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TMI Blog2024 (8) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made there under with intent to evade payment of duty, by the person chargeable with duty, the provisions of the said section shall have effect as if, for the word one year , the word five years has been substituted. It needs to be noted that the show cause notice did allege that suppression of facts by the appellant was with an intent to evade payment of central excise duty but such a finding has been recorded by the Commissioner. This apart, there is no discussion in the order as to why the appellant suppressed facts with an intent to evade payment of excise duty. The reply filed by the appellant on this aspect has not been considered at all by the Commissioner. The appellant had pointed out in reply to the show cause notice that the issue involved was complex in nature and the department also was not sure about the classification of RAB - The contention raised by the appellant have not been considered at all by the Commissioner. It was imperative for the Commissioner to have examined the aforesaid facts placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire demand is covered under the extended period of limitation. The impugned order dated 09.05.2019 passed by the Commissioner is, accordingly, set aside - appeal is allowed. - MR. DILIP GUPTA, PRESIDENT AND MR. P. V. SUBBA RAO, MEMBER (TECHNICAL) Shri S.C. Kamra and Shri N. Dubey, Advocates for the Appellant Shri Reyaz Ahmad and Shri Unmesh Kumar, Authorized Representative of the Department ORDER M/s India Glycols Limited [the appellant] has filed this appeal for quashing the order dated 09.05.2019 passed by the Commissioner, Central Goods and Service Tax, Dehradun [the Commissioner] by which the demand of central excise duty to the extent of Rs. 10,39,32,564/- with interest and penalty has been confirmed under the proviso to section 11A (1) of the Central Excise Act, 1944 [the Central Excise Act], but the proposed demand of Rs. 31,44,30,532/- has been dropped. 2. The appellant is engaged in the manufacture of dutiable goods like glycols, glycol ether, surfactant, ethoxylates, liquid oxygen, liquid nitrogen and liquid argon. In addition, the appellant also manufactures ethyl alcohol/rectified spirit, extra neutral alcohol, potable alcohol i.e. country liquor and Indian Made Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of RAB and its end-use in the manufacture of both dutiable and non-dutiable goods. The appellant also submitted year wise data of RAB consumed in the manufacture of extra neutral alcohol which was further used in the production of potable liquor. 8. The Commissioner, however, issued a show cause notice dated 04.02.2011 to the appellant for the period from 2005-06 to 2008-09 proposing to reclassify the product RAB as concentrated sugar syrup under ETI 1702 90 90 as other sugar syrups not containing added flavouring or colouring matter . The show cause notice alleges that the product RAB is most akin to syrups obtained during the extraction of sugar from sugarcane and hence would merit classification under ETI 1702 90 90 in terms of rule 4 of the General Interpretative Rules. The show cause notice also denies the benefit of excise exemption under the Notification dated 16.03.1995 on the ground that RAB was captively used in the manufacture of rectified spirit (non excisable commodity). The show cause notice further mentions that till 04.12.2009 the appellant misled the department by insisting that RAB is used in the manufacture of chemicals only and denied consumption of RAB i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant disclosed that apart from manufacturing dutiable products, it was also manufacturing non-dutiable products like extra neutral alcohol and potable alcohol from RAB. The appellant, therefore, resorted to suppression and willful mis-statement of facts with intent to evade payment of excise duty. 11. Shri S.C. Kamra, learned counsel for the appellant assisted by Shri N. Dubey made the following submissions: (i) RAB is not a marketable commodity and is not excisable. Even if a product finds entry in any heading or sub-heading of the Tariff, it is not liable to duty unless it passes the twin test of manufacture and marketability. In the absence of proven marketability i.e. the product is capable of being bought and sold in the market, an article does not become excisable goods; (ii) The onus to prove marketability is on the department; (iii) RAB contains solid contents of sugar below 65% by weight and does not have shelf life. Hence, it is not marketable nor covered by ETI 1702 90 90; (iv) The benefit of Notification dated 16.03.1995 is available on the intermediate product RAB used in the manufacture of both dutiable and non-dutiable goods; (v) The entire excise duty demand is tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 11A(4) of the Central Excise Act as the appellant did not declare removal of RAB in the ER-1 Returns. 13. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 14. One contention that has been raised by the learned counsel for the appellant, amongst others, is that the extended period of the limitation under the proviso to section 11A(1) of the Central Excise Act could not have been invoked. It would be appropriate to examine this issue first because if this issue is decided in favour of the appellant, it may not be necessary to examine the other issues raised on merit as the entire demand falls in the extended period of limitation. 15. Section 11A(1) of the Central Excise Act, as it stood at the relevant time, is reproduced below: Section 11A(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.02.2011 Time barred 19. To appreciate the contention advanced by the learned counsel for the appellant that the extended period of limitation could not have been invoked, it would be appropriate to first reproduce the allegations made in the show cause notice dated 04.02.2011 on this aspect of invocation of the extended period of limitation, and it is as follows: 28. Whereas M/s IGL mis-led the department till 04-12-09 saying that RAB is used in the manufacture of Chemicals only. Party consistently denied consumption of RAB in the manufacture of exempted goods. The fact regarding consumption of RAB in the manufacture of exempted goods has been brought to the notice of the department by M/s IGL only on 04.12.09 (please refer RUD No.9). At very early stage of the enquiry, department had inquired about the usage of RAB in the factory premises of M/s IGL from the State Excise department vide C.No. 20-CE/Misc.Corr/IGL/KPR-II/07/723 dated 14.09.2007 (RUD-13). In this connection, an exclusive question was asked from State Excise Department whether the RAB manufactured by M/s India Glycol Ltd., Kashipur is exclusively used in the