2023 (1) TMI 638 - AT - Central Excise

Invocation of extended period of limitation - it is alleged that the show cause notice was issued on December 09, 2015 without there being any reason for invoking the extended period of limitation contemplated under sub-section (4) of section 11A of the Excise Act - suppression of facts to evade duty or not. Whether for invoking the extended period of limitation under section 11A(4) of the Excise Act, facts had been suppressed by the appellant and even if they had been suppressed then whether suppression of facts is enough or it should be with an intent to evade payment of duty? HELD THAT - The show cause notice only alleges that the appellant had suppressed facts. It does not allege that the appellant had suppressed facts with intent to evade payment of excise duty. In the absence of any allegation made in the show cause notice that the appellant had suppressed facts with intent to evade payment of duty, the Department could not have invoked the extended period of limitation under section 11A(4) of the Act. This issue was raised by the appellant before the Commissioner (Appeals), but no finding has been recorded. The provisions of section 11A(4) of the Excise Act came up for interpretation before the Supreme Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT . The Supreme Court observed that section 11A empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. Thus, the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. The extended period of limitation could not have been invoked. The demand, which covers only the extended period of limitation, therefore, could not have been confirmed - Appeal allowed.

Summary

Issues Involved:
1. Invocation of the extended period of limitation under section 11A(4) of the Central Excise Act, 1944.
2. Allegation of suppression of facts with intent to evade payment of duty.

Detailed Analysis:

Invocation of the Extended Period of Limitation:
The primary issue examined was whether the extended period of limitation under section 11A(4) of the Central Excise Act, 1944, could be invoked. The appellant argued that the show cause notice issued on December 09, 2015, was beyond the one-year period from the relevant date, January 02, 2014, and that there was no justification for invoking the extended period of five years. The Department contended that the extended period was justified due to the appellant's failure to disclose required information in the ER-1 form.

The Tribunal emphasized that for the extended period to apply, there must be evidence of fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. The show cause notice merely mentioned an audit without specifying the date and did not allege intent to evade duty. The Tribunal found no space in the ER-1 form where the appellant was required to disclose the relationship with RSSL, thus ruling out suppression of information.

Allegation of Suppression of Facts with Intent to Evade Payment of Duty:
The Tribunal scrutinized whether the appellant had suppressed facts with intent to evade duty, which is necessary for invoking the extended period under section 11A(4). The show cause notice and subsequent orders did not establish that the appellant had intent to evade duty. The Tribunal referred to several Supreme Court judgments, including Pushpam Pharmaceuticals, Anand Nishikawa Co. Ltd., and Uniworth Textiles Ltd., which clarified that mere failure to declare does not amount to wilful suppression. There must be a deliberate act to escape payment of duty.

The Tribunal noted that departmental instructions require officers to scrutinize returns and call for necessary documents. The lack of such scrutiny by the officers cannot be blamed on the appellant. The Tribunal concluded that the Department failed to prove that the appellant suppressed facts with intent to evade duty.

Conclusion:
The Tribunal set aside the impugned order, ruling that the extended period of limitation could not be invoked as there was no evidence of suppression of facts with intent to evade duty. The appeal was allowed, and the demand was quashed.