2024 (8) TMI 1142 - AT - Central Excise

Extended period of limitation under section 11A(1) cannot be invoked without proving wilful suppression of facts with intent to evade duty

CESTAT New Delhi held that extended period of limitation under section 11A(1) of Central Excise Act could not be invoked against appellant. The ... Extended period of limitation - suppression of facts or not - Classification of RAB - to be classified as concentrated sugar syrup under ETI 1702 90 90 as ‘other sugar syrups not containing added flavouring or colouring matter’ or not - benefit of excise exemption under the Notification dated 16.03.1995 denied on the ground that RAB was captively used in the manufacture of rectified spirit (non excisable commodity) - HELD THAT:- It would be seen from a perusal of sub-section (1) of section 11A(1) of the Central Excise Act that where any duty of excise has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the duty which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice - The proviso to section 11A(1) of the Central Excise Act stipulates that where any duty of excise has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made there under with intent to evade payment of duty, by the person chargeable with duty, the provisions of the said section shall have effect as if, for the word ‘one year’, the word ‘five years’ has been substituted. It needs to be noted that the show cause notice did allege that suppression of facts by the appellant was with an intent to evade payment of central excise duty but such a finding has been recorded by the Commissioner. This apart, there is no discussion in the order as to why the appellant suppressed facts with an intent to evade payment of excise duty. The reply filed by the appellant on this aspect has not been considered at all by the Commissioner. The appellant had pointed out in reply to the show cause notice that the issue involved was complex in nature and the department also was not sure about the classification of RAB - The contention raised by the appellant have not been considered at all by the Commissioner. It was imperative for the Commissioner to have examined the aforesaid facts placed on record by the appellant as the consideration of the same was necessary for recording a finding one way or the other regarding invocation of the extended period of limitation. The provisions of section 11A (4) of the Central Excise Act, which are as similar to the provisions of section 11A(1) of the Central Excise Act, came up for interpretation before the Supreme Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [1995 (3) TMI 100 - SUPREME COURT]. The Supreme Court observed that section 11A(4) empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. There can be a difference of opinion between the department and Revenue and an assessee may genuinely believe that it is not liable to pay duty. On the other hand, the department may have an opinion that the assessee is liable to pay duty. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self assessment. In the present case, all that has been stated in the impugned order, even in the absence of any allegation in the show cause notice regarded intent to evade duty, is that since the appellant suppressed facts, the provisions of the extended period of limitation contemplated under the proviso to section 11A(1) of the Central Excise Act would be applicable since such suppression of facts was with an intent to evade payment of duty. The extended period of limitation could not have been invoked in the present case even if the returns were self assessed. Thus, as the extended period of limitation contemplated under the proviso to section 11A(1) of the Central Excise Act could not have been invoked, the impugned order dated 09.05.2019 passed by the Commissioner deserves to be set aside as the entire demand is covered under the extended period of limitation. The impugned order dated 09.05.2019 passed by the Commissioner is, accordingly, set aside - appeal is allowed. Issues Involved:1. Classification of RAB under the Excise Tariff.2. Marketability and excisability of RAB.3. Availability of excise exemption under the Notification dated 16.03.1995.4. Invocation of the extended period of limitation under section 11A(1) of the Central Excise Act.5. Valuation of RAB captively consumed.Issue-wise Detailed Analysis:1. Classification of RAB under the Excise Tariff:The Commissioner classified RAB under ETI 1702 90 90 as 'sugar syrups not containing added flavouring or colouring matter' based on observations that RAB is akin to sugar syrups obtained after crushing sugarcane. The department relied on the CRCL Test Report which identified RAB as a dark brown viscous liquid with 61.7% reducing sugar and 2.8% ash content. The appellant contested this classification, arguing that RAB contains solid contents of sugar below 65% by weight and does not have a shelf life, thus it should not be classified under ETI 1702 90 90.2. Marketability and Excisability of RAB:The Commissioner concluded that RAB is marketable because it has a shelf life, as evidenced by its storage in tanks before being transferred to the distillery unit. The appellant argued that RAB is not a marketable commodity and hence not excisable. They contended that even if a product finds entry in any heading of the Tariff, it is not liable to duty unless it passes the twin tests of manufacture and marketability. The onus to prove marketability lies on the department.3. Availability of Excise Exemption under the Notification dated 16.03.1995:The Commissioner granted excise duty exemption on the quantity of RAB used in the manufacture of rectified spirit, which was further used in the manufacture of denatured spirit and chemicals cleared on payment of excise duty. However, the Commissioner denied the exemption for RAB used in the manufacture of rectified spirit, which was further used in the manufacture of extra neutral alcohol and potable alcohol, as these were non-excisable goods.4. Invocation of the Extended Period of Limitation under Section 11A(1) of the Central Excise Act:The Commissioner invoked the extended period of limitation, asserting that the appellant had suppressed the fact that RAB was used in the manufacture of non-excisable goods. The appellant argued that the extended period of limitation could not be invoked as the department had full knowledge of their activities and there was no intent to evade duty. The Tribunal found that the show cause notice did not allege suppression with intent to evade duty and that the Commissioner failed to consider the appellant's detailed reply. The Tribunal emphasized that mere suppression of facts without intent to evade duty does not justify invoking the extended period of limitation.5. Valuation of RAB Captively Consumed:The appellant argued that the valuation of RAB captively consumed was not properly taken and that cost sheets certified by an independent cost accountant were discarded. The Commissioner's order did not provide detailed reasoning on this aspect, focusing instead on the classification and marketability issues.Conclusion:The Tribunal concluded that the extended period of limitation could not be invoked as there was no deliberate suppression of facts with intent to evade duty. Consequently, the entire demand, which fell under the extended period, was time-barred. The Tribunal set aside the Commissioner's order dated 09.05.2019 and allowed the appeal, emphasizing that the department must prove deliberate suppression to invoke the extended period of limitation.