2014 (12) TMI 1086 - AT - Central Excise

Tribunal rules extended period cannot be invoked without evidence of wilful intent.

M/s. Rapicut Carbides Limited Versus Commissioner of Central Excise & ST., Surat

The Tribunal ruled in favor of the appellant, finding that the extended period under Rule 57-I of the Central Excise Rules, 1944 could not be invoked ... Denial of CENVAT Credit - Invocation of extended period of limitation - Suppression of facts - Malafide intention - mere procedural violations - whether extended period is invokable for mere suppression on the part of the appellant or the suppression should be with an ‘intention to evade’ payment of duty - Held that:- So far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’ preceding the words ‘mis-statement or suppression of facts which means with intent to evade duty. The next set of words ‘contravention of any of the provisions of this Act or Rules’ are again qualified by the immediately following words ‘with intent to evade payment of duty’. It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful. Words ‘suppression of facts’, used in Rule 57I of the Central Excise Rules, 1944 are in the company of words like collusion and wilful mis-statement and will have to be understood to mean ‘with intent to evade payment of duty’. The observations made by the Adjudicating authority that ‘no intention to evade’ is required for invoking extended period of 5 years, can not thus be appreciated as the correct interpretation of law. Though there is no dispute that provisions of Section 11A of the Central Excise Act, 1944 are independent of recovery machinery under Rule 57-I of the Central Excise Rules, 1944, but the ratio of the words ‘suppression of facts’ and ‘wilful’ as interpreted by the Apex Court will also be applicable to the recovery provisions of Rule 57-I of the Central Excise Rules, 1944. - Decision in the case of Pushpam Pharmaceuticals Company vs. CCE, Bombay [1995 (3) TMI 100 - SUPREME COURT OF INDIA] followed. Credit was admissible to the appellant but for not filing the required/ proper declaration. Appellant has correctly relied upon the case laws mentioned in Para 2.1 above to the extent that for mere procedural violations CENVAT credit cannot be denied. Though in the present proceedings appellant is not agitating the issue of admissibility of credit but there is no evidence on record that there was any deliberate act on the part of the appellant to avail inadmissible credit. In our opinion extended period of 5 years cannot be invoked in these proceedings for not following the procedure properly when otherwise the credit was admissible. - Decided in favour of assessee. Issues:Whether extended period under Rule 57-I of the Central Excise Rules, 1944 can be invoked for mere suppression of facts without intent to evade payment of duty.Analysis:The appellant appealed OIO No. 11/MP/2006 dated 25.5.2006 passed by the Commissioner of Customs & Central Excise, Surat. The appellant argued that the extended period of 5 years should not apply as there was no intent to evade payment of duty, citing judgments like Cosmic Dye Chemical vs. CCE, Bombay and Pushpam Pharmaceuticals Company vs. CCE, Bombay. The appellant contended that the procedural lapse of not filing declarations should not lead to the invocation of the extended period.The Revenue argued that the judgments relied upon by the appellant were not applicable to Rule 57-I of the Central Excise Rules, 1944, emphasizing the case law of CCE, Jaipur vs. Raghuvar (India) Limited. The Revenue asserted that mere suppression by the appellant warranted the application of the extended period.The issue revolved around the interpretation of Rule 57-I of the Central Excise Rules, 1944. The Adjudicating authority held that the absence of specific language like 'intent to evade' in Rule 57-I meant that any suppression of facts would trigger the extended period of 5 years. The Tribunal analyzed the relevant provisions of Rule 57-I and compared them to Section 11A of the Central Excise Act, 1944, highlighting the importance of 'wilful' misstatement or suppression of facts with intent to evade duty.The Tribunal referred to judgments like Cosmic Dye Chemical vs. CCE, Bombay and Pushpam Pharmaceuticals Company vs. CCE, Bombay to establish that 'wilful' misstatement or suppression of facts must be present to invoke the extended period. It concluded that the words 'suppression of facts' in Rule 57-I should be understood in conjunction with 'wilful' and 'intent to evade payment of duty'. The Tribunal found that there was no evidence of deliberate intent by the appellant to avail inadmissible credit, and hence, the extended period of 5 years could not be applied.Ultimately, the Tribunal allowed the appeal, ruling that the demand from January 1990 to December 1990, with the show cause notice issued on 11.11.1994, was time-barred under Rule 57-I of the Central Excise Rules, 1944.