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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 ..... 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. 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 (3) TMI 100 - SUPREME COURT]. 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 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 which is suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore [2003 (1) TMI 107 - SUPREME COURT] the Supreme Court observed that for invoking the extended period of limitation, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of the limitation could not have been invoked in the facts and circumstances of the case. The entire period covered under the show cause notice is for the extended period of limitation. The impugned order would, therefore, have to be set aside for the sole reason that the extended period of limitation contemplated under section 11A(4) of the Central Excise Act could not have been invoked.
The impugned order dated 30.09.2021 passed by the Commissioner is, accordingly, set aside and the appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate 03. Excise Returns 04. Income Tax returns 05. Balance Sheets, Directors reports, Profit & Loss Accounts and Annual return 06. Cost Audit Report 7. According to the appellant, a Fair Audit Report was given by the Audit Team to the appellant in respect of this audit. 8. Another Excise Audit of the appellant was conducted in November 2019 for the period from April 2015 to June 2017. The appellant claims to have provided the following documents to the Audit team on 15.11.2019. 01. Copies of balance sheet For F.Y'.s 2015-2016, 2016-2017 and 2017-2018 02. Excise Return ER_1 From April 2015 to June 2017 03. Service Tax Return ST_3 From April 2015 to June 2017 04. Income Tax Return For F.Y.'s 2015-2016, 2016-2017 and 2017-2018 05. Annual Return MGT_07 For F.Y.'s 2015-2016, 2016-2017 and 2017-2018 06. Financial Statement AOC_04 For F.Y.'s 2015-2016, 2016-2017 and 2017-2018 07. Last audit report UPTO 2014-2015 08. Authority Letter Mr. Bhaskar Mishra 09. Duty Paid More than Rs. 1 Cr. Per year. 9. This appeal arises out of the last Excise Audit conducted for the period from April, 2015 to June, 2017. It was observed by the Audit Team that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by invoking extended period of limitations. 9.2 Whereas, Section 11A(4) of the Central Excise, 1944 provides the provisions of extended period of five years from the relevant date to issue a notice where any duty of excise has not been levied or paid or has been short-levied or shor-paid or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. 9.3 In the instant case, it appears that the party has contravened the provisions of Notification No. 01/2011-CE dated 01.03.2011 as amended issued under Section 5A of the Central Excise Act, 1944 and Rule 4 and Rule 6 of the Central Excise Rules, 2002 with sole intent to evade payment of Central Excise duty payable by them on their finished goods namely Allopathic medicines falling under Chapter 30 and Food/Health Supplements falling under Sub heading No. 21069099, as discussed supra. Therefore, Central Excise duty amounting to Rs. 7,50,33,780/- (Rs. 4,99,02,990/- + Rs. 2,51,30,790/-) short paid by the party against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that there is no any Fraud, Collusions, any willful misstatement, suppression of facts and Contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty was involved at our end hence raised the demand u/s 11A(4) cannot be applicable as the Extended period is not applicable in our case. Since 2004, we acted with Department in fair and transparent manner and applied Notification No. 01/2011 in bona fide and genuine belief and this view were substantiated from time to time by Department and it's officers as is visible from various actions, decisions and conclusions of the Department Officers as shown above hence Section 11A(4) can not be invoked in our case. We were fully transparent with Excise Department as we never had a will or intention to conceal any information from Department and Department were informed of and well in possession of information about anything done in our Plant. As we utilized this Notification No. 01/2011 in respect of our allopathic products and food products in bona fide genuine and honest belief without intention of evasion of duty and with consistent and transparent intimation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r demanding the duty as the fact of availing of the benefits of the above_said notification was in the knowledge of the department. 26. Thus, the main argument of the party has been that since it has been intimating the department from time to time about the fact of its availing the exemption notification, either through the periodic returns being filed or the fact that they were audited, therefore the extended period cannot be invoked, since as per them, the department was well aware of the fact that they are taking exemption. This argument is incorrect and misplaced, because a mere intimation in the form of the said information being incorporated in the period returns does not mean any kind of approval or validation by the department. In fact, the law is premised on trust in the trade that has been reposed by way of self-declaration mechanism on part of the party. In this faith and trust based mechanism and corresponding legal provisions, the legislative intent clearly expects the trade to rightfully declare the relevant information and thereby, pay the taxes correctly themselves. This is in contrast to the system of tax administration and corresponding legislative provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CE dated 01.03.2011, as amended, fully knowing that the products manufactured by them are not the ones mentioned in the said notification and in the process, paid lower central excise duty with the intent to deny the legitimate right of the government to charge and collect its rightful duty. Thus, I find that the party's act of clearing products on reduced/lower rate of duty is intentional and not accidental. 42. In view of the above facts, I am of the clear view that the party deliberately cleared their products under Notification No. 01/2011- CE dated 01.03.2011, as amended knowing full well that the products manufactured by them are not covered under the ambit of the said notification and in the process, has contravened the provisions of the Central Excise Tariff Act, 1985, Central Excise Act, 1944 and the rules made there under, with intent to evade payment of duty and all the ingredients present establish the mens rea of the party. Thus, the intent to evade payment of duty by the party is clearly established as a deliberate and apparent and hence I hold that the mens rea to evade central excise duty to deny the legitimate right of the government to charge and col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refunded, 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 this Act or of the rules made thereunder with intent to evade payment of duty,- (a) 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 so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,- (i) his own ascertainment of such duty; or (ii) the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA. 26. Section 11A(4) of the Central Excise Act deals with circumstances under which the extended period of limitation of five years can be invoked. It is reproduced below: "Section 11A(4) Where any duty of excise has not been levied or paid or has been short-levied or shor-paid or erroneously refunded, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it had provided information to the department from time to time through the periodic returns and when the audit was conducted is not correct because mere intimation does not mean "any kind of approval or validation by the department". Law is premised on trust in the trade that has been reposed by way of self-declaration mechanism on the assessee; (ii) The decisions relied upon by the assessee are not applicable as the question of mens rea was not in issue before the Courts; (iii) The assessee was aware that it did not fulfill the substantial condition stipulated in the exemption notification and, therefore, the clearing of products on reduced lower rate of duty is intentional and not accidental; and (iv) As assessee had a clear intent to evade payment of duty, the extended period of limitation was correctly invoked. 