2004 (8) TMI 109 - SC - Central Excise

Demand - Bart of limitation - Limitation - Suppression of facts - Held that - Court had concluded that the entire movement of scrap had been recorded in the regular books of accounts and proper documentation was maintained. It appears to us that the observations made in paragraph 10 set out herein above that the Appellants were entitled to get benefit of MODVAT scheme and that therefore there was no justifiable reason to suppress the fact is based on facts i.e. there was no material on record to infer or establish that excise duty had not been levied or paid by reason of any fraud, collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of any Rules. However, it is regularly urged that this authority lays down that, irrespective of facts, if a party is entitled to get benefit of a MODVAT scheme, then there can be no suppression and the above highlighted observations are capable of such an interpretation. Question whether there is suppression or not is a question to be decided on facts of each case and has nothing to do with available credit or a party having benefit of MODVAT scheme e.g. a party having credit or benefit of a MODVAT scheme may by suppression undervalue goods in order to clear a larger number of goods on his available credit. The above judgment being of two Judges it is not possible for us to take a contrary view. Judicial discipline requires that the case be referred to a Larger Bench to decide whether in every case, where a party has credit or benefit of a MODVAT scheme, it must be presumed that there can be no suppression.

Summary

Issues:
1. Whether the Tribunal's decision to allow the appeal based on the availability of credit to the respondents without suppression of duty was correct.
2. Interpretation of the principle regarding suppression in cases where the benefit of MODVAT scheme is available.
3. Determining if the entitlement to the MODVAT scheme automatically negates the possibility of suppression of facts.
4. Whether the law dictates that the presence of credit or benefit of MODVAT scheme precludes the existence of suppression in all cases.

Analysis:
1. The Tribunal allowed the appeal, stating that since credit was available to the respondents, there was no suppression of duty. The Tribunal's view was supported by a judgment which emphasized that the absence of fraud, collusion, or willful misstatement regarding excise duty payment indicated no suppression. However, the Supreme Court noted that the decision should be based on the facts of each case, regardless of credit availability or MODVAT scheme benefits. The Court highlighted that having credit could lead a party to undervalue goods for clearance, indicating that suppression could still occur despite credit availability.

2. The Court addressed the interpretation of the principle related to suppression when the MODVAT scheme benefit is accessible. While some argued that MODVAT scheme entitlement automatically rules out suppression, the Court disagreed. It emphasized that each case should be examined individually to determine the presence of suppression, irrespective of the availability of credit or MODVAT benefits. The Court highlighted the need for a factual analysis to establish suppression, rather than a blanket presumption based on credit availability.

3. The judgment highlighted the importance of factual evidence in determining suppression, rather than relying solely on the availability of credit or MODVAT scheme benefits. The Court emphasized that the absence of evidence indicating fraud or willful misstatement regarding duty payment does not automatically negate the possibility of suppression. It stressed the need for a case-by-case assessment to ascertain suppression accurately, irrespective of the party's entitlement to credit or MODVAT benefits.

4. Due to the differing interpretations regarding the relationship between credit availability, MODVAT scheme benefits, and suppression, the Supreme Court suggested referring the matter to a Larger Bench for clarification. The Court noted that judicial discipline required a thorough examination to determine whether the presumption of no suppression should apply solely based on credit availability or MODVAT scheme benefits. The case was recommended for review by a Larger Bench to establish a consistent approach in determining suppression in cases involving credit or MODVAT scheme benefits.