2011 (7) TMI 670 - SC - Central Excise

Extended period of limitation - Difference in actual quantity of goods in comparison with RG-1 - Held That -Mistake committed in maintenance of stock register etc. was admitted by the Managing Director. Further department could not establish that there was any suppression of facts or a fraud. In view of Nizam sugar (2006 (4) TMI 127 - SUPREME COURT OF INDIA), show cause notice was time barred.

Summary

Issues:
Appeal against Central Excise duty demand, penalty, and interest imposition due to discrepancies in Modvat credit availed on shortage of physical stock of Modvatable inputs. Delay in issuance of show cause notice and limitation period for proceedings.

Analysis:
The case involved an appeal by the Revenue against a judgment related to discrepancies in Modvat credit availed by a limited company manufacturing data processing machines. The Superintendent of Central Excise found a significant difference between physical stock and entries in the register, leading to a demand for Central Excise Duty, penalty, and interest. The Managing Director admitted mistakes in stock maintenance, leading to discrepancies. A show cause notice was issued in 2000, and subsequent proceedings resulted in confirmation of duty demand, penalty imposition, and interest recovery.

Upon appeal, the Commissioner (Appeals) allowed the appeal, but the CESTAT remanded the matter for further verification based on the Managing Director's second statement. The Joint Commissioner confirmed the duty demand and imposed penalties and interest. The Commissioner (Appeals) dismissed the subsequent appeal by the respondent-assessee, leading to an appeal to the CESTAT, which allowed the appeal citing a belated show cause notice issue.

The High Court upheld the Tribunal's decision, stating that the initiation of proceedings was barred by limitation. The Supreme Court, upon hearing both sides, found that the show cause notice was issued after the limitation period, and no fraud or suppression of facts was established. The judgment in Nizam Sugars was deemed applicable, and the High Court's decision was affirmed, dismissing the Revenue's appeal against the limitation issue and the judgment.

The Supreme Court concluded that the appellant failed to establish the applicability of the proviso to Section 11A of the Act. As no case was made for invoking the proviso, the High Court's judgment was upheld as just and proper. Consequently, the appeal was dismissed with no order as to costs.