2015 (1) TMI 679 - AT - Central Excise

Extended period of limitation - Suppression of facts - appellant was all along under bonafide belief that due to dispute of M/s. Roha Dychem before various forums food colour preparation shall fall under Chapter 21 while Revenue was claiming classification under Chapter 32 of Central Excise Tariff Act, 1985 - Mis declaration of goods - Penalty u/s 11AC - Malafide intention - Bar of limitation - Held that - Revenue relied on the circular dated 23-5-1997 and dated 19-12-1997. The circular dated 6-1-1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (2007 (8) TMI 11 - SUPREME COURT OF INDIA) was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word wilful , preceding the words mis-statement or suppression of facts which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty. Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful. - there was no malafide in the show-cause notice and confusion of classification persisted in the industry having led the appellant to be in confusion, the adjudication can be said to be time-barred - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of 'food colour preparation' under Central Excise Tariff Act, 1985.
2. Applicability of Chapter Note 7 to Chapter 21 of CETA, 1985.
3. Bona fide belief and registration under Central Excise Act, 1944.
4. Issuance of show-cause notice and the period of limitation.
5. Allegation of suppression of facts and evasion of duty.
6. Penalty imposition on the appellant.

Detailed Analysis:

1. Classification of 'food colour preparation' under Central Excise Tariff Act, 1985:
The appellant was under the bona fide belief that 'food colour preparation' should be classified under Chapter 21 of CETA, 1985, based on the success of M/s. Roha Dychem before the Apex Court. The Revenue, however, claimed classification under Chapter 32. The confusion in the industry regarding the correct classification led to the appellant's misunderstanding.

2. Applicability of Chapter Note 7 to Chapter 21 of CETA, 1985:
Chapter Note 7 to Chapter 21, effective from 16th March 1995, legislated that labeling, relabeling, and any other process amounting to manufacture would be considered a manufacturing activity. The appellant argued that this led to their belief that their activities did not amount to manufacture and hence were not liable to duty.

3. Bona fide belief and registration under Central Excise Act, 1944:
The appellant did not seek registration under the Central Excise Act, 1944, due to the confusion in the industry and the belief that their activities were not manufacturing. The period in question was from December 1995 to June 1997, and the show-cause notice was issued on 3.1.2001. The appellant registered in June 1997 and claimed no intentional duty evasion.

4. Issuance of show-cause notice and the period of limitation:
The appellant argued that the adjudication was time-barred due to the confusion in the industry and the bona fide belief regarding the classification. The principle of law laid down by the Apex Court in Anand Nishikawa Co. Ltd. Vs. CCE, Meerut was cited, emphasizing that mere failure to declare does not amount to willful suppression.

5. Allegation of suppression of facts and evasion of duty:
The court found no malafide intent on the appellant's part to suppress facts or evade duty. The confusion in the industry and the appellant's bona fide belief were evident from the records. The rulings in Pushpam Pharmaceuticals Co. v. CCE, Bombay and subsequent cases were cited to support that suppression must be deliberate to evade duty, which was not the case here.

6. Penalty imposition on the appellant:
Given the findings that there was no deliberate suppression or intent to evade duty, the penalty imposed on the appellant was also set aside. The appeal against the penalty was allowed, and no penalty was levied on the appellant.

Conclusion:
The adjudication was deemed time-barred due to the bona fide belief and confusion in the industry regarding the classification of 'food colour preparation.' The appeals were allowed, and no penalties were imposed on the appellant. The judgment emphasized the importance of deliberate intent in cases of suppression and evasion of duty.