2015 (3) TMI 628 - SC - Central Excise

Supreme Court upholds time-barred duty notice decision, stresses factual disclosure importance in tax cases

The Supreme Court affirmed the decision of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) that the show cause notice for non-payment ... Non payment of excise duty - Invocation of extended period of limitation - Suppression of facts - Held that:- The Tribunal has noted that there was in fact a disclosure of the aforesaid fact in CT(3) certificate which was submitted by the respondent to the Department. It is noted that no clearance could have taken place without the knowledge of the officer as to the ultimate destination of the goods and the fact that they were cleared without payment of duty in terms of the exemption notification which was specified in the application. On that basis, the Tribunal has held that proviso to Section 11(A)(1) of the Act will not get attracted and thus, the show cause notice was beyond the period limitation as specified under Section 11(A)(1) of the Act. Going through the material on record, we find that the Tribunal is justified in taking the aforesaid view. Thus, there is no merit in this appeal - Decided against Revenue. Issues:1. Whether duty is payable for the period in question.2. Whether the show cause notice was time-barred due to the respondent's alleged suppression of material facts.Analysis:Issue 1:The case involved the manufacturing of air-conditioning machinery and parts by the respondent, which were sent to 100% Export Oriented Units without duty payment. A show cause notice was issued to the respondent for non-payment of duty for a specific period. The Adjudicating Authority held that duty was indeed payable. The respondent argued that the notice was time-barred as it was not issued within six months, covering the demand period. The Authority rejected this argument, citing the respondent's alleged suppression of material facts regarding the final product's destination. This suppression extended the limitation period to five years under the proviso to Section 11(A)(1) of the Central Excise Act, 1944.Issue 2:The respondent appealed to the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT), which upheld the duty payment but accepted the respondent's contention on the limitation issue. CEGAT found that the respondent had disclosed the final product's destination in a certificate submitted to the Department. Since the officer was aware of this information and goods were cleared without duty payment based on an exemption notification, the proviso to Section 11(A)(1) was deemed inapplicable. Consequently, the show cause notice was considered time-barred. Upon review, the Supreme Court agreed with CEGAT's decision, stating that the Tribunal's interpretation was justified based on the evidence. As a result, the appeal was dismissed, affirming that there was no merit in challenging the decision regarding the limitation period and duty payment.This detailed analysis outlines the key issues addressed in the legal judgment, including the duty payment obligation and the time-barred nature of the show cause notice, along with the rationale and decisions made by the respective authorities and the Supreme Court.