2019 (4) TMI 585 - HC - Central Excise

Extended period of limitation - suppression of facts - whether the order of the Settlement Commission is liable to be interfered with by this court? - Held that - From the order of the Settlement Commission, it is clear that the Settlement Commission was apprised of the fact that differential duty had been calculated incorrectly. Therefore, one of the questions that the Settlement Commission was called upon to decide was whether the extended period of limitation was justifiably invoked by the Central Excise Department - By taking into consideration the requests for clarification and the voluntary payment of differential duty in respect of depot sales on stock transfer basis, the Settlement Commission concluded that there was no suppression of facts. In fact, the Settlement Commission has expressly stated that the Applicant therein/First Respondent herein would not have requested for clarification or communicated with regard to payment of differential duty, which included the methodology adopted for calculation thereof, if it intended to suppress facts so as to evade payment of excise duty and that these communications were not responded to by the Central Excise Department. From the proviso to Section 11-A, it is clear that the extended period can be invoked only if there is fraud, collusion, wilful misstatement, suppression of facts or contravention of the Central Excise Act or the Rules made thereunder with intent to evade excise duty - In the instant case, there is no allegation of fraud or collusion. As regards willful misstatement or suppression of facts, the question arises as to whether suppression of facts per se justifies invoking the extended period. In the instant case, the Settlement Commission expressly adverted to the fact that the First Respondent would not have sought for a clarification from the Central Excise Department as to the correct method of calculating duty on depot sales on stock transfer basis or paid the differential duty, with the method of valuation, if there was intention to evade excise duty. Thus, the order of the Settlement Commission does not suffer from any infirmities and is not liable to be interfered with by this court in the exercise of supervisory jurisdiction. Petition dismissed.

Issues Involved:
1. Whether the impugned order of the Customs and Central Excise Settlement Commission contains errors apparent on the face of the record.
2. Whether the extended period of limitation under Section 11A of the Central Excise Act was justifiably invoked.
3. Whether the Settlement Commission has jurisdiction to entertain the case.
4. Whether the freight charges should be included in the assessable value for calculating excise duty on depot sales on stock transfer basis.
5. Whether the First Respondent suppressed facts or made willful misstatements with intent to evade duty.

Detailed Analysis:

1. Errors Apparent on the Face of the Record:
The core issue in the writ petition is whether the impugned order by the Customs and Central Excise Settlement Commission contains errors apparent on the face of the record and is thus liable to be quashed under Article 226 of the Constitution of India. The petitioner argued that the Settlement Commission did not appreciate certain facts and failed to recognize the necessity of provisional assessment by the First Respondent.

2. Extended Period of Limitation:
The Settlement Commission was tasked with determining whether the extended period of limitation under Section 11A of the Central Excise Act was justifiably invoked. The Commission noted that the First Respondent had been regularly communicating with the Department, seeking advice on the method of valuation for depot sales and paying differential duty, albeit incorrectly. The Settlement Commission concluded that there was no suppression or willful misstatement by the First Respondent, as they had proactively sought clarification and informed the Department about the differential duty payments. Consequently, the invocation of the extended period was deemed unsustainable.

3. Jurisdiction of the Settlement Commission:
The Settlement Commission's jurisdiction to entertain the case was challenged. The court clarified that Section 32-E of the Central Excise Act covers cases of undervaluation and that the Settlement Commission has the authority to handle such cases. The petitioner’s reliance on a Division Bench judgment of the Karnataka High Court was found distinguishable as it pertained to a smuggling case, which was not analogous to the present matter.

4. Inclusion of Freight Charges in Assessable Value:
There was no dispute regarding the inclusion of freight charges in the assessable value for calculating excise duty on depot sales on stock transfer basis. The court referenced the judgments of the Supreme Court in the ESCORTS JCB and PRABHAT ZARDA FACTORY cases, which settled this issue affirmatively.

5. Suppression of Facts or Willful Misstatements:
The critical question was whether the First Respondent suppressed facts or made willful misstatements with the intent to evade duty. The Settlement Commission found that the First Respondent had not suppressed facts, as they had openly communicated with the Department about the differential duty and sought clarifications on the valuation method. The court cited the PUSHPAM PHARMACEUTICALS case, emphasizing that suppression of facts must be deliberate and aimed at evading duty to justify the extended period. The Settlement Commission's finding that there was no intent to evade duty was upheld, and it was concluded that the order did not suffer from any infirmities warranting interference.

Conclusion:
The writ petition was dismissed, and the court upheld the decision of the Settlement Commission, finding no errors on the face of the record. The extended period of limitation was not justifiably invoked, the Settlement Commission had jurisdiction, freight charges should be included in the assessable value, and there was no suppression of facts or willful misstatement by the First Respondent. Consequently, the connected miscellaneous petition was also closed, and no order as to costs was made.

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