2024 (12) TMI 273 - HC - Central Excise

Suppression of facts by the respondent to evade excise duty - Interpretation and applicability of N/N. 52/2002-CE and N/N. 8/2004-CE. - whether the Notification No. 8/2004-CE dated 21.01.2004 and the amended Notification, No. 28/2004-CE dated 09.07.2004, the whole of the duty of excise leviable on the finished product was exempt or the same was chargeable Nil rate of duty and thereby the Judgment of this Hon ble Court is squarely applicable in the present case? - applicability of Extended period of limitation. HELD THAT - Here in the case at hand though substantial questions of law has been framed on the issue of exemption of excise duty or suppression of material facts before the assessing authorities looking the matter from the question of limitation or of any other technicalities, this Court feels that for whatever the reasons the inspecting or audit authorities who are supposed to conduct periodical/regular audits and inspections could have raised the demand and also issued show cause notice on yearly basis but not acting upon for years together and to the surprise of the respondent, notices are issued and demand is raised before a concern to this Court and a huge amount of excise duty is important. This Court on the ground of technicalities and for certain laches committed by the department officials as pointed out by the respondent counsel is not inclined to decide the case in favour of the respondent. But keeping in mind, the quantum of excise duty and its ancillary duties which are in total of Rs. 98,03,22,312/- approx., this Court feels that the matter needs consideration as to where the things are properly attended or not. This Court feels that it is a case to remand back the matter to the Commissioner of Central Excise, Morellow Compound M.G. Road, Shillong-793001 in the respective cases for reconsidering the issue of purchase of the compound i.e. kimam and the records relating to the same and make an enquiry as to who is the supplier and in the event if the supplier has already paid the sufficient excess due, the same need not be collected earlier from the respondent herein - this Court is of the opinion that the issue of levy of excise duty and considering the exemption is concerned, an opportunity needs to be given for ascertaining whether any due has been already paid by the supplier and the same needs to be considered by the Commissioner of Central Excise, Morellow Compound M.G. Road, Shillong-793001. Appeal disposed off by way of remand.

Issues Involved:

1. Suppression of facts by the respondent to evade excise duty.
2. Interpretation and applicability of Notification No. 52/2002-CE and Notification No. 8/2004-CE.
3. Determination of whether the compound is an intermediate product or a finished product.
4. Legality of availing dual exemption benefits under the two notifications.
5. Whether the CESTAT's order was perverse or erroneous.
6. Applicability of the extended period of limitation for issuing the show cause notice.

Detailed Analysis:

1. Suppression of Facts:

The appellants alleged that the respondent suppressed the fact of manufacturing an excisable commodity termed as "compound," which was cleared for captive consumption without paying the requisite excise duties. The appellants contended that this was done with the intent to evade duty, as the respondent was aware of the exemption benefits under Notification No. 8/2004-CE but not eligible for exemption under Notification No. 52/2002-CE for the compound.

2. Interpretation and Applicability of Notifications:

The core issue revolved around the interpretation of Notification No. 52/2002-CE and Notification No. 8/2004-CE. The appellants argued that the compound, being a marketable product, was not eligible for exemption under Notification No. 52/2002-CE, as it was not an intermediate product. The respondent, however, contended that the compound was used captively and thus qualified for exemption under Notification No. 52/2002-CE, while the final product, chewing tobacco, was covered under Notification No. 8/2004-CE.

3. Intermediate Product or Finished Product:

The appellants claimed that the compound should be considered a finished product and not an intermediate one, thereby making it excisable. The respondent argued that the compound was an intermediate product used in the manufacture of chewing tobacco, which was ultimately exempted under Notification No. 8/2004-CE. The court needed to determine the classification of the compound to decide on the applicability of exemptions.

4. Dual Exemption Benefits:

A significant legal question was whether the respondent could avail dual benefits under both notifications for the same product. The appellants asserted that this amounted to a "double bonanza" and was impermissible. The respondent maintained that the exemptions were valid as the compound was used in the manufacturing process of a final product, which was itself exempted.

5. CESTAT's Order:

The appellants challenged the CESTAT's order, arguing it was perverse and failed to consider the suppression of facts and misinterpretation of notifications. The CESTAT had set aside the adjudicating authority's order on the grounds of limitation and non-sustainability of the demand. The court was tasked with examining whether the CESTAT's findings were legally sound.

6. Extended Period of Limitation:

The appellants invoked the extended period of limitation under Section 11A of the Central Excise Act, 1944, citing suppression of facts. The respondent countered that all relevant information was disclosed to the department, and audits were conducted without objections. The court had to decide if the extended limitation period was rightly applicable.

Judgment Summary:

The court noted the complexity of the issues and the substantial amount involved. It recognized the need for a thorough inquiry into whether the compound was indeed purchased from suppliers with duty paid, as claimed by the respondent. The court remanded the matter back to the Commissioner of Central Excise, Shillong, for reconsideration of the purchase records and supplier details. The court set aside the orders of the Commissioner and the CESTAT, directing a fresh examination to ascertain if the duty was already paid by the supplier. The appeal was disposed of with directions for further investigation and potential adjustment of duties based on findings.

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