issued without jurisdiction. The show cause notices demanded recovery of excise duty, imposition of penalty, and recovery of interest under relevant sections of the Central Excise Act, 1944, and Central Excise Rules, 1944. The petitioners contended that the issuance of these notices was improper since six separate proceedings had already been initiated for the same subject matter for a different period.

2. Allegations of Suppression of Facts or Mis-Statement by the Petitioners
The petitioners argued that there was no suppression of facts or mis-statement on their part. They had been following prescribed central excise procedures, including issuing invoices and filing monthly returns. The central excise officers had never raised any objections to the removal of the by-product at nil duty rate. The petitioners contended that the revenue was aware of the excisability issue, and therefore, the allegations of suppression were unfounded.

3. Invocation of the Extended Period of Limitation under Section 11A of the Central Excise Act, 1944
The petitioners contested the invocation of the extended period of limitation, arguing that the normal period of limitation for initiating proceedings under Section 11A is one year. For invoking the extended period, there must be a finding of fraud, mis-statement, or suppression with intent to evade duty. The petitioners argued that since the department was already aware of the facts when earlier show cause notices were issued, the extended period could not be invoked.

4. Validity of Earlier and Subsequent Show Cause Notices and Orders
The petitioners highlighted that six show cause notices had been issued earlier on similar grounds, covering the period from September 1999 to December 2000/January 2001. These notices culminated in orders confirming the demand for duty. The subsequent show cause notices dated 2-7-2002 covered an earlier period (July 1998 to August 1999) and were issued on similar allegations. The petitioners argued that the department could not allege suppression for the same facts already known to them.

Court's Findings:
The court examined the facts in light of several Supreme Court decisions, including Nizam Sugar Factory v. Collector of Central Excise, Hyderabad Polymers (P) Ltd v. Commissioner of Central Excise, and ECE Industries Ltd. v. Commissioner of Central Excise. It was held that once the department had issued earlier show cause notices on the same subject matter, it could not allege suppression of facts for the same issue in subsequent notices.

The court found that the facts and allegations in the earlier and subsequent show cause notices were similar. The reference to intelligence gathered and statements recorded in the impugned notices did not constitute new or different facts. Since the department was already aware of the facts during the earlier proceedings, the extended period of limitation could not be invoked for the subsequent notices.

Conclusion:
The petition was allowed, and the impugned show cause notices dated 2-7-2002 were quashed and set aside. The court ruled that the department was not justified in invoking the extended period of limitation based on the same facts already known to them. The rule was made absolute with no order as to costs.

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