2015 (7) TMI 710 - HC - Central Excise

Classification of goods - Classification as shampoo or ayurvedic liquid soap - Deliberate suppression of production and clearance of excisable goods - evasion of central excise duty - held that - Bare perusal of Section 11A(1) of the Act clearly shows that the extended period of limitation of five years may be invoked, if the central excise duty has not been levied or has not been paid or short levied or short paid or erroneously refunded by reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or Rules made there under with intention to evade payment of duty. - a clear findings of deliberate suppression of fact, clandestine removal of goods and evasion of central excise duty have been recorded. The Tribunal has not set aside those findings. In fact it has misread the findings recorded in the order in original. Under the circumstances the order of the Tribunal suffers from manifest error of law and the finding recorded with respect to the extended period of limitation is bad. It is also relevant to note that on the question of classification the Tribunal itself has found that the stand in regard of department is correct. There remained no dispute that the goods in question were excisable goods and therefore removal of such goods without paying duty was in contravention of the provisions of the Act and Rules applicable and, therefore, the condtions mentioned under Section 11 A(1) of the Act were satisfied. Thus the extended period of limitation under the proviso to Section 11A(1) of the Act was lawfully invoked. The respondent-assessee is liable to interest and penalty in accordance with law. - Decided in favour of Revenue.

Issues Involved:
1. Justification of demand of duty under Section 11-A for the extended period on excisable goods manufactured and sold without informing the department/taking Registration Certificate.
2. Legality of the penalty imposed on a person solely responsible for evasion of duty by suppressing facts.
3. Correctness of penalty equivalent to the duty evaded under Section 11-AA of the Central Excise Act, 1944.
4. Chargeability of interest on duty not paid under Section 11-AB of the Central Excise Act, 1944.

Detailed Analysis:

1. Justification of Demand of Duty under Section 11-A for the Extended Period:
The court examined whether the demand for duty on excisable goods manufactured and sold without informing the department and without obtaining a Registration Certificate was justified under the extended period provision of Section 11-A. The facts revealed that the respondent was engaged in manufacturing shampoos since 1989 without filing any declaration or obtaining central excise registration. The Commissioner of Central Excise, Meerut issued a show cause notice alleging deliberate suppression of facts and clandestine removal of goods to evade payment of duty. The adjudicating authority upheld the classification of the product under chapter heading 3305.99 and confirmed the demand for central excise duty amounting to Rs. 1,70,05,170.92, invoking the extended period of limitation due to deliberate suppression of material information. The Tribunal, however, allowed the appeal of the respondent on the basis that a similar case had not established wilful misstatement or suppression of facts. The High Court found that the Tribunal had misread the adjudication order and that the extended period of limitation was lawfully invoked due to the clear findings of deliberate suppression and evasion of duty. Thus, the demand for duty under the extended period was justified.

2. Legality of Penalty Imposed for Evasion of Duty by Suppressing Facts:
The court considered whether the penalty imposed on the respondent for evasion of duty by suppressing facts was correct in law. The adjudicating authority had imposed a penalty under Rule 173Q of the Central Excise Rules, 1944, finding that the respondent had deliberately suppressed material information and clandestinely removed excisable goods without payment of duty. The High Court noted that the Tribunal did not set aside these findings and had misread the adjudication order. Consequently, the penalty imposed was deemed lawful as the conditions for invoking the extended period of limitation were satisfied, indicating deliberate suppression of facts and evasion of duty.

3. Correctness of Penalty Equivalent to Duty Evaded under Section 11-AA:
The issue of whether a penalty equivalent to the duty evaded was correct under Section 11-AA of the Central Excise Act, 1944, was addressed. The adjudicating authority had imposed a penalty equivalent to the duty evaded, but the Tribunal did not record any specific findings on the quantification of the penalty. The High Court, therefore, did not provide a conclusive answer on this issue and left it open for the Tribunal to pass a fresh order in accordance with law after hearing the parties.

4. Chargeability of Interest on Duty Not Paid under Section 11-AB:
The court examined whether interest on the duty not paid was chargeable under Section 11-AB of the Central Excise Act, 1944. The adjudicating authority had imposed interest under Section 11AB (misquoted as Section 11AA) on the evaded duty. The High Court upheld the imposition of interest, noting that the Tribunal did not address this aspect in its final order. The High Court confirmed that the respondent-assessee was liable to pay interest as per the provisions of the Act.

Conclusion:
The High Court answered the first question of law in the affirmative, in favor of the applicant department and against the respondent-assessee, confirming the justification of the demand under the extended period. The questions of quantification of duty, penalty, and interest were returned unanswered, leaving it open to the Tribunal to pass a fresh order after hearing the parties. The reference was disposed of accordingly.

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