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TMI Blog2015 (7) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... rate period is prescribed for recovery of duty in case of this nature or that the period of five years prescribed would have to be computed only when the breach or violation of the Exemption Notification has come to the knowledge of the Department subsequently. It may be that such fact is discovered or comes to the knowledge of the authorities subsequent to the clearance, however, when the Department desires to recover the amount of duty, then, it must adhere to the period prescribed By section 5 remission of duty on goods found deficient in quantity is dealt. Section 5A confers power to grant exemption from duty of excise. If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon. - Equally, if there is any condition to furnish a Bond and in that behalf it is prescribed that in the event the terms and conditions on which the bond has been gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Central Excise Appeal No. 96 of 2014, Central Excise Appeal No. 182 of 2014, Central Excise Appeal No. 115 of 2015 - - - Dated:- 10-7-2015 - S. C. Dharmadhikari And G. S. Kulkarni, JJ. For the Appellants : Mr. V. SridharanSenior Advocate with Mr.Prakash Shah, Mr. Jas Sanghavi and Mr.Akhilesh Kangasia i/b. M/s. PDS Legal For the Respondent : Mr. S. S. Pakale with Mr. Neelesh Kalantri JUDGMENT ( Per S. C. Dharmadhikari, J.) These Central Excise Appeals raise common questions and therefore were heard together. They can be conveniently disposed of by a common Judgment. The Appeals arise out of final orders passed by the Customs, Excise and Service Tax Appellate Tribunal, Bench at Mumbai dated 3rd July, 2013. 2) The Appeals raise the following substantial questions of law: (a) Whether under the facts and circumstances, the Appellate Tribunal erred in confirming demand for period even beyond extended period of limitation i.e. five years from the date of issuance of the show cause notice? (b) Whether the Appellate Tribunal is correct to hold that relevant date for the purpose of computing period of limitation should be date of knowledge to the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us documents for scrutiny under a panchanama drawn on 10th October, 2002. In the course of the search, the Central Excise Department alleged that the Appellant installed certain machines and there was a short payment of duty amounting to ₹ 94,498/. There are shortages noticed in the manufacture of Polyester Yarn. The Appellant paid a short payment of duty by Challan dated 11th January, 2002. 5) Thereafter, further investigations were carried out by alleging that the Appellant was clandestinely diverting the inputs, namely, Polyester Yarn procured which were intended to be used in manufacture of fabrics for export. These raw materials were procured without payment of Customs and Central Excise duties but came to be diverted. Thereafter as well, investigations were carried out. We are not concerned with the details of the investigations. Suffice it to note that every step of the above nature eventually led to issuance of show cause notice dated 27th November, 2009. That notice proposed to recover Central Excise Duty amounting to ₹ 2,73,41,250/for alleged diversion of inputs (Yarn), during the period April, 2002 procured without payment of duty under CT3 procedure. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The show cause notice has been issued for violation of the conditions of Notification No. 1/95 and the Bond. Upon such conclusion in para 4.18 of the order-in-original, the adjudicating authority concludes that the demand is not time barred. 9) Mr. Sridharan has assailed this part of the conclusion of the authorities and submitted that there is a error of law and apparent on the face of the record. Both, the adjudicating authority and the Tribunal lost sight of the fact that if there is a violation or breach of the condition of the Exemption Notification, whereby the duty demand arises and if that is not honoured, then, recovery proceedings can be initiated, but for that, there is a clear provision in the Central Excise Act, 1944. That provision ordinarily allows recovery of all duties which are found to have been levied but not paid, duties not levied or short levied or short paid or erroneously refunded. In the present case, if the breach and violation of the Notification attracts the situation where the duties levied are not paid, then, the legislature in terms of the statute permits the authorities to recover the amount of duty within one year. That is the ordinary and norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into the provision something which is not specifically there. Mr. Sridharan has invited our attention to the decisions relied upon by the Tribunal as also the adjudicating authority. He submits that these Judgments have been completely misread and misapplied. In both cases, the Hon'ble Supreme Court has concluded that the Revenue had adhered to the time schedule. The argument of time bar was negatived by finding that the extended period beyond one year was rightly invoked and applied. In none of these decisions the Hon'ble Supreme Court concluded that irrespective of what has been prescribed by law, the cause of action would be the determinative factor or the knowledge or detection of fraud would be the starting point. In the circumstances, according to Mr. Sridharan, the impugned orders deserve to be quashed and set aside. 