2018 (2) TMI 12 - HC - Central Excise

Valuation - Demand of duty with penalty - Period of limitation - sale of motor vehicles from depots / sales offices - case of Revenue is that the assessee had failed to intimate the difference in the above values and make payment of the excise duty on the differential amount on its own. The Revenue s statement throughout has been that this short payment and evasion was noticed during the audit conducted in January, 2001. This suppression was made by the assessee with a view to evade payment of actual duty - Held that - the Tribunal relying on the language of Rule 7 of the Central Excise Valuation Rules, 2000 and analysing it, came to the conclusion that the language of it says that the price prevailing at the place of sale of goods shall be the transaction value in respect of the goods cleared from the factory to depot. Therefore, the Tribunal held that the submission, that in some of the cases the motor vehicles were sold at higher price than the price prevailing at the depot of sale and therefore the demand is not sustainable, cannot be accepted as those clearances are not subject matter of the present case. To that extent, the Tribunal did not agree with the assessee. Extended period of limitation - Held that - the Tribunal held that if the suppression came to light in January, 2001, subsequent to that it cannot be said that there was any further suppression or there was continued suppression. There was no fresh act by which a suppression can be inferred nor is such material brought on record. If that is how the matter is brought by the Revenue Officials, then subsequent to that period it could not be alleged by the Revenue that there was a suppression on the part of the assessee. The demand for the period February, 2001 to June, 2004 becomes time barred. The Hon ble Supreme Court has been emphasising that the Revenue cannot resort to what it has repeatedly done in matters after matters. It cannot cover up its own fault or error by such erroneous application of law. Once the legal position was clear and throughout, we do not see any justification for the Revenue bringing this appeal. Appeal dismissed.

Issues Involved:
1. Pendency of cases due to Revenue's litigation practices.
2. Alleged evasion and short-payment of excise duty by the assessee.
3. Issuance and adjudication of Show Cause Notices.
4. Applicability of the extended period of limitation under Section 11A of the Central Excise Act, 1944.
5. Tribunal's decision on the limitation period and penalties.

Detailed Analysis:

1. Pendency of Cases Due to Revenue's Litigation Practices:

The court expressed strong displeasure at the Revenue's tendency to challenge Tribunal findings on limitation and Section 11A of the Central Excise Act, 1944. It criticized the Revenue's lack of grace and maturity in accepting Tribunal decisions, noting that frivolous appeals waste judicial time. The court emphasized the need for the Revenue to introspect and reconsider its litigation strategies, especially in high-stakes matters, and to engage competent legal representation.

2. Alleged Evasion and Short-payment of Excise Duty by the Assessee:

The respondents, a manufacturer of motor vehicles, were found during a January 2001 audit to have been clearing vehicles to Regional Sales Offices on a lower assessable value, leading to alleged short-payment of excise duty. The Revenue claimed this constituted evasion, as higher prices were charged to customers after intra-depot transfers, necessitating additional duty payments.

3. Issuance and Adjudication of Show Cause Notices:

The Revenue issued nine Show Cause Notices between 2005 and 2010, alleging suppression of facts and evasion of duty. These were adjudicated by a common Order-in-Original in March 2011, confirming the demand. The Commissioner (Appeals) upheld this order but reduced the duty and penalties. The CESTAT partly allowed the assessee's appeal, dropping the duty demand for February 2001 to June 2004 and the penalties for July 2004 to March 2013.

4. Applicability of the Extended Period of Limitation under Section 11A of the Central Excise Act, 1944:

The court noted that the CESTAT held the Show Cause Notices issued from 2005 to 2010 were time-barred for periods prior to the normal limitation period because the alleged suppression was detected in January 2001. The Revenue should have issued the notices promptly within the normal period. The court agreed with the CESTAT's interpretation that the extended period could not be invoked without fresh acts of suppression post-detection.

5. Tribunal's Decision on the Limitation Period and Penalties:

The Tribunal found that the first Show Cause Notice dated 19-7-2005, referring to suppression detected in January 2001, could not justify demands for periods beyond the normal limitation. The Tribunal dropped the demand for February 2001 to June 2004 and penalties for July 2004 to March 2013, as no further suppression was proven post-January 2001. The court upheld this reasoning, emphasizing that the Revenue failed to establish continued suppression, making the demands time-barred.

Conclusion:

The court dismissed the Revenue's appeal, agreeing with the CESTAT's findings on the limitation period and penalties. It reiterated that the extended period under Section 11A could not be invoked without fresh acts of suppression post-detection. The court criticized the Revenue's litigation practices, deeming the appeal frivolous and an abuse of judicial process, and imposed costs of ?1,00,000 on the Revenue.

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