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TMI Blog2016 (5) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT OF INDIA] applies. - in the present case, the conditions for invoking the extended period of limitation in terms of the proviso to Section 11 A (1) of the CE Act were not fulfilled and that the demand raised in respect of the BeCN used in the manufacture of PAA for the extended period of 1st March 1986 till 31st December 1989 was barred by limitation. - Decided in favor of assessee. - W.P.(C) 3951/1998 & W.P.(C) 1926/2000 - - - Dated:- 25-5-2016 - S. MURALIDHAR VIBHU BAKHRU JJ. For the Appellant: Mr. C. Hari Shankar, Senior Advocate with Mr. S. Sunil, Advocate. For the Respondent: Mr. Ripu Daman Bhardwaj, Advocate for R-1/UOI. Ms. Sonia Sharma, Advocate for Respondents 2 3 J U D G M E N T Dr. S. Muralidhar, J.: 1. These are two writ petitions by the Petitioner, DCM Shriram Industries Ltd., challenging the orders dated 15th April 1998 and 14th March 2000 passed by the Customs, Excise Gold (Control) Appellate Tribunal ( CEGAT ). While the first mentioned order dated 15th April 1998 of the CEGAT emanated from a Show Cause Notice (SCN) dated 19th February 1991 issued by the Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was used captively to make PAA and its Aqueous Layer. It is further stated that the BeCN which is produced and used captively to produce PAA and Aqueous Layer is in a 'crude' form and is unstable and therefore cannot be marketed as such. In an affidavit dated 14th January 1992 filed before the CEGAT by Mr. Ajay Gupta, Assistant Plant Superintendent of the Petitioner at its chemical plant at Daurala, it is explained that the crude BeCN that is captively consumed in the manufacture of PAA is debited in the column for other purposes and for such removal, serial numbered captive gate passes of the Company is used. These gate passes are duly pre-authenticated by the Central Excise Officers. The affidavit proceeds to explain how some quantity of BeCN is also manufactured for the purpose of sale and the process used for the production of such marketable BeCN. It is stated that the saleable quantity of BeCN packed in drums/ 'carboys' are accounted for in the Central Excise production records under the column pack. The quantity of BeCN is removed on payment of duty against Central Excise gate pass in GP. 1 and accordingly shown under the column for removal on payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from PAA (classified under Chapter 38 to the Schedule) on which BED of 15% ad valorem was paid. (c) Production of BeCL and BeCN for captive consumption, which were exempt from duty in terms of Notifications 171, 172 and 176 dated 1st March 1986. (d) Manufacture of BeCL and BeCN on which 15% duty ad valorem was paid. This was consistent with the Petitioner's stand that some portion of the BeCN which was not captively consumed, and in marketable form, was being sold after clearance on payment of duty. 10. The Inspector of Central Excise by a letter dated 31st March 1986 directed that the MODVAT credit taken on the inputs should be reversed. In its reply dated 18th April 1986, the Petitioner clarified that the PAA was cleared after availing exemption from payment of duty in terms of Notification No. 147/84-CE dated 18th June 1984. The Petitioner undertook to reverse the MODVAT input credit qua the PAA and debit the amounts so claimed in the RG-23A register on clearance of PAA and Benzyl Alcohol against credits already obtained on receipt of such inputs. In Annexures 1 and 2 to the said letter, the Petitioner gave the details of the inputs purchased from outside. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as present, the RG 1 registers for the period 1st March 1986 onwards were resumed. Thereafter, the Petitioner submitted a letter dated 27th March 1990 disclosing the process of manufacture and stating that BeCL and BeCN used in the manufacture of PAA were being cleared without payment of duty in terms of Notifications 171, 172 and 176/86 dated 1st March 1986, Notification No 147/84 dated 18th June 1984 and Notification No. 217/86 dated 2nd April 1986. 14. The Petitioner states that on 29th March 1990, the local Excise Inspector demanded payment of excise duty on BeCN for the period commencing 20th March 1990 and that the Petitioner was forced to pay it under protest. The Petitioner made a detailed representation on 29th May 1990 enclosing material to show that BeCN that was captively used in the manufacture of PAA was unmarketable. It was further explained that since BeCN was also used in the manufacture of Aqueous Layer, which was dutiable, the Petitioner would be entitled to claim exemption on BeCN under Notification No. 217/86. The said representation also mentioned the cases of other assessees undertaking the same process of production and on whom there had been no levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E ) to the Petitioner for suppressing the facts with an intent to evade payment of duty, with reference to the use of benzyl chloride and benzyl cyanide manufactured and used within the factory of production in the manufacture of PAA. This was for the period 1st March 1986 to 31st December 1989 and therefore, was by way of invocation of the extended period of limitation under the proviso to Section 11 A (1) of the CE Act as it stood prior to the passing of the Finance Act, 2011. 