11) Reliance is placed upon the Judgments of the Hon'ble Supreme Court of India, which have been interpreting section 11A. The principal amongst them are Judgments in the case of J. K. Spg and Wvg Mills Ltd. vs. Union of India reported in 1987(32) ELT 234, Ahmedabad Manufacturing and Calico Printing Co., Ltd. v. S.G. Mehta, reported in (1963) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout payment of duty. The fraud was perpetrated by M/s Jannat Fabrics and it was discovered and came to the knowledge of Revenue only during investigation. Once the conditions of the Exemption Notification are not complied with then, the benefit of that Notification becomes unavailable. Then, the demand can be raised. In the present case, there is therefore no time limit. The provisions of section 11A of the Central Excise Act, 1944, in any event, would have to be construed and interpreted in this light. 13) Apart from the case of M/s. Kalvert Foods India Pvt. Ltd. (supra), reliance is placed upon a Judgment of Division Bench of this Court rendered in the case of Commissioner of Customs (Import) vs. Wockhardt Hospital and Heart Institute; Grant Medical Foundation in Customs Appeal Nos. 22 of 2004; 17 of 2005 decided on 28th April, 2006. This decision is reported in 2006 (200) ELT 15. Though this decision was challenged in the Hon'ble Supreme Court of India, the Hon'ble Supreme Court has not reversed the view taken by the Division Bench of this Court but has interpreted the word payable in the light of the relevant statutory provisions is the submission. Mr. Pakale has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise or with his prior approval by any officer subordinate to him: Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice under this subsection shall be served without the prior approval of the Chief Commissioner of Central Excise. Explanation. Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be. (2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under subsection (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. (2A) Where any notice has been served on a person under subsection (1), the Central Excise Officer ( a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebate of duty or excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (ii) relevant date means; ( a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid ( A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed; (B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund. 15) A perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub section (1) in respect of the duty so paid. And by proviso to sub section (2B), it is stated that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in subsection (1) shall be counted from the date of receipt of such information of payment. Explanation 1 to sub section (2B) reads as under: Explanation 1. Nothing contained in this subsection shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. 16) A perusal thereof would indicate as to how sub section (2B) will not apply in case where the duty was not levied or was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no power in the authorities to verify and scrutinise the documents based on which the clearance is made. One of the documents at the stage of clearance refers to the Exemption Notification and thereafter the person clearing the goods or removing them urges that there is no duty liability, then, what terms and conditions have been prescribed or whether the exemption is absolute are matters which are to be checked and determined by the authorities. We have not been showing any embargo or prohibition nor is it the contention of Mr. Pakale that when there is an exemption the goods can be cleared or removed without any scrutiny or that no scrutiny or verification is permissible in law. Mr. Pakale's reliance on the Central Excise Rules, 1944 and particularly Rules 9 and 49 would be enough to record this conclusion. Further, the terms and conditions of the Exemption Notification and the Bond would indicate as to how it is possible to ensure compliance of law at various stages. Thus, the Rules and Rule 173G(2A) read with the proviso thereto would indicate as to how goods which are exempted have to be removed and cleared. However, Mr. Pakale's reliance on para (d) of the Exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government to charge excise duty on the basis of capacity of production in respect of notified goods. Thus, the two provisions deal with chargeability of the duty and the specification thereof. By section 4, valuation of excisable goods for purposes of charging of duty of excise is dealt with. There, one would find the definition of the term 'assessee' and it is clearly stated that where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall in a case where the goods are sold by the assessee, for delivery at the time and place of removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value. In other case, including the