1999 (10) TMI 123 - AT - Central Excise

Summary

Issues Involved:
1. Interpretation of Section 11A(1) of the Central Excise Act, 1944 and its proviso.
2. Relevance of the date of knowledge by the Department for issuing a Show Cause Notice (SCN).
3. Validity of invoking the extended period of limitation under Section 11A(1) proviso.

Issue 1: Interpretation of Section 11A(1) of the Central Excise Act, 1944 and its proviso

The Tribunal was tasked with interpreting Section 11A(1) of the Central Excise Act, 1944, specifically whether the date of knowledge by the Department is relevant for issuing a SCN. The section states that a Central Excise Officer may serve notice within six months from the relevant date for recovery of duties not levied or paid, with an extended period of five years in cases involving fraud, collusion, or suppression of facts.

Issue 2: Relevance of the date of knowledge by the Department for issuing a SCN

The Tribunal noted conflicting views on whether the date of knowledge by the Department is relevant for issuing a SCN. Some decisions, such as in M/s. Pure Drinks (P) Ltd. and Indian Oxygen Ltd., held that the date of knowledge is irrelevant, and the extended period of five years applies from the date of removal. Conversely, other decisions, including M/s. Varanasi Bottling Co. Pvt. Ltd., held that the SCN must be issued within six months from the date of knowledge by the Department.

Issue 3: Validity of invoking the extended period of limitation under Section 11A(1) proviso

The Tribunal examined whether the extended period of limitation can be invoked if the Department had prior knowledge of the facts. The assessee argued that the extended period should not apply if the Department was aware of the facts at the time of issuing the first SCN. The Tribunal considered various case laws, including Hindustan Development Corporation Ltd. and Khatao Makanji Spg. & Wvg. Co., which supported the view that the extended period is not applicable if the Department had prior knowledge.

Majority Decision:

The majority held that the date of knowledge by the Department is not relevant according to the provisions of Section 11A, and a notice issued beyond six months from the date of knowledge will not be barred by limitation. They emphasized that the legislative intent was to allow a five-year period for cases involving fraud, collusion, or suppression of facts, irrespective of the Department's date of knowledge.

Dissenting Opinion:

A.C.C. Unni, Member (J), dissented, arguing that the date of knowledge should be considered relevant. He cited the Mopeds India Ltd. case, where the Tribunal held that the Department's knowledge of malpractice affected the limitation period. This view was upheld by the Supreme Court, indicating that the date of knowledge is a critical factor in determining the applicability of the extended period.

Final Order:

By majority, it was held that the date of knowledge by the Department is not relevant according to the provisions of Section 11A, and the notice issued beyond the period of six months from the date of knowledge will not be barred by limitation.