2008 (12) TMI 185 - HC - Central Excise

Demand and Recovery Period of limitation suppression of facts section 11A Held that - . In the instant case it appears that by way of self assessment the assessee has claimed a relief/a benefit but no notice was served on the assessee to clarify the position within the period mentioned in the Act by not doing so. In our considered opinion it cannot be said that assessee has suppressed any material facts from the authority or concealed anything which can tantamounts to show an intention to evade the duty. Therefore such fact in this case cannot in our considered opinion draw the benefit to the respondent for extension of the period of limitation as provided under the Statute.

Summary

Issues:
Whether the department can take recourse to the proviso to Section 11A of the Central Excise Act, 1944, and the six months of acquiring knowledge that the assessee shall/is engaged in manufacturing excisable items.

Detailed Analysis:

1. The appeal raised the question of whether the department could invoke the proviso to Section 11A of the Central Excise Act, 1944, based on the knowledge that the assessee was engaged in manufacturing excisable items. The appellant, a chemical company, availed Modvat credit on certain items classified as capital goods. However, a subsequent amendment excluded hydrogen gas cylinders from the list of capital goods. The appellant filed returns claiming credit on these items as capital goods, asserting no intention to evade duty or suppress facts. The appellant argued that authorities failed to properly assess and notify any discrepancies, emphasizing the absence of fraud or suppression.

2. The appellant contended that the extended period of demand under Rule 57 or 57(u) of the 1944 Act was unjustified due to the absence of intentional evasion or suppression. Citing relevant case law, the appellant emphasized that an extended period should only apply in cases of deliberate fraud or suppression, not mere non-declaration. The appellant highlighted that they had disclosed material facts through returns, and any benefit from an extended period was unwarranted due to the department's inaction.

3. The respondent argued that the appellant deliberately withheld material facts despite being aware of the notification changes. Ignorance of the law was not a valid excuse, and the appellant's duty was to disclose all pertinent information. Referring to a Supreme Court decision, the respondent contended that the proviso to Section 11A could be invoked if there was a deliberate intention to suppress information, which, in this case, was evident from the appellant's actions.

4. The court analyzed the facts and case law presented. It concluded that the authorities had ample opportunity to address any discrepancies at the time of filing the returns. Emphasizing the importance of natural justice, the court noted that the appellant's self-assessment and claim for relief should have prompted the authorities to seek clarification within the specified period. Since no such notice was served, the court found no evidence of intentional evasion or suppression by the appellant. Consequently, the appeal was allowed in part, with the court ruling that no penalty could be imposed on the appellant except for the duty owed based on the reclassification of cylinders as non-capital goods.

5. The judgment, delivered by two judges, highlighted the differing perspectives presented by the appellant and respondent. While the appellant argued against intentional evasion or suppression, the respondent contended that the appellant's actions demonstrated a deliberate withholding of material facts. The court ultimately sided with the appellant, emphasizing the importance of proper assessment by authorities and the lack of evidence supporting intentional evasion or suppression by the appellant.