2018 (9) TMI 1202 - HC - Central Excise

Court dismisses appeal due to time-barred duty demand under Section 11A(1) of Central Excise Act. No malafide intent found.

The Commissioner of Central Excise Versus Surya Fine Chemicals, The Customs, Excise and Service Tax Appellate Tribunal

The Commissioner of Central Excise Versus Surya Fine Chemicals, The Customs, Excise and Service Tax Appellate Tribunal - 2018 (362) E.L.T. 754 (Mad.) Issues Involved:1. Whether the demand of duty under the extended proviso to Section 11A(1) of the Central Excise Act 1944 and consequential penalties is barred by limitation.2. Whether the assessee's ignorance of law amounts to suppression within the meaning of proviso to Section 11A(1) of the Central Excise Act.3. Whether the Tribunal's finding that there is no malafide in the show cause notice and confusion of classification persisted in the industry is correct.Issue-wise Detailed Analysis:1. Limitation on Demand of Duty and Penalties:The appellant argued that the 1st respondent registered with the department only on 19.06.1997 and started paying duty from that date. The demand for duty was made for the period from 16.03.1995 to 18.06.1997, based on the insertion of Chapter Note 7 to Chapter 21 from 16.03.1995. The show cause notice dated 03.01.2001 demanded duty of Rs. 1,55,456/- under proviso to Section 11A(1) of the Central Excise Act, 1944. The Tribunal found that the claim made by the department was time-barred as the notice was issued much later than the period of limitation prescribed under Section 11A, which was one year at the relevant time. The court upheld this finding, noting that the show cause notice was issued belatedly and was thus time-barred.2. Ignorance of Law and Suppression:The appellant contended that the 1st respondent's failure to register and pay duty amounted to suppression of facts. However, the 1st respondent explained that there was confusion in the industry regarding the classification of food colour preparations, influenced by disputes and guidance from other companies. The Tribunal held that there was no malafide intention or willful suppression by the 1st respondent. The court agreed, emphasizing that the show cause notice did not explicitly state any malafide intentions or suppression, and the confusion in the industry was a valid reason for the 1st respondent's actions.3. Tribunal’s Finding on Malafide and Industry Confusion:The Tribunal found that the confusion in the industry regarding the classification of food colour preparations under Chapter 21 or Chapter 32 of the Central Excise Tariff Act, 1985, led to the 1st respondent's belief that their activities did not amount to manufacture. This confusion was resolved only after the CEGAT and Supreme Court judgments confirmed the classification under Chapter 21. The court upheld the Tribunal's finding, noting that the absence of specific allegations of malafide in the show cause notice and the industry's confusion justified the 1st respondent's actions.Conclusion:The court dismissed the appeal, finding no infirmity in the Tribunal's order. The demand for duty was time-barred, and there was no evidence of malafide intention or willful suppression by the 1st respondent. The confusion in the industry regarding the classification of food colour preparations was a valid reason for the 1st respondent's actions, and the extended period for demand under Section 11A(1) was not applicable.