2004 (5) TMI 158 - AT - Central Excise

Extended period of limitation - demand duty u/s 11A(1) - short payment of duty - HELD THAT - Once the facts are known to the Department or are within the knowledge of the Department the extended period of limitation for demanding the duty cannot be invoked because the same can be invoked only if the duty has not been levied or short-levied on account of fraud collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of Central Excise Act or Central Excise Rules with intent to evade payment of duty. The Commissioner (Appeals) under the impugned order has rightly held that once it came to the notice of the Department that the products were not P or P medicine show cause notice for the subsequent period should have been issued from time to time within the normal limitation period. The reliance of the Department on the decision in the case of Nizam Sugar 1999 (10) TMI 123 - CEGAT NEW DELHI does not help the Revenue s case since what was held by the Larger Bench in Nizam Sugar case was that any show cause notice issued beyond the period of six months from the date of acquiring knowledge will not be barred by limitation if the duty has not been levied or not paid or short-paid or short-levied or erroneously paid by reason of fraud collusion or wilful misstatement or suppression of facts .... and the show cause notice has been issued within 5 years from the relevant date as defined under sub-section (3) of Section 11A of the Central Excise Act. This does not mean that the extended period of limitation remains invocable even if the facts have come to the knowledge of the Department. This was the view expressed by the Tribunal in the case of Rubicon Steels 2002 (12) TMI 351 - CEGAT NEW DELHI which has been confirmed by the Supreme Court also. We therefore find no reason to interfere with the impugned order passed by the Commissioner (Appeals). Accordingly we reject the Appeal filed by the Revenue.

Summary

Issues involved:
The issue involved is whether the extended period of limitation for demanding duty under Section 11A(1) of the Central Excise Act can be invoked after the detection of short payment of duty by the Central Excise officer.

Comprehensive Details:

1. Classification of Medicines:
Mrs. Charul Baranwal argued that the medicines were misclassified by the company, leading to a show cause notice for demanding duty. The Additional Commissioner confirmed the demand and imposed a penalty. The Commissioner (Appeals) upheld the classification but restricted the extended period of limitation to the period before the officer's discovery of misdeclaration on 11-9-96.

2. Department's Position:
The Senior Departmental Representative contended that the five-year period under Section 11A(1) cannot be curtailed, citing the Department's knowledge of irregularities. They relied on a precedent involving Nizam Sugar Factory to support their argument.

3. Counter-Argument:
Shri B.L. Narasimhan argued that once the Department is aware of misdeclaration, the extended period of limitation ceases to apply. Referring to a case involving Rubicon Steels, it was asserted that the extended period is not applicable once the Department is informed of the facts.

4. Decision and Rationale:
The Tribunal noted that the Department was aware of the misdeclaration on 11-9-96, and thus, the extended period of limitation could not be invoked. The Commissioner (Appeals) rightly held that subsequent show cause notices should have been issued within the normal limitation period once the misclassification was known. The Tribunal rejected the Revenue's appeal, emphasizing that the extended period of limitation does not persist once the Department is aware of the facts, as established in the Rubicon Steels case, affirmed by the Supreme Court.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and rejected the Revenue's appeal, emphasizing that the extended period of limitation for demanding duty cannot be invoked once the Department is aware of the relevant facts.