2018 (10) TMI 267 - HC - Central Excise

Extended period of Limitation - Benefit of reduced Penalty - invoking extended period of limitation under Section 11A of the Central Excise Act and imposition of penalty under Section 11AC when all relevant information were within the knowledge of the department from 02.12.2003? - Eligibility of availing Cenvat Credit when no return was filed. Held that - The proviso comes into play only when suppression is established or stands admitted and it would differ from a case where fraud, etc., are merely alleged or is disputed by the assessee and therefore, the concept of knowledge cannot be read into the provisos because that would amount to rendering the term relevant date negatory and such interpretation is not permissible. The contention that once knowledge has been acquired by the department, there is no suppression and the ordinary statutory period of limitation prescribed under sub-section (1) of section 11 would be applicable was rejected as a fallacious argument inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularity, the suppression would not be obliterated. In the instant case, it has been established that there has been suppression, there has been clandestine removal of excisable goods without payment of excise duty, the assessee having collected excise duty from the customers did not remit it to the department and the assessee did not obtain registration from the department nor maintained any records and obtained registration under the provisions of the Act only on 16.05.2003. Thus, these facts would clearly establish that the extended period of limitation was invocable in the assessee s case. Also, the plea raised by the assessee that they should have been granted the opportunity to pay 25% is unacceptable. If the assessee had collected excise duty, he is bound to remit the duty to the department and cannot retain the same and then contend that due to financial difficulty, he could not remit the same and had remitted a portion of the same in instalments. The factual scenario in the instant case disentitles the assessee for any remedy. CENVAT Credit - it is submitted that the Adjudicating Authority has erroneously denied the Cenvat credit and the assessee was able to succeed only before the Appellate Authority - Held that - The assessee did not file any return and did not maintain any records. Therefore, for reasons assigned by the original authority, the credit was rightly denied. However, the assessee has partially succeeded before the Appellate Authority and as against the said finding, the department has not filed an appeal - this can, in no way, advance the case of the assessee. Appeal dismissed - decided against assessee.

Summary

Issues Involved:
1. Invocation of extended period of limitation under Section 11A of the Central Excise Act, 1944.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
3. Retrospective effect of Notification No.30/2004-CE dated 09.07.2004.

Detailed Analysis:

1. Invocation of Extended Period of Limitation under Section 11A of the Central Excise Act, 1944:
The primary issue was whether the extended period of limitation under Section 11A of the Central Excise Act, 1944, could be invoked. The assessee contended that since the department had knowledge of the facts from 02.12.2003, the extended period should not apply. However, it was established that the assessee had suppressed facts, clandestinely removed excisable goods without payment of duty, and collected but did not remit the excise duty to the department. The High Court of Gujarat in the case of Commissioner of Central Excise, Surat vs. Neminath Fabrics Pvt. Ltd. held that the concept of knowledge by the department does not negate the suppression. The extended period of limitation is applicable when suppression is established, regardless of the department's knowledge. Thus, the extended period of limitation was rightly invoked.

2. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:
The assessee argued against the imposition of penalty under Section 11AC, contending that the relevant information was already with the department. The court referred to the statutory provisions and case law, including the decision in Principal Commissioner of Service Tax, Delhi vs. Tops Security Ltd., which held that the benefit of a reduced penalty of 25% is only applicable if the duty, interest, and reduced penalty are paid within 30 days of the communication of the adjudicating authority's order. The court concluded that the assessee did not qualify for the reduced penalty as they did not comply with the statutory requirements within the prescribed period. Therefore, the imposition of the penalty under Section 11AC was upheld.

3. Retrospective Effect of Notification No.30/2004-CE dated 09.07.2004:
The assessee contended that the notification re-instituting the exemption should have retrospective effect, citing the Supreme Court's decision in WPIL vs. Central Excise, Meerut. However, the court distinguished the facts of the present case from WPIL, noting that the notification dated 09.07.2004 was not clarificatory but a new notification. In WPIL, the exemption was clarified and made explicit due to an inadvertent omission. In contrast, the notification in the present case was a fresh exemption and could not be applied retrospectively. Thus, the court held that the notification dated 09.07.2004 did not have retrospective effect.

Conclusion:
The High Court dismissed the appeal, answering both substantial questions of law against the assessee. The invocation of the extended period of limitation and the imposition of the penalty under Section 11AC were upheld. The notification dated 09.07.2004 was determined not to have retrospective effect.