Concessional-duty approval must be cancelled before Section 11A demand; extended limitation needs proof of suppression or wilful misstatement

Where concessional-duty approval and Annexure-I certificate remain in force, the Department must first set aside that approval through the prescribed statutory mechanism before invoking recovery under Section 11A; direct demand proceedings without such cancellation were jurisdictionally unsustainable. The extended limitation period under the proviso to Section 11A applies only on proof of fraud, collusion, wilful misstatement, or suppression of facts; disclosed facts and an approved procurement process did not establish such conduct. The show cause notices were therefore quashed as both without jurisdiction and time-barred.

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Issues: (i) whether, after issue of Annexure-I certificate and approval under the concessional duty scheme, the Department could invoke Section 11A of the Central Excise Act, 1944 without first cancelling the approval by resort to Section 35E(2); (ii) whether the show cause notices could sustain the extended period under the proviso to Section 11A on the basis of suppression or wilful misstatement.

Issue (i): whether, after issue of Annexure-I certificate and approval under the concessional duty scheme, the Department could invoke Section 11A of the Central Excise Act, 1944 without first cancelling the approval by resort to Section 35E(2)

Analysis: Section 11A and Section 35E operate in different fields, but they must be read harmoniously. The approval and Annexure-I certificate granted under the concessional-duty procedure remained effective until set aside in the manner known to law. In the absence of cancellation or rejection of that approval, the Department could not bypass the statutory mechanism and proceed directly under Section 11A to demand duty on the footing that the exemption was unavailable.

Conclusion: The show cause notices were held to be without jurisdiction insofar as they sought to invoke Section 11A without first disturbing the approval through the proper statutory process, and this issue was decided in favour of the assessee.

Issue (ii): whether the show cause notices could sustain the extended period under the proviso to Section 11A on the basis of suppression or wilful misstatement

Analysis: The material facts had been disclosed to the authorities, the procurement was made under the approved procedure, and the Department was aware of the relevant power purchase arrangements. The record did not disclose any positive act of concealment, fraud, collusion, or wilful suppression. Mere change of opinion or failure to appreciate the legal effect of disclosed facts was insufficient to attract the extended limitation.

Conclusion: The extended period under the proviso to Section 11A was not available, and the demand notices were barred by limitation; this issue was decided in favour of the assessee.

Final Conclusion: The impugned show cause notices were quashed and the writ petitions were allowed because the demand was held to be jurisdictionally unsustainable and time-barred.

Ratio Decidendi: Where a concessional-duty approval remains in force, the Department must first set it aside through the prescribed statutory mechanism before invoking recovery under Section 11A, and the extended limitation period applies only on proof of fraud, collusion, wilful misstatement, or suppression of facts.

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