2013 (8) TMI 151 - HC - Central Excise

Extended period of Limitation - clandestine removal of goods - textile articles - The contention of the appellant was that once the alleged clandestine removal of goods came to the notice of the Department, notice for recovery of duty ought to have been issued within one year from such knowledge Held that - Upon reading the relevant provisions contained in Section 11A of the Act, it becomes clear that in case of duty which has not been levied or paid, or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression of facts, etc., period of service of notice on the person chargeable with such duty would be five years instead of one year provided in normal circumstances. Nowhere does this provision refer to the period of service of notice after fraud, collusion, wilful misstatement or suppression, etc. comes to the knowledge of the Department. In simple terms, the Department could recover unpaid duty up to a period of five years anterior to the date of service of notice when the case falls under proviso to sub-section (1) and such omission is on account of fraud, collusion, wilful misstatement, etc - Decided against the Assessee.

Issues Involved:
1. Limitation period for issuing a show cause notice under Section 11A of the Central Excise Act, 1944.
2. Legality and validity of the Appellate Tribunal's decision upholding the issuance of the show cause notice.
3. Sustainability of the confirmation of duty demand and imposition of penalties.

Issue-wise Detailed Analysis:

1. Limitation Period for Issuing a Show Cause Notice:
The appellant-manufacturer challenged the issuance of a show cause notice beyond the normal period of limitation. The notice was issued on 9-5-2005, while the investigation was completed on 30-7-2003. The primary contention was whether the notice was barred by limitation under Section 11A of the Central Excise Act, 1944, even when the extended period of limitation was considered.

The court referred to Section 11A, which allows for recovery of duties not levied or paid within one year from the relevant date. However, the proviso extends this period to five years in cases involving fraud, collusion, or wilful misstatement. The court emphasized that the "relevant date" does not incorporate the concept of the department's knowledge of the evasion, and thus, the extended period of five years applies irrespective of when the department became aware of the fraud.

2. Legality and Validity of the Appellate Tribunal's Decision:
The appellants argued that the Tribunal's decision to uphold the issuance of the show cause notice was illegal and invalid. The Tribunal had rejected the contention that the notice was barred by limitation, asserting that the notice was issued within the extended period allowed under the proviso to Section 11A.

The court upheld the Tribunal's decision, aligning with the precedent set in the case of Commissioner of C. Ex., Surat-1 v. Neminath Fabrics Pvt. Ltd., which clarified that the extended period of five years applies from the relevant date and not from the date of knowledge of the department. The court found no merit in the appellant's argument and confirmed the Tribunal's interpretation of the statutory provisions.

3. Sustainability of the Confirmation of Duty Demand and Imposition of Penalties:
The appellant contested the confirmation of the duty demand of Rs. 2.78 lacs and the imposition of penalties. The Assistant Commissioner had confirmed the duty demand with interest and imposed penalties, which was upheld by the Commissioner (Appeals) and the Tribunal.

The court examined the statutory framework and the facts of the case, concluding that the confirmation of the duty demand and penalties was justified given the established clandestine removal of goods. The court noted that the evidence on record supported the findings of the lower authorities, and there was no legal infirmity in their decisions.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision and the actions of the Revenue Authorities. The court held that the show cause notice was issued within the extended period of five years as provided under the proviso to Section 11A of the Central Excise Act, 1944. The confirmation of the duty demand and imposition of penalties were found to be sustainable in the given facts and circumstances. The court reiterated that the statutory provisions do not support the appellant's contention regarding the limitation period being reckoned from the date of the department's knowledge of the evasion.

← Previous Next →