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TMI Blog2025 (2) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... tained the necessary licences to manufacture such medicines from the Drug Licence-cum- Controlling Authority (Manufacturing). 3. The appellant claims that it had been availing the benefit of Area Based Exemption granted under a Notification dated 10.06.2003 in respect of all the excisable goods manufactured in the factory with effect from 25.12.2004. Since the exemption from payment of excise duty was granted for a period of ten years, the appellant opted to pay excise duty on the goods manufactured by it with effect from 01.04.2014 and intimated this fact to the jurisdictional Assistant Commissioner of Central Excise by a letter dated 07.04.2014. The appellant also claims that the description of excisable goods manufactured remained the same during the period the appellant availed the benefit of the Notification dated 10.06.2003 and the period during which the appellant availed the benefit of Exemption Notification dated 01.03.2011. 4. An Excise Audit of the appellant was conducted by the officers of Central Excise in the month of March, 2016 covering period from April, 2011 to March, 2015. The appellant claims to have provided the following documents to the audit team: 01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice is reproduced below: "2. Whereas, Audit of the records of party was conducted by the officers of Central Goods & Service Tax Audit Commissionerate, Dehradun for the period from 01.04.2015 to 30.06.2017. During the course of audit, it has been observed that during the audit period, the party was manufacturing and clearing various medicaments. xxxxxxxxxxx by availing the benefit of Notification No. 01/2011-CE dated 01.03.2011 as amended vide notification No. 16/2012-CE dated 17.03.2012 without availing CENVAT credit. 7. Whereas it appears that the intention of the party was to misuse the exemption under Notification No. 01/2011-CE dated 01.03.2011 as amended to avoid payment of higher rate of duty on medicaments falling under Chapter heading 30.04 and food supplements falling under Sub heading No. 21069099 manufactured by them xxxxxx" (emphasis supplied) 11. The show cause notice also invoked the extended period of limitation under section 11A(4) of the Central Excise Act, 1944 [the Central Excise Act] and the relevant portions of the show cause notice dealing with this issue are reproduced below: "9.1 Whereas, in the era of self-assessment and self-removal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period of limitations along with interest under Section 11AA of the Act and a penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944." (emphasis supplied) 12. The show cause notice, therefore, called upon the appellant to show cause as to why: "(i) The exemption under Notification No. 01/2011-CE dated 01.03.2011 as amended should not be denied to them on the goods manufactured and cleared during the period from 01.04.2015 to 30.06.2017. (ii) The differential Central Excise duty amounting to Rs.7,50,33,780/- (Rupees Seven crore, Fifty lakhs, Thirty three thousand, Seven hundred and eighty only) should not be recovered from them under the provisions of Section 11A(4) of the Central Excise Act, 1944 along with interest payable under Section 11AA of the Act ibid. (iii) Penalty should not be imposed upon them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 for contravention of provisions of Notification No. 01/2011-CE dated 01.03.2011 as amended and Rule 4, 6 and 8 of the Central Excise Rules, 2002 with intent to evade the payment of duty." 13. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced by the appellant, both on merits and on the extended period of limitation. 15. On merits, the Commissioner observed as follows: "Supplements are not 'FOOD' as held above, although they are packaged and ready for consumption. Obviously, a tablet or syrup cannot be eaten in the sense of food being eaten. They are to be swallowed or gulped down the throat. The party has tried to extrapolate the simple literal wording of the notification to wrongfully claim the benefit of the Notification No. 01/2011- CE dated 01.03.2011, as amended. 23. In view of the above facts and discussion, I hold that the benefit of the Notification No. 01/2011- CE dated 01.03.2011, as amended, is not applicable and available on the 'Food/ Health Supplements' falling under Chapter Sub Heading 21069099 of the First Schedule to the Central Excise Tariff Act, 1985, being manufactured and cleared by the party." 16. On the extended period of limitation, the Commissioner observed as follows: "25. xxxxxxxxx. The party has contended that on 25.04.2014 they had intimated the department about their intention of opting to avail the benefit of Notification No. 01/2011-CE dated 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. Likewise, when any new product was manufactured by a party, the party was supposed to file a classification list and also a valuation list before the departmental designated authority. Only after approval by the said authority, could the manufacturer clear the goods under that classification heading and with that valuation. Obviously, in this kind of a scenario if the department did not agree with the classification as proposed by the manufacturer or with the availment of the exemption notification as proposed by the manufacturer, it would have been incumbent and mandatory on part of the department to point out the error and if the said error or the correction would not be pointed out by the departmental authority, it would be logical for the party to argue that the said information was very well in the knowledge of the department and therefore, the extended period cannot be invoked. Whereas, in the tax environment pertaining to the period in question, this system of physical control has long become obsolete and the current system is completely a trust driven tax collection mechanism." (emphasis supplied) 17. The decisions relied upon by the appellant to contend that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the appellant submitted that the appellant was entitled to avail the benefit of the Exemption Notification and denial of the same by the impugned order is unjustified. Learned counsel also submitted that the entire period of dispute, which is from 01.04.2015 to 30.06.2017, covered by the show cause notice dated 26.06.2020 falls under the extended period of limitation provided for under section 11A(4) of the Central Excise Act, but in view of the facts and circumstances of the case the extended period of limitation could not have been invoked. In this connection, learned counsel placed reliance upon certain decisions to which reference shall be made at the appropriate stage. 21. Shri Rakesh Agarwal, learned authorized representative appearing for the department, however, submitted that the appellant was not entitled to claim the benefit of the Exemption Notification, and in any view of the matter, the Commissioner was justified in holding that the extended period of limitation contemplated under section 11A(4) of the Central Excise Act was correctly invoked. In this connection, learned authorized representative also placed reliance upon certain decisions to which a refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y person chargeable with the duty, the Central Excise Officer 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." 