18. The case of the Department in this SCN was similar to the first SCN dated 5th July 1990. The allegation was that the fact of the use of BeCL and BeCN in PAA exempted from payment of duty was suppressed by the Petitioner. The paragraphs of the first SCN were more or less repeated. There was an additional paragraph in which it was stated: It is also appears that the party has suppressed the facts that the final products is cleared at nil rate of duty in remark col. of their classification list submitted right from 1.3.86 onwards, by not disclosing the name of final product in this Col. It also appears that the party has mis-declared the rate of duty leviable on Benzyl Chloride and on Benzy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was only 'spent sulphuric acid' and had no BeCN content in it. BeCN used as a reactant was only found in PAA which was cleared at Nil rate of duty. 22. The CCE further held that the figure of the total quantity of BeCN produced and cleared for captive consumption as shown in the SCN had been worked out on the basis of the RG 1 registers and was, therefore, correct. It was held that the Petitioner had in the classification list quoted the wrong exemption notification availed for clearance of BeCL and BeCN and by not declaring the final product had suppressed the fact that the above intermediate products were used in manufacturing a exempted final product i.e. PAA. Orders in the first SCN 23. Subsequently on 24th October 1991, the Assistant CCE (ACCE) passed an order-in-original in respect of the first SCN dated 5th July 1990. Incidentally, the discussion and findings in the said order were on the same lines as the order dated 12th August 1991 of the CCE in respect of the second SCN dated 19th February 1991. The ACCE therefore confirmed the demand of central excise duty on BeCN in the sum of ₹ 10,58,415.75 and dropped the demand as far as BeCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned Notification No.118/75 in which there was no condition as to the necessity of the final product being dutiable. The notification that applied was Notification No. 217/86 which had such a condition built into it. (v) The contention that crude BeCN was not marketable and therefore not dutiable could not be accepted in the absence of any technical evidence to show the difference in the two products. (vi) Since the demand was being confirmed, the MODVAT credit taken by the Petitioner which was earlier reversed was restored. Further the benefit of Notification No. 217/86 should be available for the BeCL used. The duty short levied was required to be reconsidered by making adjustments for the cost of packing. (vii) As regards the BeCN sold outside the penalty imposed was not excessive, even if as a result of the re-calculation the duty figure was reduced to some extent. CEGAT's order dated 18th November 1999 26. The Petitioner filed an application before the CEGAT seeking rectification of some factual errors in the above order dated 15th April 1998. Meanwhile the Petitioner also filed the present writ petition W.P. (C) No. 3951 of 1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea of the Petitioner that since BeCN was also used in producing Aqueous Layer that was dutiable, the exemption under Notification No. 217/86 could not be denied only because it was used to produce PAA that was exempt from duty. 29. By order dated 27th April 2000 in W.P. (C) No. 1926 of 2000, while issuing Rule, the Court directed it to be heard along with W.P. No. 3951 of 1998. However, since the Petitioner has not pressed W.P. (C) No. 1926 of 2000, no further discussion of the said order dated 14th March 2000 of the CEGAT is necessary. Preliminary Objection 30. A preliminary objection has been raised by Ms. Sonia Sharma, learned Standing counsel for the Department, to the maintainability of W.P. (C) 3951 of 1998 . It is contended that the petition involves questions concerning the rate of duty and valuation and that there is an efficacious statutory remedy of an appeal before the Supreme Court of India against the impugned orders of the CEGAT under Section 107 (and now Section 35 L) of the CE Act. She placed reliance on the decision of this Court in Perfect Electric Concern Pvt. Ltd. v. Assistant Collector/CCE 2000 (118) ELT 578 (Del) and the decision dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 then the period of limitation is extended from six months to five years. 