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TMI Blog2023 (11) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... the department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would transpire from the aforesaid decision that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. In the present case, the show cause notice merely alleges that because the appellant did not pay central excise duty on additional levy at the rate of Rs. 295 /- per MT, the appellant suppressed material facts. There is no allegation in the show cause notice that such suppression was with an intent to evade payment of central excise duty. This was an important aspect, which was required to be not only alleged in the show cause notice, but also to be proved by the department before the extended period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India, by a letter dated 20.06.1996 alloted coal to the appellant at the Gare Palma Coal Block area in Raigarh coalfields for captive mining. Such allocation of coal, as also the allotment made to other persons, was challenged before the Supreme Court in a Writ Petition filed by Manohar Lal Sharma and by a judgment dated 25.08.2014 the Supreme Court held that the allocation of coal blocks in question was arbitrary and illegal. The Supreme Court, therefore, cancelled 42 out of the 46 coal blocks effective from 31.03.2015 and an additional levy of Rs. 295 per metric ton of coal that was extracted was directed to be paid to correct the wrong done by the Union of India. The name of the appellant was also included at Serial No. 19 of Annexure I to the judgment of the Supreme Court. The relevant portion of the judgment of the Supreme Court is reproduced below: "33. In Sheela Barse it was observed, and we endorse that view, that the relief to be granted in a case always looks to the future. It is generally corrective and in some cases it is compensatory. The present case takes within its fold all three elements mentioned in Sheela Barse. Our judgment highlighted the illegality and arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 295/- per metric ton." (emphasis supplied) 4. An audit memo dated 13.04.2016 was issued by the department to the appellant mentioning that as a consequence of the order passed by the Supreme Court, the value of coal cleared by the appellant would increase by Rs. 295/- per metric ton. The appellant was, therefore, directed to pay central excise duty on such additional amount paid for the period from April 2011 to March 2015. 5. The appellant, by a letter dated 08.06.2016, explained the accounting treatment adopted by the appellant for payment of additional levy of Rs. 295/- per metric ton. By letter dated 08.06.2016, the appellant also informed that the payment of additional levy of Rs. 295/- per metric ton would not form part of the cost of production and consequently would not invite excise duty. 6. However, a show cause notice dated 20.05.2016 was issued to the appellant proposing a demand of central excise duty on the additional levy of Rs. 295/- per metric ton. The extended period of limitation covering the entire proposed demand was also invoked in the said show cause notice. The relevant portion of the show cause notice dated 20.05.2016 is reproduced below: "2. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could not have been invoked in the facts and circumstances of the case. 8. The Commissioner, however, by order dated 28.11.2017 that has been impugned in the present appeal confirmed the demand holding that the extended period was correctly invoked. The relevant portion of the order passed by the Commissioner in connection with the invocation of the extended period of limitation is reproduced below: "3.15 The Noticee in its defense also contested the invocation of extended period of limitation. In the instant case, it is observed that the Noticee has not disclosed about the additional levy of coal @ Rs. 295/- per metric ton. The Noticee neither included the additional levy ibid, in their invoices for payment of duty nor disclosed in the statutory return i.e. ER-1. This fact of additional levy was noticed by the department during the course of audit of the books and accounts of the Noticee. Thus, the Noticee has suppressed the material facts from the knowledge of department and have deliberately not paid central excise duty on such additional levy of Rs. 295/- per metric ton on coal extracted from mines. Accordingly, I find that the Noticee has contravened the provisions of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voiding payment of central excise duty, the appellant did not pay the central excise duty. Learned special counsel, therefore, submitted that the extended period of limitation was correctly invoked. Learned special counsel also pointed out that in case the appellant had any doubts, it could have sought a clarification from the department, but it did not do so. Learned special counsel also pointed out that immediately after the audit team conducted the audit, the show cause notice was issued to the appellant. 11. The submissions advanced by the learned counsel for the appellant and the learned special counsel for the department have been considered. 12. It is not in dispute that the show cause notice was issued on 20.05.2016 for the period from May 2011 to March 2015. At the relevant point of time, the normal period prescribed for issuance of the show cause notice was one year, though in the circumstances enumerated in section 11A (4) of the Central Excise Act, the show cause notice could be issued within a period of five years. 13. Though learned counsel for the appellant made submissions, both on merit and on the invocation of the extended period of limitation, it would be appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or atypical cost whose occurrence is usually irregular and unexpected and/or due to some abnormal situation of the production or operation. ***** 5.28 Fines, penalties, damages, demurrage and similar levies paid to statutory authorities or other third parties shall not form part of the cost of production or acquisition or supply of goods or provisions of services". 17. Reliance on the aforesaid provisions has been placed by the learned counsel for the appellant to contend that the belief of the appellant that the compensation of Rs. 295/-per metric ton imposed by the Supreme Court would not be included in the cost of production was bonafide and based on material. 18. The show cause notice that was issued to the appellant emphasises that the appellant had suppressed material facts from the department, as the additional value of coal was not included by the appellant in the invoices for payment of excise duty and this fact was not disclosed in the statutory ER-1 returns. 19. The show cause notice is for the period from May 2011 to March 2015, which period includes the period prior to August 2014. The appellant could not have included this amount for the period prior to Augu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice". 22. It would be seen from a perusal of sub-section (4) of section 11A of the Central Excise Act that where any excise duty has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice to the person chargeable with the duty requiring him to show cause why he should not pay the amount specify in the notice. Sub-section (4) of section 11A, however, provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason for fraud; or collusion; or any wilful mis-statement; or suppression facts; or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of duty, the Central Excise Officer shall, within five years from the relevant date service notice on such person requiring into show cause why he should not pay the amount specified in noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious." (emphasis supplied) 28. Even assuming that there was suppression, it has to be examined whether suppression of facts by the appellant was wilful and with an intent to evade payment of central excise duty. The Supreme Court and the Delhi High Court have held that suppression of facts has to be "wilful‟ and there should also be an intent to evade payment of duty. 29. In Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [1995 (78) E.L.T. 401 (SC)], the Supreme Court examined whether the department was justified in initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :- "In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable. ***** 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment." (emphasis supplied) 35. It would transpire from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid if it is to be paid as per law. Revenue neutrality is a concept which has evolved through a series of decisions only for the limited purpose of determining if the assessee could have had an intention to evade payment of duty. This intention is an essential ingredient to invoke extended period of limitation. If it is Revenue neutral situation where, the excess duty, if paid, would have been available to the appellant itself or its another unit or a related unit as CENVAT credit, there cannot be an intention to evade because the assessee would gain nothing by evading. If the duty is chargeable or differential duty is chargeable such charge flows from the charging section- Section 3 of the Act. If such duty or differential duty is not paid, the remedy is available to the Revenue under Section 11A. This section places limitation on when a notice can be issued- within the normal period or extended period. Beyond the limitation, Revenue has no remedy although the charge remains. It is like a time-barred debt which, though owed, cannot be recovered by the creditor. If differential duty was chargeable but was not paid and it is later discovered by audit and it gets time barred under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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