27. It would be seen from a perusal of sub-section (1) of section 11A of the Central Excise Act that where any duty of excise has not been levied or paid, for any reason, other than the reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act or the Rules made thereunder with intent to evade payment of duty, the Central Excise Officer, shall within one year from the relevant date, serve notice on the person chargeable with the duty which has not been paid. However, sub-section (4) of section 11A of the Central Excise Act provides that where any duty of excise has not been levied by reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act with intent to evade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed above, all that has been stated in the show cause notice regarding invocation of the extended period of limitation is that the appellant wrongly availed the benefit of the Exemption Notification deliberately with the sole intent to evade payment of central excise duty. The Commissioner also held that there was an intent to evade payment of central excise duty merely because the benefit of the Exemption Notification was wrongly availed. 33. Mere wrong availment of an Exemption Notification would not lead to a conclusion that it was with an intent to evade payment of central excise duty unless the department is able to not only allege but substantiate that the said suppression was deliberate with an intent to evade payment of central excise duty. 34. The provisions of section 11A of the Central Excise Act, as it then stood, 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 the proviso to section 11A empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was 7 (2005) 7 SCC 749 11 E/52953/2018 not open to CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts." (emphasis supplied) 36. In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore [(2003) 3 SCC 410] the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, 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. 37. 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 behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation under the proviso to section 73 (1) of the Finance Act, 1994 [the Finance Act] and held as follows: "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words 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 bonafi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt in the service tax return." (emphasis supplied) 41. This issue was also examined at length by a Division Bench of the Tribunal in M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South [Service Tax Appeal No. 51787 of 2022 dated 21.08.2023]. After referring to the provisions of section 73 of the Finance Act, the Bench observed: "13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked. ***** 14. In this appeal, the case of the 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 adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could co-exist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory requirement. Upon a deeper examination of the said letter, the suppression becomes more apparent, namely the nonmentioning of change of the name and classification of the goods which they were currently manufacturing and which they ought to have disclosed. It is this hiding of the fact and not specifying the details in their letter that led to the issuance of the show cause notice and invocation of Section 11A and Section 11 AC of the CE Act, by the Department. It cannot be ignored that till filing of the letter dated 30.03.2006, the assessee itself was classifying the product as 'zarda/jarda scented tobacco' falling under CET SH 2403 9930 and being a large-scale manufacturer and paying large sums of amount as duty, to contend that it was unaware of the difference between these two products, or to contend that it had classified the product as 'zarda/jarda scented tobacco' by ignorance, is not a plausible justification on part of the assessee. However, on the issuance of Notification No.2 of 2006 dated 01.03.2006 under which 'zarda/jarda scented tobacco' was excluded orin other words not included in the said notification, the assessee changed the description of its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nanced. It is the duty of the officers scrutinizing the returns to examine the information disclosed by an assessee and the department cannot be permitted to take a plea that it is the duty of the assessee to disclose correct information and it is not the duty of the officers to scrutinize the returns. 50. In this connection, reference can be made to the decision of the Tribunal in M/s. Raydean Industries vs. Commissioner CGST, Jaipur [Excise Appeal No. 52480 of 2019 decided on 19.12.2022]. The Tribunal, in connection with the extended period of limitation, observed that even in a case of self assessment, the department can always call upon an assessee and seek information and it 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 emphasis 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 produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round 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 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) 52. It also needs to be noticed that in the present case three Audits had been conducted. The first Audit was conducted in March 2016 for the period from April 2011 to Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Central Excise & Service Tax, Raipur [2024 (4) TMI 816 - CESTAT New Delhi], and in particular to paragraph 20, to contend that the extended period of limitation was correctly invoked. The relevant observations of the Tribunal are: "20. The contention of the learned counsel of the appellant that they were subjected to the audits earlier may not immune them as they have not provided any evidence of the disclosures to the audits earlier which render them to prove that department ignored certain facts despite being bought to the notice. Audit is always a selective audit and non-pointing out of any lapse by audit depend upon the many factors like disclosure of the information to the audit, submission of the concerned record before the audit, thorough disclosure of the activity before the audit etc. Non pointing out during audit cannot be a ground to declare it to be non-suppression." 55. In the present case, as noticed above, detailed information was provided by the appellant to the Audit Team during the course of all the two earlier Audits. This decision of the Tribunal in Godawari Power & Ispat would, therefore, not come to the aid by the department. 56. The appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 5. Pending applications, if any, are disposed of." 59. It would also be relevant to refer to the decision of the Tribunal in M/s. Kalya Constructions Private Limited vs. The Commissioner, Central Excise Commissionerate, Udaipur [Service Tax Appeal No. 54385 of 2015 decided on 15.11.2023], wherein it was observed: "11. Both the SCNs further state that had the audit not conducted scrutiny of the records, the short paying the service tax would not have come to notice. It is a matter of fact that all the details were available in the records of the appellant. The appellant was required to furnish returns under section 70 with the Superintendent of Central Excise which it did. It is for the Superintendent to scrutinize the returns and ascertain if the service tax had been paid correctly or not. If the assessee either does not make the returns under section 70 or having made a return, fails to assess the tax in accordance with the provisions of Chapter or Rules made thereunder, the Superintendent of Central Excise can make the best judgment assessment under section 72. For this purpose, he may require the assessee to produce such accounts, documents or other evide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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