2023 (3) TMI 1067 - AT - Central Excise

Invocation of Extended Period of Limitation - case involving interpretation of law or not - department was well aware of the facts of the case since SCN was issued for the previous period on the same issue - Five audits were conducted at the factory every year since 1.1.2008 - no intent to evade - HELD THAT - There is no dispute regarding the merits of the case and the calculation of duty. Therefore, insofar as the directions of this Tribunal in the Final Order dated 29.7.2019 2019 (7) TMI 1791 - CESTAT NEW DELHI are concerned, they have been fully complied with. The only question which remains is the invocation of extended period of limitation which was also required to be examined by the Commissioner. The officer is mandated under the Rules to do what the audit may do much later. If the officer, who is an expert in taxation scrutinises the returns as he is mandated to do and calls for any records as he is authorised to call for, any mistakes which may be pointed out by the audit would come to light and an SCN could have been issued under section 11A within the normal period of limitation. Therefore, even if no audit is conducted during the relevant period and some duty escapes assessment, extended period of limitation cannot be invoked for that reason. The check against incorrect self assessment is the scrutiny of the return by the officer and audit is only the second check. Therefore, while the fact that audit checks only some selected documents and not every document as held in the impugned order is correct, this cannot be a ground to invoke extended period of limitation. Unlike audit, the officer receiving the ER-1 returns is required to scrutinise the returns and is empowered to call for any information. While the assessee was required to self assess duty and file ER-1 return, a check against such self- assessment was the scrutiny which the officers were mandated to do by Rules. Audit is the next level of check against the scrutiny. If the audit points out some wrong assessment which was not pointed out by the officer scrutinising the ER-1 return, the fault lies at the doorstep of the officer. It does not, by itself, establish that the assessee had suppressed any facts. In this case, not only one but several rounds of audit were conducted. Show Cause Notice was issued for the previous period on the same issue by the Revenue. Thus, the department was fully aware of the issue in question, the general marketing pattern of the appellant and it was for the officer scrutinising the returns to have checked the returns and issued SCN within time. The impugned order cannot be sustained as the entire demand is time barred - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the invocation of extended period of limitation for demand of duty, imposition of penalty under Section 11AC, and the correctness of the impugned order regarding the demand calculation and penalty imposition.

Extended Period of Limitation:
The Tribunal remanded the matter to the original adjudicating authority for detailed verification and examination of claims made by the appellant. The appellant contended that the extended period of limitation could not have been invoked due to settled law by the Supreme Court and the department's awareness of the case facts. The Commissioner invoked the extended period citing suppression of facts, lack of evidence provided by the appellant, and the selective nature of audits. However, the Tribunal found that the appellant was legally bound to self-assess and pay duty based on ER-1 returns, and the responsibility for scrutiny lies with the officer, not the appellant. The officer's failure to scrutinize the returns within the normal period of limitation rendered the demand time-barred. The Tribunal held that the impugned order cannot be sustained, and the appeal was allowed with consequential relief to the appellant.

Imposition of Penalty under Section 11AC:
The appellant contested the imposition of penalty under Section 11AC, arguing that the demand was beyond the normal period of limitation. The Commissioner imposed the penalty citing suppression of facts and intentional misinterpretation by the appellant. However, the Tribunal found that the appellant's differing interpretation of the law did not indicate an intent to evade payment of duty. The Tribunal concluded that since the demand itself was time-barred, the penalty under Section 11AC could not be sustained, and the impugned order was set aside with relief to the appellant.

Correctness of the Impugned Order:
The impugned order dropped a portion of the demand while confirming another portion and imposing a penalty under Section 11AC. The appellant challenged the order based on the invocation of extended period of limitation and the penalty imposition. The Tribunal found that the officer's failure to scrutinize the returns within the normal period of limitation rendered the demand and penalty time-barred. The Tribunal emphasized the officer's responsibility for scrutiny and the limited scope of audits in comparison. As the department was aware of the issue and previous audits were conducted, the impugned order was set aside, and the appeal was allowed with relief to the appellant.