manufacture of potable alcohol. (Refer Question No. 6 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations especially when there is crystal clear and cogent evidence on record to establish the intent to evade payment of duty . In the instant matter, the Noticees were and still are under a bona-fide belief that so called RAB is not excisable. ***** ***** I.7. Furthermore, the SCN fails to show any deliberate malicious act on the part of the Noticees to invoke extended period of limitation. The Noticees submit that throughout the Department was in constant touch with the Noticees regarding the activities that is taking place in the Kashipur Plant. The Department has alleged that the knowledge regarding consumption of Rab on the manufacture of exempted goods has been brought to the Notice of the Department only in 2009. Noticees submit that such an allegation is incorrect. Whenever the Department has sought information from the Noticees, the Noticees have promptly provided all the information available. The Excise officers have periodically visited the plant of the Noticees at Kashipur for statutory checks. Therefore, by no means did the Noticees ever willfully suppress any fact from the Department. ***** ***** I.11 From the above correspondence, it is clear that Department has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis supplied) 22. A perusal of the show cause notice dated 04.02.2011 issued to the appellant for the period 2005-06 to 2008-09 would show that there is no allegation that the appellant suppressed facts with an intention to evade payment of excise duty. The show cause notice merely mentions that consumption of RAB in the manufacture of exempted goods was brought to the notice of the department only on 04.12.2009 and, therefore, the appellant suppressed facts that RAB had been used in the manufacture of non excisable goods. 23. It must be remembered that mere suppression of facts is not enough. There has to be a deliberate attempt to evade payment of excise duty. The show cause notice must specifically deal with this aspect and the adjudicating authority is also obliged to examine this aspect in the light of the facts stated by the assessee in reply to the show cause notice. 24. The appellant had filed a detailed reply to the show cause notice pointing out why the extended period of limitation could not have been invoked in the facts and circumstances of the case, but the Commissioner upheld the invocation of the extended period of limitation merely for the reason that it was after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner to have examined the aforesaid facts placed on record by the appellant as the consideration of the same was necessary for recording a finding one way or the other regarding invocation of the extended period of limitation. 25. The provisions of section 11A (4) of the Central Excise Act, which are as similar to the provisions of section 11A(1) of the Central Excise Act, came up for interpretation before the Supreme Court in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay [ 1995 (78) E.L.T. 401 (S.C.) ]. The Supreme Court observed that section 11A(4) empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. The relevant observations are: 2. ***** The Department invoked extended period of limitation of five years as according to it the duty was shortlevied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation. 28. The aforesaid decisions of the Supreme Court were relied upon by the Supreme Court in Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur [ 2013 (288) E.L.T. 161 (S.C.) ] and the relevant portion of the judgment is reproduced below: 12. We have heard both sides, Mr. R.P. Batt, learned senior counsel, appearing on behalf of the appellant, and Mr. Mukul Gupta, learned senior counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds in the proviso, i.e. fraud, collusion, wilful misstatement . As explained in Uniworth (supra), 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 excise duty. ***** Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention. ***** The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief. (emphasis supplied) 32. The Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [ W.P. (C) 7542 of 2018 decided on 06.04.2023 ], also observed as follows: 28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the duty of the proper officer to scrutinize the correctness of the duty assessed by the assessee. The Division Bench also noted that departmental instructions issued to officers also emphasise that it is the duty of the officers to scrutinize the returns. The relevant portion of the decision of the Tribunal is reproduced below: 24. It would be seen that the ER-III/ER-I returns filed by the applicant clearly show that the applicant had categorically declared that it had cleared the final products by availing the exemption under the notification dated 17.03.2012. The applicant had furnished the returns on the basis of self assessment. Even in a case of self assessment, the Department can always call upon an assessee and seek information. It is under sub-rule (1) of rule 6 of the Central Excise Rules, 2002 that the assessee is expected to self assess the duty and sub-rule (3) of rule 12 of the 2002 Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts. 16. Another ground for invoking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand for the extended period of limitation cannot be sustained. (emphasis supplied) 36. The Tribunal in Sunshine Steel Industries vs. Commissioner of CGST, Customs Central Excise, Jodhpur [ (2023) 8 Centax 209 (Tri.-Del.) ] also observed as follows: 20. The Department cannot be permitted to invoke the period of limitation by merely stating that it is a case of self-assessment as even in a case of self-assessment, the Department can always call upon an assessee and seek information . It is under sub-rule (1) of rule 6 of the Central Excise Rules, 2002 that the assessee is expected to self-assess the duty and sub-rule (3) of rule 12 of the Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considering the assessee s view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner. 24. The extent of disclosure that an assessee makes is also linked to his belief as to the requirements of law. **********. On the question of disclosure of facts, as we have already noticed above the assessee had disclosed to the department its pricing policy by giving separate letters. It is also not disputed that the returns which were required to be filed were indeed filed. In these returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. 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. (emphasis supplied) 39. What, therefore, transpires from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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