2015 (9) TMI 1323 - HC - Central Excise

Duty demand - Invocation of extended period of limitation - revenue neutral situation - misstatement or suppression of facts - Held that - controversy involved in this case is identical to 2014 (2) TMI 770 - ALLAHABAD HIGH COURT except for the period in question. The decision of the Tribunal as affirmed by this Court, is squarely applicable in this case. Consequently, the show cause notice dated 03.06.2011 cannot be sustained and is quashed - Decided in favour of assessee.

Summary

Issues:
- Extended period of limitation under the Central Excise Act, 1944 for the period 2002 to March 2006.
- Applicability of the extended period of limitation under the proviso to Section 11A(1) of the Act.
- Scrutiny of ER-1 returns by the Range Officer.
- Allegations of fraud, collusion, misstatement, or suppression of facts.
- Revenue neutrality and intent to evade payment of duty.

Extended Period of Limitation (2002 to March 2006):
The Tribunal found that the extended period of limitation could not be invoked as there was no evidence of fraud, collusion, misstatement, or suppression of facts by the assessee. The Range Officer had scrutinized all documents, revealing that the assessee had transferred its products to a related entity for captive use. The High Court affirmed the Tribunal's decision, emphasizing the lack of intent to evade duty payment and the revenue-neutral nature of the transactions. Consequently, the show cause notice under the proviso to Section 11A(1) was set aside.

Applicability of Extended Period of Limitation:
In a similar case for the period from April 2006 to March 2010, a show cause notice was issued under the proviso to Section 11A(1) in 2011. The Court held that the issues were identical to the previous case, where the Tribunal's decision was upheld. The Court ruled that the show cause notice from 2011 could not be sustained based on the precedent, and it was quashed.

Scrutiny of ER-1 Returns and Allegations:
The Tribunal emphasized the importance of the Range Officer's scrutiny of ER-1 returns to detect any discrepancies in duty payment. It was noted that the short payment was only detected during an audit, which could have been identified earlier through proper scrutiny. The absence of collusion between the assessee and excise officers, coupled with the revenue-neutral outcome of the transactions, led to the conclusion that the extended period of limitation was not justified.

Revenue Neutrality and Intent:
The Tribunal and the Court highlighted the revenue-neutral nature of the transactions, where the duty paid by the assessee was available as cenvat credit to the related entity. This factor, along with the absence of intent to evade duty payment, further supported the decision that the extended period of limitation was not warranted. The Court dismissed the appeal, stating that no substantial question of law arose in the case.

In conclusion, the judgments focused on the lack of fraudulent intent, the importance of proper scrutiny of returns by Range Officers, the revenue-neutral aspect of the transactions, and the absence of collusion or suppression of facts. The decisions emphasized that in the absence of intent to evade duty payment and considering the revenue-neutral impact, the extended period of limitation under the proviso to Section 11A(1) of the Act was not applicable.