2009 (10) TMI 441 - AT - Central Excise

Suppression of facts- The show-cause notice had not alleged that the assessee had evaded payment of duty by way of fraud collusion willful mis-statement/suppression of fact or contravention of any provision of the Act/Rules with intent to evade payment of duty. Without specific allegation of any of the ingredients of the proviso to Section 11A(1) the proviso could not be invoked. Held that- It should have been alleged that the noticee contravened provisions of law with intent to evade payment of duty. Fraud collusion suppression and mis-statement are expressions nowhere found in the show-cause notice. Thus the proviso to Section 11A(1) of the Act was wrongly applied to this case. The entire demand of duty is hit by limitation. The impugned order is set aside and these appeals are allowed.

Summary

Issues:
Adjudication of a show-cause notice leading to demand of duty, appropriation of payment, imposition of penalties, invocation of extended period of limitation, bona fide belief for exemption, sustainability of penalties.

Detailed Analysis:

1. Demand of Duty and Penalties:
The original authority confirmed a duty demand against the assessee under the first proviso to Section 11A(1) of the Central Excise Act and imposed penalties under Section 11AC of the Act read with Rule 25, and separately on the Director under Rule 26 of the Central Excise Rules. The appellate authority rejected the appeals filed by the company and its director. The appellants argued that the proviso to Section 11A(1) was wrongly invoked as the show-cause notice did not allege fraud, collusion, willful mis-statement, or intent to evade duty. They claimed a bona fide belief in exemption eligibility and cited relevant case law to support their stance.

2. Extended Period of Limitation and Evidence:
The SDR argued that the statements recorded from the Director under Section 14 of the Act admitted duty liability and knowledge of excisability of goods, justifying the demand. The show-cause notice alleged contraventions and evasion, providing the necessary background for invoking the proviso to Section 11A(1). The SDR contended that the so-called bona fide belief needed evidence to be considered valid, citing tribunal decisions and a Supreme Court judgment. The authorities below confirmed the duty demand based on the evidence gathered from the Director's statements.

3. Judicial Analysis and Decision:
The Member analyzed the facts, noting the admission of manufacturing activities and clearances without duty payment, lack of registration or compliance, and the invocation of the proviso to Section 11A(1) in the show-cause notice. The Member referred to the Supreme Court's judgment emphasizing the necessity of specific allegations to invoke the proviso. It was observed that the notice lacked explicit allegations of intent to evade duty, fraud, collusion, suppression, or mis-statement. Consequently, the proviso to Section 11A(1) was deemed wrongly applied, rendering the demand of duty time-barred. Consequently, the penalties imposed on the assessee and the Director were set aside, and the appeals were allowed, overturning the impugned order.

This detailed analysis covers the adjudication process, arguments presented by both parties, legal interpretations, and the final decision of the Appellate Tribunal CESTAT, Mumbai in the cited judgment.