30. It has to 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 caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from 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." (emphasis supplied) 35. This decision of the Supreme Court in Pushpam Pharmaceuticals was followed by the Supreme Court in Anand Nishikawa Co. Ltd. vs. Commissioner of Central Excise, Meerut [(2005) 7 SCC 749] and the relevant paragraph is as follows:- "27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceuticals Co. v. CCE 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 and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proviso." (emphasis supplied) 38. The Supreme Court in Continental Foundation Joint Venture vs. Commissioner of Central Excise, Chandigarh [2007 (216) E.L.T. 177 (S.C.)] also observed in connection with section 11A of the Central Excise Act, that suppression means failure to disclose full information with intention to evade payment of duty and the observations are as follows:- "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as "fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant intended to evade payment of duty. The Commissioner also held that since the appellant did not fulfill the condition stipulated in the Exemption Notification, the clearing of products at a reduced rate of duty is intentional. The reply filed by the appellant has not been appreciated by the Commissioner in its correct perspective. Thus, in the absence of any intent by the appellant to evade payment of service, the extended period of limitation under section 11A(4) of the Central Excise Act could not have been invoked. 43. The contention of the appellant is also that it bona fide believed that it was entitled to avail the benefit of the Exemption Notification and it cannot be said that the belief of the appellant is mala fide merely because it may ultimately be held that the appellant is not entitled to the benefit of the Exemption Notification. This contention deserves to be accepted. 44. In this connection, it may be pertinent to refer to the decision of the Supreme Court in Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)]. The Supreme Court held that if an assessee bonafide believes that it was correctly dischargin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed exports within the value of domestic clearances." (emphasis supplied) 45. Learned authorized representation appearing for the department, however, placed reliance upon a decision of the Supreme Court in Commissioner of Central Excise vs. Urmin Products Pvt. Ltd. [(2023) 11 Centax 270 (S.C.)] and in particular to paragraph 42 to contend that the extended period of limitation was correctly invoked. The said paragraph is reproduced below: "42. It is an admitted fact that till the filing of this letter, the assessee continued to classify the product as 'zarda/jarda scented tobacco' falling under CET SH 2403 9930. It is for this precise reason, that the adjudicating authority has observed, and rightly so that the letter dated 30.03.2006 had been cleverly drafted and it does not mention in detail the product which they were manufacturing at that material time namely 'zarda/jarda scented tobacco'. Though the classification in the letter shows entry CET SH 2403 9910 ('chewing tobacco'), it would depict a picture as though it is a new product. A plain reading of the letter would not indicate that the author of the said letter intended to reveal any details about the product that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment which was lower than the value as prescribed under Section 4 of the CE Act." (emphasis supplied) 46. It is in view of the fact that the assessee had cleverly drafted the letter so as not to reveal the correct details of the product that was being manufactured that the Supreme Court held that the appellant suppressed the change of name and classification of the goods which it was currently manufacturing. This decision would, therefore, not help the department as it is based on the peculiar facts of the case. 47. In M/s. Patanjali Yogpeeth Trust vs. Commissioner of Central Excise, Meerut-I [Service Tax Appeal No. 55429 of 2013 decided on 05.10.2023], the Tribunal recorded a categorical finding that the appellant suppressed the fact that it had received consideration for the provision of services and on the other hand reflected the same as donation in the books of account. This decision also, therefore, would not come to the aid of the department. 48. The show cause notice also alleged that in an era of self-assessment in assessee in required to correctly discharge the duty liability but the appellant wrongly availed the benefit of the exemption notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules. 25. Departmental instructions to officers also emphasise upon the duty of officers to scrutinize the returns. The instructions issued by the Central Board of Excise & Customs on December 24, 2008 deal with "duties, functions and responsibilities of Range Officers and Sector Officers". It has a table enumerating the duties, functions and responsibilities and the relevant portion of the table is reproduced below: xxxxxxxxx 26. The Central Excise Manual published by CBEC on May 17, 2005, which is available on the website of CBEC, devotes Part VI to SCRUTINY OF ASSESSMENT. xxxxxxxxxx 27. It is thus evident that not only do the 2002 Rules mandate officers to scrutinise the Returns to verify the correctness of self assessment and empower the officers to call for documents and records for the purpose, Instructions issued by the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.2024 ]. The Tribunal held: "39. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and Revenue and an assessee may genuinely believe that it is not liable to pay duty. On the other hand, the department may have an opinion that the assessee is liable to pay duty. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self assessment. If some duty escapes assessment, the officers of the department can always call upon the assessee to submit further documents and he may also conduct an enquiry. In fact when the audit was conducted, the officers of the audit team would have scrutinized the records and, therefore, notice should have been issued within the stipulated time from the date the audit was conducted. Even otherwise merely because facts came to light only during the audit does not prove that there was an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules." (emphasis supplied) 58. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs and Central Excise vs. Sunshine Steel Industries) filed by the department before the Supreme Court to assail the aforesaid decision of the Tribunal in Sunshine Steel Industries was dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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