2005 (9) TMI 92 - SC - Central Excise

Demand - Limitation - Extended period - whether the Respondents were entitled to invoke the extended period of limitation under Section 11A of the Central Excise Act, 1944 - Held that - appellants have all along claimed that merely because they were affixing the label of a foreign party, they did not lose the benefit of Notification No. 175/86-C.E. as amended by Notification No. 1/93-C.E. The view taken by the Appellants had, in some cases, been approved by the Tribunal which had held that mere use of the name of a foreign party did not dis-entitle a party from getting benefit of the Notifications. It is only after Larger Bench held in Namtech Systems Limited v. Commissioner of Central Excise, New Delhi reported in 1999 (12) TMI 145 - CEGAT, NEW DELHI that the position has become clear. It is settled law that mere failure to declare does not amount to wilful mis-declaration or wilful suppression. There must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression. When all facts are before the Department and a party in the belief that affixing of a label makes no difference does not make a declaration, then there would be no wilful mis-declaration or wilful suppression. If the Department felt that the party was not entitled to the benefit of the Notification, it was for the Department to immediately take up the contention that the benefit of the Notification was lost - Decided in favour of Revenue.

Summary

Issues:
Whether the Respondents were entitled to invoke the extended period of limitation under Section 11A of the Central Excise Act, 1944.

Analysis:
The Supreme Court heard an appeal against an Order of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) concerning the invocation of the extended period of limitation under Section 11A of the Central Excise Act, 1944. The Tribunal had based its decision on a previous judgment by the Larger Bench in the case of Nizam Sugar Factory v. Commissioner of Central Excise, Hyderabad. The dispute arose from the classification of a product by the Department and the Appellants, which had led to interception and seizure of goods in transit. The Appellants contended that affixing a foreign brand label did not disqualify them from benefiting from certain notifications. Previous Tribunal decisions had supported this view until the Namtech Systems Limited case clarified the position. The Court emphasized that mere failure to declare does not constitute wilful mis-declaration or suppression unless there is a positive act by the party. In this case, all relevant facts were known to the Department, and there was no justification for invoking the extended period of limitation. Consequently, the Court ruled that since limitation was not available, no penalty could be imposed, leading to the allowance of the Appeal and setting aside of the Tribunal's judgment.