2015 (7) TMI 957 - HC - Central Excise

Invocation of extended period of limitation - determination of relevant date for issue of notice within 5 years - Duty demand u/s 11A - Held that - If the goods and which are excisable have to be cleared on payment of duty, but if they are exempted from payment of such duty, it does not mean that there is no power in the authorities to verify and scrutinise the documents based on which the clearance is made. One of the documents at the stage of clearance refers to the Exemption Notification and thereafter the person clearing the goods or removing them urges that there is no duty liability, then, what terms and conditions have been prescribed or whether the exemption is absolute are matters which are to be checked and determined by the authorities - Once it is possible to scrutinise and verify the compliance of the terms and conditions on which the exemption has been issued in this case, then, it will not be possible to hold that a separate period is prescribed for recovery of duty in case of this nature or that the period of five years prescribed would have to be computed only when the breach or violation of the Exemption Notification has come to the knowledge of the Department subsequently. It may be that such fact is discovered or comes to the knowledge of the authorities subsequent to the clearance, however, when the Department desires to recover the amount of duty, then, it must adhere to the period prescribed By section 5 remission of duty on goods found deficient in quantity is dealt. Section 5A confers power to grant exemption from duty of excise. If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon. - Equally, if there is any condition to furnish a Bond and in that behalf it is prescribed that in the event the terms and conditions on which the bond has been given and accepted are breached and violated, a demand can be raised, that that stipulation will not mean that the mandate of section 11A is any way diluted or can be interpreted with the aid of such term or condition of the Bond. Thus, the terms and conditions of the Exemption Notification or of the Bond cannot be of any assistance. That only would enable recovery of duty and further levy of interest, recovery thereof and equally of penalty. In these circumstances, we do not find any provision which would enable us to conclude that the date of knowledge or the date of discovery of the fraud by the Revenue will be the determinative and decisive date. If that is beyond the period of five years, then, section 11A will have to be interpreted accordingly is the express stand and which we find cannot be accepted because the plain language of the statute or the words of the section cannot be brushed aside or ignored. In the light of the clear language of the Statute the Hon ble Supreme Court arrived at somewhat similar conclusion. In the case of Ahmedabad Manufacturing and Calico Printing Co., Ltd. (supra) the Hon ble Supreme Court concluded that the mistake can be corrected but the tax can be recovered in the light of the provisions enabling such recovery and in that case, it was held that if the language of the law has clear meaning, it must be given that effect. In the case of S. S. Gadgil (supra), the Hon ble Supreme Court, after underlying this difference, concluded that a provision of the nature and carved out like section 11A is really not a provision of limitation but a fetter or restriction on the power of the authority to bring to tax escaped income. This is what is clearly held by us. If there is a power to recover and within a specific period, then, the exercise of that power is contemplated within the said period, else there is a fetter or restriction to recover the duty. Tribunal s order is ex-facie erroneous and unsustainable in law. It is vitiated by complete non application of mind as well. That the fraud is of great magnitude and that involvement or the act is admitted does not mean that recovery of duty because of such fraud or as a result of it can be made at any time under section 11A. This was clearly lost sight of by the Tribunal. We do not find that this approach of the Tribunal can be sustained in law - Decided in favour of assessee.

Issues Involved:

1. Whether the Appellate Tribunal erred in confirming demand for a period beyond the extended period of limitation (five years from the date of issuance of the show cause notice).
2. Whether the relevant date for computing the period of limitation should be the date of knowledge to the Central Excise Department under section 11A of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Demand Beyond Extended Period of Limitation:

The core issue was whether the demand raised in the show cause notice dated 27th November, 2009, for the period April 2002 to January 2003, was time-barred under Section 11A of the Central Excise Act, 1944. The appellant argued that the demand was barred by limitation as it was issued after more than six years. The Tribunal, however, concluded that the show cause notices were issued within five years from the date when the evidence of clandestine clearance was put to the proprietors in 2006. The Tribunal dismissed the appeals, stating that the demands were not disputed on merits and thus were not time-barred.

The High Court, upon reviewing the relevant provisions, held that Section 11A prescribes a period of one year for recovery of duties not levied or paid, which can be extended to five years in cases involving fraud, collusion, or willful misstatement. The Court emphasized that the relevant date for computing this period is crucial and must be adhered to strictly. The Court found that the Tribunal and the adjudicating authority erred in their interpretation, as the show cause notice was issued beyond the prescribed period, making the demand time-barred.

2. Relevant Date for Computing Period of Limitation:

The appellant contended that the relevant date for computing the period of limitation should be the date on which the duty is to be paid under the Act or the rules made thereunder, as per Section 11A(3)(ii)(C). The Tribunal had held that the relevant date should be the date of knowledge to the Central Excise Department. The High Court disagreed with this interpretation, stating that the statute's plain language must be followed, and the relevant date should be the date on which the duty is to be paid under the Act or the rules.

The Court emphasized that the period of limitation starts from the relevant date as defined in the statute and not from the date of knowledge of the fraud. The Court referred to the Supreme Court's judgments, which clarified that the period of limitation must be strictly construed and cannot be extended based on the date of discovery of the fraud. The Court concluded that the Tribunal's interpretation was erroneous and unsustainable in law.

Conclusion:

The High Court quashed and set aside the Tribunal's order, holding that the demand raised in the show cause notice was time-barred as it was issued beyond the prescribed period of five years from the relevant date. The Court emphasized the importance of adhering to the statutory period of limitation and clarified that the date of knowledge of the fraud cannot be used to extend this period. The appeals were allowed, and the impugned orders were quashed, with no order as to costs.

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