1997 (11) TMI 251 - AT - Central Excise

Summary

Issues: Duty evasion, imposition of penalty, limitation period for issuing show cause notice

The judgment by the Appellate Tribunal CEGAT, New Delhi involved a case where the appellants were engaged in the manufacture of Steam Boilers, which were classified under different tariff items. Central Excise Officers alleged duty evasion by the appellants amounting to Rs. 12,90,145.59, claiming that two units associated with the appellants were dummy units without independent manufacturing premises. The Collector of Central Excise concluded that one unit enjoyed exemption, but confirmed duty demand and imposed a penalty on the appellants. The main arguments focused on the limitation period for issuing the show cause notice and the imposition of penalty. The appellants contended that the demand was time-barred as there was no intention to evade duty, citing the Collector's own observation that there was no such intention. The Department argued that complete disclosure should have been made by the appellants to determine the situation accurately.

The Tribunal considered the Collector's observation that no intention to evade duty was proved, and he had taken a lenient view in imposing the penalty. The Tribunal referred to a Supreme Court judgment emphasizing that for invoking the extended period under Section 11-A, specific situations like fraud or collusion must exist, coupled with an intention to evade duty. The burden of proof lies on the Department to establish these situations. The Court clarified that intentional evasion means the deliberate avoidance of paying duty that is lawfully due, requiring the assessee to be aware of the duty liability and intentionally avoid payment.

Ultimately, the Tribunal held that since the Collector found no intention to evade duty, none of the conditions necessary for invoking the extended period under Section 11-A were met. Consequently, the demand issued in 1987 for the period 1984-85 and 1985-86 was deemed time-barred. As the extended period was not sustainable, the penalty was also deemed unsustainable, citing a Supreme Court precedent. The appeal was allowed solely on the grounds of limitation, setting aside the impugned order without delving into the merits of the case.