36. In the present case, the Department's stand is that in the Classification Lists filed by the Petitioner on 7th March 1986, 7th May 1986 and 1st March 1989, the name of the final product, i.e., PAA was not disclosed and that in any event, in the Classification List of 1st March 1989 the wrong Notification No. was shown. In short, the case of the Department is that the Petitioner was claiming the benefit of exemption in respect of the BeCL and BeCN captively consumed by paying Nil rate of duty without disclosing that they were being used to manufacture PAA which was not dutiable. 37. Mr. C. Hari Shankar, learned Senior counsel appearing for the Petitioner, contested the above stand of the Department and pointed out that the documents on record showed that the following facts were in the knowledge of the Department throughout: (a) The Petitioner was manufacturing PAA. (b) That such PAA was exempt from duty in terms of Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onne of phenyl acetic acid shall be debited back in the RG-23A register on clearance of PAA and Benzyl Alcohol against credit already obtained on receipt of such inputs. The Petitioner further undertook that the debit entries will be commenced after we complete despatches of phenyl acetic acid and Benzyl Alcohol which were manufactured from inputs on which we have not obtained any credit under MODVAT. We shall make such debit entries so long as Phenyl Acetic Acid Benzyl Alcohol remain exempted from excise duty. Annexure 1 to this letter sets out the inputs which would be procured from the small-scale industries and therefore, MODVAT credit would not be taken in respect thereof. In a note in Annexure-I to it, a certificate of the Chartered Accountant was also appended wherein it was stated: Note For manufacture of Phenyl acetic acid, Benzyl Cyanide and Sulphuric Acid are inputs. - For manufacture of Benzyl Cyanide in the plant, Benzyl Chloride, Sodium Cyanide, Tri Ethyl Amine, Bleaching Powder and caustic soda are inputs. - For manufacture of Benzyl Chloride in the plant, Toluene, Chlorine and caustic Soda are inputs. We confirm that the figures m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty. Also, the word suppression in the proviso to Section 11 A (1) of the CE Act has to be read in the context of other words in the proviso, i.e. fraud, collusion, wilful misstatement . As explained in Uniworth Textiles Ltd. v. CCE (2013) 9 SCC 753 the word misstatement or suppression of facts does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the Assessee to avoid paying excise duty. The mere fact that the wrong notification number may have been mentioned will not ipso facto attract the proviso to Section 11 A (1) of the CE Act. As pointed out by Mr Hari Shankar, the Department was aware of the factual situation and therefore was not justified in invoking the extended period of limitation. Further in the second SCN dated 19th February 1991, the entire facts on the basis of which suppression and wilful misstatement was alleged were not set out. 45. Ms. Sonia Sharma, appearing for the Department, relied on the decision of the CEGAT in Saraswati Air Products v. Collector of Central Excise 1998 (98) ELT 391 (Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbefore. This merely sets out the language of the proviso to Section 11 A (1) and makes no reference to material that was not already available with the Department when the first SCN was issued. In such circumstances, the ratio of the decision in Nizam Sugar Factory (supra ) applies. The decisions in Pushpam Pharmaceuticals Co v. CCE 1995 Supp (3) SCC 462, Gujarat Ambuja Exports Limited v. Union of India 2012 (26) STR 165 (Guj) and Commissioner of Central Excise, Delhi-IV v. Escorts Limited, Faridabad 2009 (235) ELT 55 (P H) also appear to support the case of the Petitioner in this regard. 48. For all of the above reasons the Court holds that in the present case, the conditions for invoking the extended period of limitation in terms of the proviso to Section 11 A (1) of the CE Act were not fulfilled and that the demand raised in respect of the BeCN used in the manufacture of PAA for the extended period of 1st March 1986 till 31st December 1989 was barred by limitation. Conclusion 49. The impugned order of the CEGAT dated 15th April 1998 as corrected by the order dated 18th November 1999 to the extent it upholds the above demand in respect of BeCN and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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