2018 (11) TMI 352 - AT - Central Excise

Extended period of limitation - suppression of facts - Claiming SSI exemption - Suppression of turnover - it was alleged that the appellant had suppressed the fact regarding forfeited security amount from the Department. Held that - There is no doubt that in the present case, the case was made out on the basis of examination of balance sheet. The amount in question was duly reflected in the audited balance sheet and profit and loss account of the Appellant - It is not the allegation of the Department that the appellant were showing different amounts in the balance sheet, ledgers and books of accounts in order to avoid payment of tax - The demand for extended period can be issued and confirmed only in cases where the non-payment of tax is by reason of fraud/ collusion/ willful mis-statement/ suppression of fact/ contravention of any statutory provision with intention of evade tax. The department has to establish with supporting evidence, the existence of factors indicating willful mis-statement / suppression of facts. The non-collection of duty from the customers also supported the bonafide belief. The entire dealings are on records and the payments they have made and received are through banking channel only. Further, the clearance had taken place under cover of Central Excise invoices which were duly entered in the Central Excise records and therefore intention to evade payment of duty is not establish. As the demand is based on the basis of information appearing in the balance sheet, suppression of such information with an intention to evade duty cannot be alleged and therefore, the demand raised by the Department is hit by limitation and as a result of which the extended period cannot be invoked in the facts of the present case - invocation of extended period not justified. The impugned order is set aside on the ground of limitation only without going into further merits of the matter - appeal allowed.

Summary

Issues Involved:
1. Invocation of the extended period for demand under Section 11A of the Central Excise Act, 1944.
2. Liability of the appellant to pay Central Excise duty on forfeited advances.
3. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Invocation of the Extended Period for Demand:
The primary issue was whether the extended period for demand was rightly invoked. The department issued a Show Cause Notice alleging suppression of facts and invoking the extended period under Section 11A of the Central Excise Act, 1944. The adjudicating authority and the Commissioner (Appeals) upheld this invocation, citing suppression of facts regarding forfeited security amounts. However, the Tribunal emphasized that for the extended period to be invoked, the non-payment of tax must be due to fraud, collusion, willful misstatement, or suppression of facts with intent to evade duty. The Tribunal noted that the amount in question was reflected in the audited balance sheet and profit and loss account, which are public documents. There was no evidence of fraudulent intent or willful suppression. The Tribunal referenced the Supreme Court's decision in Cosmic Dye Chemical vs. Collector of Central Excise, Bombay and the Tribunal's decision in Hindalco Industries Ltd. vs. Commissioner Of C. Ex., Allahabad, which held that intent to evade duty must be proved for invoking the extended period. Consequently, the Tribunal concluded that the extended period was not rightly invoked, and the demand was hit by limitation.

2. Liability to Pay Central Excise Duty:
Although the Tribunal primarily decided the case on the issue of limitation, it briefly addressed the appellant's liability to pay Central Excise duty. The appellant received advances from customers for the manufacture of Gravures Cylinders, which were forfeited when the customers did not collect the goods. The department argued that these advances should be included in the value of clearances for determining duty liability. The Tribunal noted that the entire dealings were recorded, and payments were made through banking channels. The demand was based on the balance sheet, a public document, and there was no intention to evade duty. Therefore, the Tribunal did not delve further into the merits of the duty liability, as the demand was already set aside on the ground of limitation.

3. Imposition of Penalty:
The department imposed a penalty under Rule 25 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944, for contravention of Rules 6 and 8. The Tribunal observed that penalties under Section 11AC are applicable only when there is intent to evade duty through fraud, collusion, willful misstatement, or suppression of facts. Since the extended period was not rightly invoked and there was no evidence of intent to evade duty, the imposition of penalty was also not justified. The Tribunal set aside the penalty along with the demand.

Conclusion:
The Tribunal allowed the appeal filed by the appellant, setting aside the impugned order on the ground of limitation without delving into the further merits of the matter. The extended period for demand was not rightly invoked as there was no evidence of intent to evade duty, and the entire dealings were recorded in public documents. Consequently, the penalty imposed was also set aside.