Issues involved: Determination of short levy proceedings u/s 11A of the Central Excises & Salt Act, 1944 for the years 1978-79, 1979-80, 1980-81, and 1981-82.
Summary: The Supreme Court considered whether the Department was justified in initiating proceedings for short levy u/s 11A by invoking the proviso to Section 11A of the Central Excises & Salt Act, 1944 for the mentioned years. The appellant manufactured items falling under Tariff Entry 14E and Item 68, with the latter being fully exempt from duty. The Department claimed that duty was short levied due to the turnover of both items being clubbed together, exceeding the exemption limit of Rs. 5 lakhs. The Department invoked an extended period of limitation of five years, alleging suppression of facts.
The Court referred to the law on excisability of exempted goods as settled in a previous case, highlighting the uncertainty in law regarding the liability to club turnovers of assessable and exempted goods. The Court raised two key questions: whether the appellant was obligated to include the turnover of both items and whether there was a duty to inform the Department about goods not liable to duty. The Court noted the absence of a specific rule requiring disclosure of turnover of exempted goods and emphasized that the appellant could not be held guilty of suppression when the law itself was uncertain.
Analyzing Section 11A, the Court explained that the proviso allows re-opening of proceedings within five years from the relevant date in cases of suppression of facts. The Court clarified that suppression entails deliberate non-disclosure of correct information to evade duty payment. Mere omission without deliberate intent does not constitute suppression. The Court emphasized that suppression must be construed strictly and does not encompass any omission.
In conclusion, the appeal was allowed, and the matter was remitted back to the Authority for determining the turnover of the assessee within the six-month period from the date of the show cause notice, excluding the extended period invoked by the Department.
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