2005 (9) TMI 331 - SC - Central Excise

Proviso to Section 11A cannot extend limitation for alleged suppression; tax demand limited to six months before notice

ANAND NISHIKAWA CO. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT

The SC held the Tribunal (CEGAT) erred in allowing extended limitation under the proviso to Section 11A for alleged suppression by the appellant; the ... Classification of extruded rubber profiles - Suppression of facts - extended period of limitation under proviso to Section 11A - Whether extruded rubber profiles be classified under sub-heading 4008.29 of the Central Excise Tariff which attracted Nil rate of duty or Heading 4016.19? Held that:- We are of the view that the CEGAT was not justified in holding that the extended period of limitation would be available to the Department for initiating the recovery proceedings under Section 11 A of the Act on a finding that there was suppression of facts by the appellant. Accordingly, it was not open to the Excise authorities to invoke proviso to Section 11 A of the Act and therefore, the demand of the Revenue must be restricted to six months prior to the issue of notice dated 19-10-1995 instead of five years. In view of this conclusion, it is not necessary for us to consider the question of applicability of the classification lists namely of 4008.29 and 4016.19 and the question of MODVAT facilities. Accordingly, in our opinion, CEGAT came to a wrong conclusion for wrong reasons and therefore, we allow this appeal and set aside the judgment and order of the CEGAT and restore the order of the Commissioner. Issues Involved:1. Classification of extruded rubber profiles.2. Applicability of the extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944.3. Alleged 'suppression of facts' by the appellant.4. Recovery of duties not levied or paid.5. Validity and retrospective effect of the amendment to Section 11A of the Central Excise Act, 1944.Detailed Analysis:1. Classification of Extruded Rubber Profiles:The appellant, M/s. Anand Nishikawa Co. Ltd., classified their extruded rubber profiles under sub-heading 4008.29 of the Central Excise Tariff, attracting a Nil rate of duty. The Revenue, however, classified these products under Heading 4016.19, which implied a different duty rate. The classification dispute was remanded by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) to the Commissioner for a fresh decision.2. Applicability of the Extended Period of Limitation:The core issue was whether the extended period of limitation under proviso to Section 11A of the Act was applicable. The original Rule 10 and Section 11A of the Act, both before and after the 2000 amendment, were examined. The proviso to Section 11A allows for an extended period of five years in cases of fraud, collusion, willful mis-statement, suppression of facts, or contravention of the Act with intent to evade duty. The amendment in 2000 extended the power of the Central Excise Officer to initiate recovery proceedings even when the classification list was approved by the department.3. Alleged 'Suppression of Facts':The Revenue claimed that the appellant did not disclose the post-forming processes like notching, drilling, and slitting, which constituted 'further working' and should classify the products under sub-heading 4016.19. The CEGAT found 'suppression of facts' based on this non-disclosure. However, the Supreme Court noted that the department had inspected the products and collected samples. The flow-chart of the manufacturing process submitted in 1990 mentioned the post-forming processes, and the classification lists were approved from time to time. The Court concluded there was no deliberate suppression of facts by the appellant.4. Recovery of Duties Not Levied or Paid:The Supreme Court analyzed the provisions of Section 11A and its amendments, noting that recovery proceedings could be initiated even if the classification lists were approved by the department. However, the extended period of limitation could only be invoked if there was deliberate suppression of facts, which was not the case here. The demand for duty was restricted to six months prior to the show cause notice dated 19-10-1995.5. Validity and Retrospective Effect of the Amendment:The amendment to Section 11A in 2000, which allowed recovery proceedings irrespective of classification list approval, was upheld as valid and retrospective from 17-11-1980. This amendment aimed to negate previous court decisions that restricted recovery proceedings based on approved classification lists. The Supreme Court affirmed that the amendment did not alter the basis of the judgment in Cotspun Ltd.'s case and was a valid piece of legislation.Conclusion:The Supreme Court allowed the appeal, set aside the CEGAT's judgment, and restored the Commissioner's order. The extended period of limitation under proviso to Section 11A was not applicable due to the absence of deliberate suppression of facts by the appellant. The demand for duty was limited to six months prior to the show cause notice. The classification and MODVAT credit issues were not addressed due to the conclusion on the limitation period. No order as to costs was made.