2023 (1) TMI 638 - AT - Central Excise

Extended-period demand under s.11A(4) invalid where show-cause notice alleges suppression but not deliberate intent to evade duty

CESTAT held the extended period under s.11A(4) of the Excise Act could not be invoked because the show-cause notice merely alleged suppression of facts ... Extended period of limitation - suppression of facts - intent to evade payment of duty - self-assessment and scrutiny of returns - burden on Revenue to prove suppression with intentExtended period of limitation - suppression of facts - intent to evade payment of duty - burden on Revenue to prove suppression with intent - Whether the extended period of limitation under section 11A(4) of the Central Excise Act could be invoked against the appellant. - HELD THAT: - The Tribunal examined the show cause notice and the adjudicating and appellate orders and found that the notice merely alleged suppression of facts without any allegation or finding that the suppression was deliberate or done with intent to evade payment of duty. The law requires a strict construction of the proviso to section 11A and the invocation of the five year period postulates a positive, deliberate act - suppression must be with intent to evade duty. The ER 1 return did not require disclosure of related party status and there was no finding that incorrect information was furnished in the prescribed return; moreover, the departmental machinery and statutory rules and instructions place a duty on officers to scrutinise returns and call for records. In these circumstances the Department could not, by relying on an audit objection alone or on a bare allegation of suppression, invoke the extended period. The Tribunal relied on settled Supreme Court jurisprudence holding that mere omission or non payment does not amount to suppression with intent and that the burden lies on the Revenue to demonstrate deliberate suppression to attract section 11A(4). [Paras 24, 26, 27, 34, 35]The extended period under section 11A(4) could not be invoked as there was no allegation or proof of deliberate suppression with intent to evade duty; invocation was therefore unjustified and the demand confined to the extended period could not be sustained.Self-assessment and scrutiny of returns - officer's duty to call for records - Whether the appellant was obliged to disclose related party information in the ER 1 return and whether failure to disclose, if any, justified invoking the extended period. - HELD THAT: - The Tribunal noted that the ER 1 form does not provide a field to disclose related party status and the Department could not point to any place where such disclosure was required. Further, the statutory scheme and departmental instructions require officers to scrutinise returns and call for documents; the Revenue could have detected and acted on any discrepancy within the one year period by exercising its scrutiny powers. Accordingly the mere non disclosure in a form that did not require such information, without more, does not amount to suppression with intent to evade duty. [Paras 19, 20, 24, 26]Non disclosure in ER 1 could not be treated as deliberate suppression when the form did not require such disclosure and when officers had statutory and instructional duties to scrutinise returns and call for records; therefore such non disclosure did not justify invoking the extended period.Merits not reached - Whether it was necessary to decide the demand on merits after holding that the extended period was wrongly invoked. - HELD THAT: - The Tribunal held that since the entire confirmed demand related only to the period covered by the extended limitation, and the extended period could not be invoked, there was no need to examine the substantive merits of the valuation and demand. [Paras 6, 34]Merits of the demand were not adjudicated because the demand stood vitiated by incorrect invocation of the extended limitation period.Final Conclusion: The appeal is allowed; the impugned orders confirming the demand (which related solely to the extended period) are set aside because invocation of the five year period under section 11A(4) was not justified in the absence of any allegation or proof of deliberate suppression with intent to evade duty. Issues Involved:1. Invocation of the extended period of limitation under section 11A(4) of the Central Excise Act, 1944.2. Allegation of suppression of facts with intent to evade payment of duty.Detailed Analysis:Invocation of the Extended Period of Limitation:The primary issue examined was whether the extended period of limitation under section 11A(4) of the Central Excise Act, 1944, could be invoked. The appellant argued that the show cause notice issued on December 09, 2015, was beyond the one-year period from the relevant date, January 02, 2014, and that there was no justification for invoking the extended period of five years. The Department contended that the extended period was justified due to the appellant's failure to disclose required information in the ER-1 form.The Tribunal emphasized that for the extended period to apply, there must be evidence of fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. The show cause notice merely mentioned an audit without specifying the date and did not allege intent to evade duty. The Tribunal found no space in the ER-1 form where the appellant was required to disclose the relationship with RSSL, thus ruling out suppression of information.Allegation of Suppression of Facts with Intent to Evade Payment of Duty:The Tribunal scrutinized whether the appellant had suppressed facts with intent to evade duty, which is necessary for invoking the extended period under section 11A(4). The show cause notice and subsequent orders did not establish that the appellant had intent to evade duty. The Tribunal referred to several Supreme Court judgments, including Pushpam Pharmaceuticals, Anand Nishikawa Co. Ltd., and Uniworth Textiles Ltd., which clarified that mere failure to declare does not amount to wilful suppression. There must be a deliberate act to escape payment of duty.The Tribunal noted that departmental instructions require officers to scrutinize returns and call for necessary documents. The lack of such scrutiny by the officers cannot be blamed on the appellant. The Tribunal concluded that the Department failed to prove that the appellant suppressed facts with intent to evade duty.Conclusion:The Tribunal set aside the impugned order, ruling that the extended period of limitation could not be invoked as there was no evidence of suppression of facts with intent to evade duty. The appeal was allowed, and the demand was quashed.