case where the goods are not sold, the value be determined in such manner as may be prescribed. By section 5 remission of duty on goods found deficient in quantity is dealt. Section 5A confers power to grant exemption from duty of excise. If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pakale ignores the Judgment of the Hon'ble Supreme Court in the case of J. K. Cotton Spinning and Weaving Mills C. Ltd. vs. Collector of Central Excise reported in AIR 1998 SC 1270. In paras 16 to 22 the Hon'ble Supreme Court held as under: 16. Exclusion of any period from the time provided for issuing notice which is contemplated in S. 11A of the Act is mentioned in the Explanation which is incorporated as part of that section. Period of the stay can be excluded if the service of the notice is stayed by an order of a Court. The converse is, if there is no stay of service of notice there is no scope for excluding any time from the period of limitation as per this Explanation. 17. If a very strict interpretation is given, notice should have been issued before passing the order of stay so that service of the notice could be blocked. But such an extreme view is not necessary for understanding the contours of the Explanation. 18. In considering whether the extension of time permitted in S. 11A of the Act can be liberally construed or that it should be a strict construction, we think it useful to recall how this Court approached the challenge made against S. 51 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the four conditions: (i) when duty of excise has not been levied on the commodity; (ii) when such duty has been short levied; or (iii) When such duty, though levied, has not been paid;or (iv) when such duty levied was only short paid. 22. If any one of the above conditions exists, the notice contemplated therein can be issued. It is an extremely difficult proposition for acceptance that Collector of Central Excise was prevented from issuing a notice to the appellant in this case as the Delhi High Court has restrained the department from giving effect to the contents of the directive of the Board dated 2491980. The said directive of the Board was mainly intended to be observed by the Collector of Central Excise as well as the other officials under him to carry out certain steps while exercising powers under Rule 9(1) of the Act and also for making delegation of such powers to the licensing authorities. Here the test is, if the said circular (or directive) had not been issued at all, could the Collector of Central Excise have issued a notice under subsection (1) to S. 11A of the Act. The answer is, that the Collector could still have issued a notice. If so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts finished P and P food products without payment of Central Excise Duty, the Central Excise Officials searched the factory premises and after the search was carried out, the Revenue issued a show cause notice. That show cause notice was issued after the conclusion of the search on 28th November, 2000. The adjudicating authority confirmed the demand. The Appeal before the Customs, Excise and Gold Control Appellate Tribunal (CEGAT) was filed and the CEGAT found that the Respondent was not guilty of clandestine removal of excisable goods and also the goods were excisable inasmuch as they were not packed in the containers and therefore not required to pay Excise Duty. Thus, against such a conclusion of the CEGAT that the matter was carried to the Hon'ble Supreme Court of India. The rival contentions have been noticed and thereafter, the Hon'ble Supreme Court found that the company had admitted the fact that it was guilty of clandestine removal of excisable goods as non-excisable goods in order to evade excise duty. It voluntarily came forward to sort out the issue and to pay the excise duty and paid excise duty to the extent of ₹ 11,00,000/on different dates. It is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... else there is a fetter or restriction to recover the duty. That does not mean that the Department or Revenue is remedyless. Such a prohibition does not mean that remedies under the general laws are barred or are in any way affected or taken away. It is only when recovery is contemplated in terms of the statute that the adherence to the statutory provision is mandated. Once this conclusion is reached, then, we find that even the Judgment in the case of Commissioner of Central Excise, Vishakhapatnam vs. Mehta and Co. reported in 2011 (264) E. L. T. 481 will not be carrying the case any further. There, the Hon'ble Supreme Court of India found that the department discovered the fraud or it came to its knowledge in the year 1997. There was a reply sent to a letter from the Department by the Assessee in February, 1997. Limitation is computed from the date of such reply. The show cause notice was issued on 15th May, 2000, which was within the period of limitation of five years. Therefore, this is not a decision which would in any manner hold that the accrual of the cause of action is to be taken into account and for computing and calculating the relevant date. 24) As a result of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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