AN ORDINARY CITIZEN CANNOT BE EXPECTED TO KEEP TRACK OF THE JUDGMENT OF VARIOUS COURTS

[Mr. M. GOVINDARAJAN]

  The judgments delivered by High Courts and Supreme Courts are law of the land.The judgment of Supreme Court is binding on High Courts and the judgments of Supreme Court and High Courts are binding on lower courts.   Most of the litigations are based on interpretation of statute and the higher courts give their rulings in such cases.The practicing professionals in legal field are expected to be updated in change of law and also in the judgments delivered by various courts to rely in their clients’ cases wherever required.  But it is not the case to the individual citizens.If any litigation arises he needs the help of the practicing professionals In such a nature he cannot be expected to keep track of the judgment of various courts and to understand the law laid down by the court and follow the same.

 In ‘Modipan Fibres Company V. Commissioner of Central Excise, Ghaziabad’- 2012 (284) ELT 561 (Tri. Del) the appellant is engaging in manufacture of manmade fiber and yarn.During the period 2002-2003 and 2003-2004 the appellant while clearing the goods from its factory collected charity/dharmada from the customers, which have not been included in the valuation for the purpose of excise duty. 

 The Department on the Supreme Court judgment in ‘Commissioner of Central Excise, V. Panchmukhi Engineering Works and others’ – 2002 (11) TMI 122 - SUPREME COURT OF INDIA in which the Supreme Court held that ‘dharmada charges’ collected by the manufacturer from the buyer would be included in the transaction value for the purpose of excise duty, issued a show cause notice to the appellant raising demand of duty which is short paid. The Assessing Officer confirmed the duty with interest and also imposed equal amount of penalty. 

Before the Commissioner (Appeals) the appellant contended that the demand raised by the Department was barred by limitation and there was no justification for invoking the extended period of five years by the Department. The Commissioner (Appeals) did not find merit in the appeal and dismissed the same.Therefore the appellant filed the present appeal before the Tribunal. Before the Tribunal the appellant raised the following contentions:

•             The show cause notice was issued invoking the extended period of limitation;

•             There was no justification for invoking the extended period of limitation for the reason that the appellant have been paying  the excise duty bona fide under the impression that ‘dharmadha charges’ were not to be included in transaction value for the purpose of calculating the excise duty;

•             In their earlier case a show cause notice was issued on the same grounds in which the Assessing Officer held that ‘dharmadha charges’ were not includible in the assessable value the order of which has not been challenged by the Department;

•             In view of the aforesaid findings the appellant was under the impression that dharmada was not includible in assessable value ;

•             It cannot be said that the appellant had either committed fraud or suppressed or concealed the facts from the department dishonestly with a view to evade payment of the excise duty;

The Revenue put forth the following arguments:

•             The appellant has deliberately not included ‘dharmadha charges’ in the assessable value for the purpose of excise duty and this fact came to light only during audit conducted by the Department;

•             The appellant never disclosed this fact in his ER-1 return, therefore, it is a clear case of suppression and concealment of the material facts by the appellant;

•             As such the department was justified in invoking the extended period of five years.

The dispute which requires consideration in this appeal by the Tribunal is whether or not Department was justified in invoking extended period of five years for raising the duty demand. The Tribunal analyzed the provisions of Section 11A of the Central Excise Act, 1944.On reading of the above provision, the Tribunal held, that it is evident that normal period of limitation for raising duty demand is one year. It is, however, extendable to 5 years  provided it is established that non levy or short levy of duty demand is by reason of fraud, collusion or any willful mis-statement or suppression of facts with the intention to evade the payment of excise duty.  In the earlier case of the appellant the Assistant Commissioner decided the matter in favour of the appellant holding that ‘dharmadha charge’ is not to be includible in assessable value for excise duty.From this it is evident that the department was well aware that the appellant has not been including the ‘dharmadha charges’ collected from the buyers in the transaction value for the purpose of excise duty.Not only this, the Department by allowing the adjudication order in respect of earlier proceedings to attain finality has given an impression to the appellant that he was rightly refraining from including the ‘dharmadha charges’ in the transaction value.

The Tribunal further held that from the above it is apparent that the appellant was discharging his obligation to pay excise duty in accordance with legal interpretation of the transaction value as prevailing at the relevant time. Therefore it cannot be said that the appellant had concealed or suppressed the facts with intention to evade the excise duty. In the view of the Tribunal the appellant’s case is not a case of fraud, concealment or suppression of facts with dishonest intention to escape the excise duty liability.As such there was no occasion for invoking the extended period of limitation for raising the demand.

 The Department submitted that even if it is assumed for the sake of argument that the appellant was not including ‘dharmadha charges’ in the transaction value for the purpose of excise duty under mistaken interpretation of law then also after the pronouncement of judgment of Supreme /Court in the matter of ‘Panchmukhi Engineering works’ (supra) the appellant was required to include ‘dharmadha charges’ in the transaction value from 28.11.2002 onwards. Admittedly the appellant failed to do so.Therefore there is justification for invoking the extended period of limitation. The Tribunal did not accept the said contention of the Department.The Tribunal held that an ordinary citizen under the ordinary course of circumstances cannot be expected to keep track of the judgment of various courts.He is not expected to know about the law laid down by judicial pronouncement unless he comes across the judgment itself. The judgment of Supreme Court in the above said case was published in the year 2003.Even the Board issued clarification pursuant to aforesaid judgment on 21.11.2003 it would be unfair to infer that the appellant was aware the law laid down by the Supreme Court judgment immediately after the pronouncement of the judgment. 

 The Tribunal set aside the order of the lower authorities and allowed the appeal filed by the appellants.