2015 (3) TMI 734 - HC - Central Excise

Invocation of extended period of limitation - Suppression of facts - Whether or not period of five years provided under proviso to Section 11A(i) can bar the demand of Central Excise duty when the clearance are affected by reason of willful mis-statement and suppression of facts and in contravention of the provisions of the Act and Rules - Held that - Inspection was carried out by the Officers of the appellants on 16.91996. The first show-cause notice was issued on 14.3.1997 and the second showcause notice was issued on 20.4.1998 and the third show-cause notice was issued on 27.3.2001. It is true that the show-cause notices were issued with regard to part of the transactions for different periods, but on the basis of the same inspection made on 16.9.1996. Once the earlier show-cause notices were issued with regard to the same inspection, then the averment of the department cannot be accepted that they have discovered suppression, fraud etc. subsequently. Everything was within the knowledge of the department from the date of inspection and from the Panchnama made by them on 16.9.1996. Therefore, in view of the peculiar facts and circumstances of the case, the extended period of five years was not available to the department. - Decided against Revenue.

Summary

Issues:
1. Interpretation of the period of five years under proviso to Section 11A(i) for barring demand of Central Excise duty due to willful misstatement and suppression of facts.
2. Empowerment of CESTAT to not impose penalty under Rule 173-Q of Central Excise Rules on the assessee who evaded Central Excise duty.

Analysis:
1. The case involved a respondent who processed man-made fabrics, facing a demand for Central Excise duty due to alleged illicit removal and undervaluation. The Commissioner confirmed a duty of Rs. 25,76,598 for illicit removal and Rs. 1,60,77,291 for undervaluation, but dropped the latter amount as it was settled in favor of the respondent by CESTAT in a previous case.
2. The respondent appealed the Commissioner's order, arguing that the show-cause notice issued on 27.3.2001 was time-barred. The department contended that the notice was valid under Section 11A of the Central Excise Act, as it was within the extended period of five years due to suppression of facts.
3. The High Court noted that the inspection leading to the show-cause notices was conducted on 16.9.1996, and subsequent notices were issued based on the same inspection. The court held that the department had prior knowledge of the facts from the inspection, thus the extended period of five years was not applicable.
4. CESTAT's findings highlighted that the earlier appeal in favor of the respondent and settlement in the KVSS hindered the department from invoking the extended period. The court agreed that the demand was time-barred, and the penalty under Rule 173-Q could not be imposed due to lack of specific contravention mentioned.
5. Referring to a Supreme Court case, the court emphasized that issuing multiple show-cause notices on the same facts did not constitute suppression of facts by the assessee. Consequently, the court ruled against the department on both issues, holding that the extended period of five years was not available and that excise duty and penalty could not be levied due to the time-barred proceedings.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning in reaching its decision.