Suppression of true transaction value justified extended limitation and penalty where scrap-related compensation formed part of excisable consideration.

A receipt described as compensation was treated as part of the consideration for auto parts sold as scrap, because the record showed it was not disclosed in ER-1 returns and the balance-sheet entry did not adequately explain its nature. On those facts, the arrangement was found to involve suppression of the true transaction value with intent to evade duty, so the extended period of limitation under the Central Excise Act was validly invoked. The same factual basis also satisfied the conditions for penalty under section 11AC(1)(c), making the penalty sustainable and the duty demand with consequential penalty upheld.

---

---

Issues: (i) Whether the extended period of limitation under section 11A(4) of the Central Excise Act, 1944 was validly invoked. (ii) Whether penalty under section 11AC(1)(c) of the Central Excise Act, 1944 was sustainable.

Issue (i): Whether the extended period of limitation under section 11A(4) of the Central Excise Act, 1944 was validly invoked.

Analysis: The amount described as compensation was held to be part of the consideration for the auto parts ultimately sold as scrap. The record showed that the compensation amount was not disclosed in the ER-1 returns, and the balance sheet entry did not sufficiently explain the nature of the receipt. The Court treated the arrangement between the appellant, Honda India, and the buyers of scrap as one designed to suppress the true transaction value and evade duty. On these facts, the ingredients of suppression of facts with intent to evade duty were found to exist.

Conclusion: The extended period of limitation was rightly invoked.

Issue (ii): Whether penalty under section 11AC(1)(c) of the Central Excise Act, 1944 was sustainable.

Analysis: Penalty under section 11AC(1)(c) follows where non-payment or short-payment of duty is by reason of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. Since the same factual foundation that justified invocation of the extended limitation period was established, the statutory basis for penalty was also satisfied.

Conclusion: The penalty was justified and sustainable.

Final Conclusion: The application failed on both the limitation and penalty issues, and the duty demand with consequential penalty was upheld.

Ratio Decidendi: Where a receipt described as compensation is found, on the facts, to form part of the consideration for excisable goods and is not disclosed in the statutory returns, suppression of facts with intent to evade duty is established, justifying both extended limitation and equal penalty under the excise law.

---