2023 (7) TMI 196 - SC - Central Excise

Demand of Differential Duty - wrongful determination of assessable value of finished goods by not including therein the monetary value of the duty benefits, obtained from its customers as a result of the transfer of the advance licenses - invocation of Extended period of limitation invoking proviso to Section 11A (1) of the Central Excise Act, 1944 - HELD THAT - Section 11A of the Central Excise Act, 1944, which deals with the issue of limitation for issuing show cause notices for recovery of duties which have been short paid or short levied, is the governing law in the present case. In the case of Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay 1995 (3) TMI 100 - SUPREME COURT , this Court, while dealing with a similar fact circumstance wherein the extended period of limitation under the abovementioned proviso had been invoked, held that since the expression suppression of facts is used in the company of terms such as fraud, collusion and willful misstatement, it cannot therefore refer to an act of mere omission, and must be interpreted as referring to a deliberate act of non-disclosure aimed at evading duty, that is to say, an element of intentional action must be present. The format of the ER-1/RT-12 return is seen, which the assessee was required to file on a monthly basis for intimating to the department the value of clearances effected and the amounts of duties paid thereon - there are no separate column or requirement in these forms for declaring the value and other details of clearances effected to the deemed export buyers i.e. holders of advance licenses. Note 4 under Form ER-1 does require separate details to be mentioned for exports under bond - In the absence of any specific column or note similar to note 4, requiring separate disclosure of the value of deemed export clearances, there are no merit in the findings of the adjudicating authority that there was suppression of facts as a consequence of assessee's failure to separately disclose the value of deemed export clearances. An accusation of non-disclosure can only be made if there is in the first instance a requirement to disclose. The finding of the Tribunal agreed upon, that during the period in dispute it was holding a bonafide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a malafide belief particularly when such a belief was emanating from the view taken by a division bench of Tribunal - Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee's action of including the value of deemed exports within the value of domestic clearances. The Show Cause Notice in this case was issued on 29.12.2005 and sought to invoke the extended period of limitation by making similar allegations as in Civil Appeal No. 6033 of 2009. The order impugned in this appeal, however is an order dated 4.4.2010 of the Gujarat High Court by which the Court had dismissed an appeal filed by the revenue against an order of CESTAT, by holding that no question of law could be stated to arise from the order of CESTAT. The conclusions with regard to Civil Appeal 6033 of 2009 apply equally to this appeal. In the result both the appeals filed by the Revenue are dismissed on the ground that the demands are time barred.

Summary

Issues Involved:
1. Extended Period of Limitation
2. Suppression of Facts and Willful Misstatement
3. Bonafide Belief and Revenue Neutrality

Summary:

Extended Period of Limitation:
The central issue in the appeals was whether the demand for differential duty raised by the Commissioner of Central Excise was time-barred under Section 11A of the Central Excise Act, 1944. The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that the assessee had a bonafide belief that it had correctly discharged its duty liability based on the Tribunal's view in the IFGL Refractories Ltd. case, which was later reversed by the Supreme Court. The Tribunal concluded that the demand should be confined to the normal period of limitation as the extended period of five years could not be invoked.

Suppression of Facts and Willful Misstatement:
The Commissioner had invoked the extended period of limitation on the grounds of deliberate suppression of facts and willful misstatement by the assessee. However, the Tribunal found that the assessee had disclosed its pricing policy and filed the required returns, which did not necessitate separate disclosure of deemed export clearances. The Supreme Court agreed with the Tribunal's finding that there was no suppression of facts since the assessee was not required to disclose deemed export clearances separately under the law.

Bonafide Belief and Revenue Neutrality:
The Tribunal accepted the assessee's plea of bonafide belief based on the Tribunal's earlier decision in the IFGL Refractories Ltd. case. The Supreme Court upheld this finding, stating that the assessee's conduct during the material period could not be considered malafide as it followed the Tribunal's view. The Court also noted that the issue of valuation involved plausible interpretations, and invoking the extended period of limitation in such cases would be unjustified. The appeals were dismissed on the ground that the demands were time-barred, without expressing any opinion on the merits of the matter, including the aspects of revenue neutrality.