2021 (12) TMI 427 - HC - Central Excise

Time Limitation - suppression of fact of manufacture and clearance of excisable goods - exemption Notification No.74/1993 dated 28.2.1993 - HELD THAT - The facts on record indicate that prior to 1996 the appellant was engaged in the manufacture of gates and hoists that were supplied to the Irrigation Department. By virtue of exemption Notification No.74/1993 dated 28.2.1993 the goods falling under the heading 73 and 84 of the Schedule were exempted from payment of central excise duty. On 1.4.1986 the Corporation came to be established and it is thereafter that the demand of central excise duty from 1997-1998 to 1999-2000 came to be raised by issuing show cause notice dated 30.3.2001. In the show cause notice it has been stated that the appellant suppressed the fact of manufacture and clearance of excisable goods with a view to evade payment of central excise duty. In view of the fact that the appellant had not obtained necessary registration, the Directorate found it sufficient to invoke the proviso to Section 11A(1) of the said Act. When the material on record is perused it becomes clear that in the reply to the show cause notice itself the appellant had stated that in view of exemption Notification No.74/1993 which was applicable to it till 31.3.1996, the appellant was not aware of the procedure as regards charging and paying excise duty. It became a statutory Corporation and there was no intention to evade the payment of central excise duty in any manner whatsoever. While admitting that it was liable to pay central excise duty it was stated that the penalty or interest may not be imposed upon the appellant. The Tribunal while considering the aforesaid material has stated that the explanation furnished by the appellant was not sufficient and the plea of bona fide belief was not accepted. It is thus found that satisfaction recorded initially by the Commissioner and then by the Tribunal as regards the intention of appellant to evade payment of central excise duty is without any supporting material on record - The substantial question of law as framed is answered by holding that the Tribunal was not justified in law and in facts in holding that the demand under the show cause notice was not barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Section 11A(1) of the Central Excise Act, 1944 regarding the limitation period for demanding excise duty.
- Application of exemption Notification No.74/1993 dated 28.2.1993 to the appellant's case.
- Consideration of intention to evade payment of duty in invoking extended limitation period.
- Adequacy of material supporting the conclusion of deliberate evasion of excise duty.
- Justification of invoking the proviso to Section 11A(1) based on suppression of facts.

Analysis:

1. Interpretation of Section 11A(1) of the Central Excise Act:
The case involved the interpretation of Section 11A(1) regarding the limitation period for demanding excise duty. The appellant argued that the proviso to Section 11A(1) was wrongly invoked by the revenue beyond the one-year period without evidence of wilful misstatement or suppression of facts to evade duty. The Tribunal upheld the demand based on the extended limitation period, leading to the appeal.

2. Application of Exemption Notification:
The appellant contended that prior to 1996, it was entitled to exemption from excise duty under Notification No.74/1993. However, after the establishment of the Corporation in 1996, the demand for excise duty from 1997-1998 to 1999-2000 was raised. The appellant maintained a bona fide belief that the exemption continued to apply, leading to the dispute over the duty demand.

3. Consideration of Intention to Evade Payment:
The crucial aspect was the intention to evade payment of duty in invoking the extended limitation period. The appellant argued that there was no evidence of wilful evasion and that immediate registration post-service of the show cause notice indicated a lack of intent to evade. The Tribunal's conclusion of deliberate non-payment was challenged based on the appellant's explanation and belief in continued exemption eligibility.

4. Adequacy of Supporting Material:
The judgment scrutinized the material on record to assess the justification for concluding deliberate evasion of duty. The appellant's explanation and lack of concrete evidence indicating wilful suppression of facts raised doubts on the Tribunal's findings. The absence of substantial material supporting the conclusion of intentional evasion undermined the Tribunal's decision.

5. Justification of Proviso to Section 11A(1) based on Suppression of Facts:
The judgment emphasized that wilful misstatement or suppression of facts must be established for invoking the proviso to Section 11A(1). The lack of concrete evidence indicating deliberate evasion rendered the invocation of the proviso unjustified in this case. The Tribunal's failure to consider this jurisdictional aspect led to setting aside the judgment and allowing the appeal.

In conclusion, the High Court held that the Tribunal was not justified in upholding the demand under the show cause notice beyond the limitation period without sufficient evidence of intentional evasion. The judgment was set aside, allowing the appeal, and granting the appellant the option to seek a refund under Section 11B of the Central Excise Act.