2019 (8) TMI 1252 - HC - Central Excise

Invocation of extended period of limitation by subsequent SCN - three show cause notices for larger period of limitation had been issued already to the appellants in the past for the same cause of dispute - duty demand on income of selling patterns/moulds - all the show cause notices were issued on basis of audit verification of balance sheets only HELD THAT - It may be pertinent to note that the earlier also show cause notices were issued and same are quashed and set aside and therefore, the reference to intelligence in the impugned show cause notices is of no consequence, since all the said facts were already before the central excise authorities at the time when the earlier show cause notices came to be issued - it cannot be said that the impugned show cause notices are based on new or different facts than the earlier ones. Even the while issuing the present show cause notices, the same and/or similar set of facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. Under the circumstances, the respondents were not justified in invoking the extended period of limitation in respect of earlier periods by issuing the impugned show cause notices, on the plea of suppression of facts by the appellants, as the facts were already in the knowledge of the Department. The controversy involved in the present petition is no longer res-integra in view of the decision of the Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT where it was held that while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Invocation of extended period of limitation under Section 11A of the Central Excise Act.
2. Allegations of suppression of facts and willful misstatement by the appellant.
3. Applicability of the Supreme Court's decision in Nizam Sugar Factory to the present case.
4. Validity of duty demands raised under show cause notices dated 22.10.2007 and 14.11.2007.

Detailed Analysis:

1. Invocation of Extended Period of Limitation:
The primary issue revolves around whether the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) was justified in allowing the Revenue to invoke an extended period of limitation for issuing show cause notices dated 22.10.2007 and 14.11.2007. The appellant argued that the invocation of the extended period was impermissible since similar show cause notices had been issued previously for the same cause of dispute.

The court noted that under Section 11A of the Central Excise Act, a show cause notice for any duty not levied or short-levied must be issued within one year from the relevant date. However, in cases involving fraud, collusion, willful misstatement, or suppression of facts, the period extends to five years. The Supreme Court in Nizam Sugar Factory held that once a show cause notice is issued on certain facts, subsequent notices on the same facts cannot invoke the extended period of limitation.

2. Allegations of Suppression of Facts and Willful Misstatement:
The Revenue alleged that the appellant had willfully suppressed facts regarding the sales of patterns/moulds, justifying the extended period of limitation. The appellant countered that all relevant facts were disclosed in the balance sheets, which are public documents, and there was no suppression or misstatement.

The court reiterated that mere omission to give correct information does not constitute suppression unless it is deliberate and intended to evade duty. The Supreme Court in Continental Foundation Jt. Venture and other cases emphasized that suppression involves deliberate concealment of information, not a bona fide omission.

3. Applicability of the Supreme Court's Decision in Nizam Sugar Factory:
The appellant relied heavily on the Nizam Sugar Factory case, where the Supreme Court ruled that subsequent show cause notices on the same facts cannot invoke the extended period of limitation. The Tribunal distinguished the present case by stating that the periods covered by the impugned show cause notices were prior to the periods covered by the earlier notices.

The court found this distinction irrelevant, noting that the facts and allegations in the impugned notices were similar to those in the earlier notices. The Supreme Court's decision in Nizam Sugar Factory applies regardless of whether the subsequent notices cover earlier or later periods, as long as the facts and allegations are the same.

4. Validity of Duty Demands Raised Under Show Cause Notices Dated 22.10.2007 and 14.11.2007:
The court concluded that the impugned show cause notices were based on the same facts already known to the authorities when the earlier notices were issued. Therefore, invoking the extended period of limitation was unjustified. The Tribunal's decision to uphold the extended period for the fourth and fifth show cause notices was found to be contrary to the established legal principles.

Conclusion:
The court allowed the appeal, quashing the show cause notices dated 22.10.2007 and 14.11.2007 and the Tribunal's order dated 7.9.2018. It held that the demands raised under these notices were barred by limitation and unenforceable. The respondent was directed to grant all consequential benefits to the appellant.

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