2023 (11) TMI 1069 - AT - Central Excise

Invocation of Extended period of Limitation - Recovery of central excise duty on coal extracted and cleared by Jindal Steel Power Ltd. - suppression of material facts from the department - additional value of coal was not included by the appellant in the invoices for payment of excise duty and this fact was not disclosed in the statutory ER-1 returns - revenue neutrality - HELD THAT - In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT , the Supreme Court examined whether the department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Central Excise Act. The proviso to section 11A of the Central Excise Act which was considered by the Supreme Court carved out an exception to the provisions that permitted the department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would transpire from the aforesaid decision that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. In the present case, the show cause notice merely alleges that because the appellant did not pay central excise duty on additional levy at the rate of Rs. 295 /- per MT, the appellant suppressed material facts. There is no allegation in the show cause notice that such suppression was with an intent to evade payment of central excise duty. This was an important aspect, which was required to be not only alleged in the show cause notice, but also to be proved by the department before the extended period of limitation of five years could have been invoked. However, it has neither been alleged nor proved - In such circumstances, it is not possible to hold, even if there was suppression of facts, that the appellant had any intent to evade payment of central excise duty. Revenue Neutrality - HELD THAT - Even if there was any additional duty payable by the appellant, the same would be admissible as CENVAT credit to its own Raigarh unit. Such CENVAT credit would have been utilized by the Raigarh unit for payment of central excise duty at its end. Therefore, the entire exercise of demanding any further excise duty would be revenue neutral. It, therefore, follows that the extended period of limitation could not have been invoked in the facts and circumstances of the case. As the entire demand of central excise duty has been confirmed after invoking the extended period of limitation, the confirmation of the demand would have to be set aside - In this view of the matter, it would not be necessary to examine whether the additional levy of Rs. 295/- per MT was actually required to be added to the cost of production. Appeal allowed.

Issues Involved:

1. Whether the additional levy of Rs. 295/- per metric ton is subject to central excise duty.
2. Whether the extended period of limitation for issuing the show cause notice is applicable.
3. Whether the appellant suppressed material facts with intent to evade payment of central excise duty.
4. Whether the penalty and interest imposed are justified.
5. Whether the finding that the additional levy is akin to royalty is beyond the scope of the show cause notice.

Summary:

1. Additional Levy and Excise Duty:
The appellant argued that the additional levy of Rs. 295/- per metric ton, imposed by the Supreme Court, was in the nature of compensation and not subject to central excise duty. They contended that this levy was an "abnormal cost" and should not be included in the cost of production as per CAS-4 read with rule 8 of the Valuation Rules. The Tribunal noted that the appellant had a bonafide belief, supported by the provisions of CAS-4, that the additional levy was not to be included in the cost of production.

2. Extended Period of Limitation:
The show cause notice was issued on 20.05.2016 for the period from May 2011 to March 2015. The Tribunal emphasized that the extended period of limitation under section 11A (4) of the Central Excise Act is applicable only in cases involving fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. The Tribunal found no evidence of such intent or deliberate suppression by the appellant and held that the extended period of limitation could not be invoked.

3. Suppression of Material Facts:
The Tribunal examined whether the appellant's omission to include the additional levy in the cost of production constituted suppression of facts with intent to evade duty. It referred to several Supreme Court decisions, which clarified that suppression must be deliberate and with intent to evade duty. The Tribunal concluded that the appellant's belief was bonafide and there was no intent to evade duty, thus suppression could not be alleged.

4. Penalty and Interest:
Given that the extended period of limitation was not applicable and there was no intent to evade duty, the Tribunal held that neither penalty nor interest could be imposed on the appellant.

5. Additional Levy as Royalty:
The Tribunal noted that the finding in the impugned order that the additional levy is akin to royalty was beyond the scope of the show cause notice and thus could not be sustained.

Conclusion:
The Tribunal set aside the order dated 28.11.2017 passed by the Commissioner, confirming the demand of central excise duty, and allowed the appeal. The Tribunal emphasized that the entire exercise was revenue neutral since any additional duty paid by the appellant would be available as CENVAT credit to its Raigarh unit.

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