2007 (5) TMI 1 - SC - Central Excise

Appeal allowed: extended limitation under proviso to Section 11A cannot be invoked without specific fraud or suppression allegations

LARSEN & TOUBRO LTD. Versus COMMISSIONER OF C. EX, PUNE’II

SC allowed the appeal, set aside the impugned order, and held that Revenue was not justified in invoking the extended period of limitation under the ... Demand - applicability of the extended period of limitation as contained in the proviso appended to Section 11A - Revenue alleged that appellant is manufacturer of PSC Griders used it for construction of bridges of the Railways and it not register itself with central excise and accordingly penalty imposed on him - HELD THAT:- Acts of fraud or suppression, it is well settled, must be specifically pleaded. The allegations in regard to suppression of facts must be clear and explicit so as to enable the noticee to reply thereto effectively. It was not the case of the revenue that the activities of the appellant were not known to it. Admittedly, when the first show cause notice was issued, the extended period of limitation was not resorted to. A notice should ordinarily be issued within a period of six months (as the law then stood) i.e. within the prescribed period of limitation but only in exceptional cases, the said period could be extended to 5 years. When in the original notice, such an allegation had not been made, we are of the opinion that the same could not have been made subsequently as the facts alleged to have been suppressed by the appellant were know to them. Extension of the period of limitation entails both civil and criminal consequences and, therefore, must be specifically stated in the show cause notice, in absence whereof the Court would be entitled to raise an inference that the case was not one where the extended period of limitation could be invoked. As a matter of fact, while considering imposition of penalty under Section 11A of the Act, the Commissioner has refused to impose any penalty upon the appellant on the premise that it was not guilty of any act of mala fide. We, therefore, keeping in view the facts and circumstances of this case, are of the considered view that the impugned judgment cannot be sustained. It is set aside accordingly. We hold that the Revenue was not justified in invoking the extended period of limitation in the instant case. The appeal is allowed. Issues Involved:1. Whether a process of 'manufacture' is involved.2. Whether the girders can be considered as immovable property.3. Whether the girders can be considered as marketable and whether exemption under Notification No. 59/90 can be extended.4. Whether there was suppression of facts on the part of the noticees so as to invoke the extended period.Detailed Analysis:1. Whether a process of 'manufacture' is involved:The Commissioner of Central Excise, Pune, held that the construction of bridges involves multiple components, including the foundation and superstructure. The manufacture of Pre Stressed Concrete Girders (PSC Girders) falls within the purview of this construction activity, thereby constituting a process of manufacture. Consequently, the activities carried out by the appellant were considered manufacturing activities subject to excise duty.2. Whether the girders can be considered as immovable property:The Commissioner opined that PSC Girders, once manufactured and transported to the construction site, were not embedded into the earth and thus could not be classified as immovable property. This classification was crucial as immovable property is not subject to excise duty under the Central Excise Act, 1944. The Tribunal upheld this view, leading to the conclusion that the PSC Girders were excisable goods.3. Whether the girders can be considered as marketable and whether exemption under Notification No. 59/90 can be extended:The Commissioner addressed the marketability of the PSC Girders, stating that they were indeed marketable. The appellant did not provide sufficient evidence to claim exemption under Notification No. 59/90. As such, the Commissioner concluded that the PSC Girders were subject to excise duty and did not qualify for the claimed exemption.4. Whether there was suppression of facts on the part of the noticees so as to invoke the extended period:The extended period of limitation was invoked based on allegations of suppression of facts by the appellant. The appellant argued that the first show cause notice did not allege suppression, and thus, the second notice could not introduce such an allegation. The Supreme Court agreed, noting that acts of fraud or suppression must be specifically pleaded and clear. The Court found that the facts alleged to have been suppressed were already known to the authorities when the first notice was issued. Consequently, invoking the extended period of limitation was deemed unjustified. The Court referenced several decisions, including *P & B Pharmaceuticals (P) Ltd. v. Collector of Central Excise* and *Nizam Sugar Factory v. Collector of Central Excise, A.P.*, which supported the view that the same set of facts could not be used to invoke the extended period of limitation if they were already known to the authorities.Conclusion:The Supreme Court set aside the impugned judgment, concluding that the Revenue was not justified in invoking the extended period of limitation. The appeal was allowed, and the Court emphasized that the appellant's plea of bona fide was not rejected, and no penalty was imposed under Section 11A of the Act, indicating no mala fide intent. The judgment highlights the necessity for clear and explicit allegations of suppression and the importance of adhering to statutory limitation periods.