2014 (2) TMI 396 - AT - Central Excise

Short payment of duty - extended period of limitation - Penalty u/s 11AC - Excess of the exemption limit on payment of duty - Held that - for invoking extended period something positive other than mere inaction or failure on the part of the manufacturer or conscious or deliberate withholding of information when the manufacture knew otherwise, is required to be established - since the expression suppression of fact has been used in the company of such strong words as fraud, collusion or wilful misstatement, it has to be construed strictly and it would not mean any omission, that the Act must be deliberate, that when the facts are known to both the sides, the omission by one to do what he might have done and not that he must have done would not render it suppression. Record also show that besides this, the appellant every month were also addressing a letter to the Department mentioning the quantity and value of the cement cleared during the month and also the particulars of the duty paid through PLA and through Cenvat credit from which it was possible to calculate the quantity of cement cleared upto the month during the financial year. Though during the period of dispute, there was system of self-assessment, from the Board s Circular No. 249/83-96-CX dated 11/10/96 it is clear that even after the introduction of self-assessment system, the ER-1 returns filed by the assessee were required to be subjected to scrutiny by the Range Officer within three months after receipt and during scrutiny, in addition to checking arithmetical accuracy, duty payable and paid, the correctness rate of duty applied to the goods was also required to be checked. Short payment is attributable to lack of due diligence on the part of Jurisdictional Central Excise authorities and not on account of wilful default on the part of the assessee. Therefore, in our view, this is not the case where the extended limitation period under proviso to Section 11A (1) can be applied and, as such, the duty demand is time barred - Decided in favour of assessee.

Summary

Issues:
- Duty exemption under Notification No. 5/1998-CE and successor notifications.
- Short payment of duty and extended period under proviso to Section 11A (1).
- Allegations of suppression of facts and deliberate contravention of Central Excise Act.
- Arguments regarding limitation and intentional evasion of duty.
- Scrutiny of ER-1 returns and self-assessment system.
- Compliance with duty payment requirements and communication with authorities.

Analysis:

The case revolves around the appellant, a cement manufacturing company owned by the State of Jammu & Kashmir, availing duty exemption under specific notifications. The dispute arises from the appellant exceeding the exemption limit and short paying duty during 1998-1999, 2000-2001, and 2001-2002, leading to a demand for Rs. 95,55,323. The Commissioner's order imposed penalties based on extended period provisions under Section 11A (1).

The appellant's counsel argued against the duty demand based on limitation, citing regular filing of returns and communication with authorities regarding cement clearances. They contended that the Department was aware of their exemption limit and there was no intent to evade duty. The Department, represented by the Authorized Representative, defended the order, emphasizing the intentional wrong availment of duty exemption and suppression of facts.

Upon review, the Tribunal noted that the duty exemption was not applicable beyond 99,000 M.T. of cement clearances in a financial year. The issue of extended period under Section 11A (1) was crucial for the demand's validity. Citing Supreme Court precedents, the Tribunal clarified that mere inaction or failure does not constitute suppression, requiring positive evidence of deliberate intent to evade duty. The appellant's consistent filing of returns and monthly communications provided complete information, indicating lack of wilful default.

The Tribunal concluded that the duty demand was time-barred as the appellant's actions did not amount to suppression or deliberate contravention. The order was set aside, and the appeal was allowed, highlighting the lack of due diligence on the part of Central Excise authorities rather than intentional evasion by the appellant. The case exemplified the importance of thorough scrutiny and communication in excise duty matters, emphasizing compliance and transparency in dealings with authorities.

The judgment underscores the significance of adherence to duty payment regulations, effective communication with authorities, and the need for clear evidence of intentional evasion to invoke extended limitation periods in duty-related disputes.