2025 (7) TMI 631 - AT - Central Excise

Mere suppression of facts insufficient to invoke extended limitation period under section 11A(4) without willful intent

Process Agrochem Industries Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Indore

CESTAT New Delhi dismissed the appeal in a case involving recovery of short-paid excise duty. The tribunal held that mere suppression of facts is ... Recovery of Excise Duty short paid - suppression of facts or not - invocation of extended period of limitation - HELD THAT:- The Commissioner (Appeals) held that mere suppression of fact is not enough to invoke the extended period of limitation. Such suppression of facts has to be with intent to evade payment of duty. The Commissioner (Appeals) in the impugned order has observed that since there was suppression of facts by the appellant, the show cause notice that was issued to the appellant while dealing with the aspect of extended period of limitation under section 11A(4) of the Central Excise Act has observed that since there was suppression of facts it would appear that the noticee has wilfully suppressed the facts and had it not been audited, the correct fact would not have come to the notice of the department. The show cause notice completely fails to mention why there was any willful suppression of facts by the appellant. Since mere suppression of facts would not mean that the facts have been suppressed wilfully with an intent to evade payment of duty. This issue was considered at length by this Bench of the Tribunal in Ingram Micro India Pvt. Ltd. vs Principal Commisioner of Customs (Import), New Delhi [2022 (2) TMI 308 - CESTAT NEW DELHI] and it was held that the goods would merit classification under CIT 8471 41 90 as claimed by the respondent of this appeal and not under CIT 8528 52 00 as claimed by the department, though in the present appeal the department has claimed the classification under CTI 8528 59 00. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the demand of central excise duty confirmed under section 11A(4) of the Central Excise Act, 1944, was validly raised within the extended period of limitation.- Whether the invocation of the extended period of limitation under section 11A(4), on the ground of suppression of facts with intent to evade duty, was justified.- Whether the classification of the goods under the Customs Tariff Heading (CTH) 8528 59 00 by the department was correct, or whether the classification under CTH 8471 41 90 as held by the Tribunal and Principal Commissioner was appropriate.- Whether the departmental appeal against the Tribunal's decision on classification was maintainable, given the ongoing appeals against rulings of the Customs Authority for Advance Rulings (CAAR).2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Demand Raised Under Section 11A(4) and Extended Period of LimitationThe legal framework governing this issue is section 11A of the Central Excise Act, 1944. Sub-section (1) mandates issuance of a show cause notice within two years for duty short paid or short levied. Sub-section (4) permits issuance within five years where duty short payment arises from fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade duty.The Assistant Commissioner confirmed demand under section 11A(4), invoking the extended limitation period, based on departmental audit findings indicating suppression of facts and intent to evade duty. The Commissioner (Appeals) upheld this, noting that the show cause notice was issued within five years and that the appellant did not rebut allegations of wilful suppression or incorrect valuation. The Commissioner emphasized that the evasion surfaced through audit, implying the appellant's failure to disclose related party clearances and correct valuation.The appellant contended the demand was time-barred and that the show cause notice lacked specific allegations justifying extended limitation. However, the Tribunal noted the absence of any evidence from the appellant to refute suppression allegations. The Tribunal concurred with the Commissioner (Appeals) that the element of suppression with intent to evade duty was established, justifying invocation of the extended period.The Tribunal further clarified that mere suppression of facts is insufficient; it must be wilful and with intent to evade duty. The show cause notice and subsequent findings indicated such wilful suppression, given that the evasion remained undisclosed until audit intervention.Issue 2: Justification for Invocation of Extended Period of LimitationThe Tribunal relied on the principle that invocation of extended limitation under section 11A(4) requires proof of suppression or fraud with intent to evade duty. The Commissioner (Appeals) and Tribunal found that the appellant's failure to disclose related party transactions and correct valuation constituted wilful suppression. The appellant's failure to adduce evidence rebutting this was critical.The Tribunal referenced its own prior jurisprudence emphasizing that extended limitation is not automatic but contingent on establishing intent and suppression. The absence of such intent would preclude extended limitation. Here, the Tribunal found the facts met the threshold for extended limitation.Issue 3: Classification of Goods under Customs TariffThe classification dispute centered on whether the goods (Interactive Flat Panels or IFPs) should be classified under CTH 8471 41 90 or CTH 8528 59 00. The Tribunal had previously ruled in a related case that classification under 8471 41 90 was appropriate. The Principal Commissioner also concurred with this classification.However, the department relied on a directive from the Commissioner of Customs, Chennai-II (Import), dated August 4, 2023, which instructed classification under 8528 59 00 pending the outcome of appeals against CAAR rulings that favored classification under 8471 41 90. This directive was issued despite the Tribunal's prior decision and the favorable CAAR rulings for the assessee.The Tribunal observed that the departmental appeal was motivated solely by this directive and that the appeal lacked merit, especially since the departmental note relied on pending appeals rather than binding decisions. The Tribunal characterized the departmental appeal as frivolous, given the settled position in its earlier ruling and the Principal Commissioner's concurrence.Issue 4: Maintainability and Merits of Departmental Appeal Against ClassificationThe Tribunal noted that the departmental appeal did not challenge the Tribunal's earlier decision or the Principal Commissioner's findings. Instead, the appeal was filed in deference to an internal departmental note pending outcomes of other appeals before the CAAR.The Tribunal emphasized that classification issues had been conclusively decided in favor of the appellant's position, and the departmental appeal was an attempt to circumvent these decisions. The Tribunal thus dismissed the appeal as lacking substantive grounds and being an abuse of process.3. SIGNIFICANT HOLDINGS'The evasion of duty by the Appellant has surfaced out of the Departmental Audit carried out by the officers of Central Excise department. Had the officers of Audit team not taken up the audit, the evasion of Central Excise duty would have remained unnoticed.''The Appellant neither before the Original Authority nor in their present appeal have adduced any evidence to refute the allegations of wilfully suppressing the entire facts from the department about the clearance to related party and also not done the correct valuation with intent to evade payment of Central Excise duty.''Mere suppression of fact is not enough to invoke the extended period of limitation. Such suppression of facts has to be with intent to evade payment of duty.''The show cause notice completely fails to mention why there was any willful suppression of facts by the appellant. Since mere suppression of facts would not mean that the facts have been suppressed wilfully with an intent to evade payment of duty.''The goods would merit classification under CIT 8471 41 90 as claimed by the respondent of this appeal and not under CIT 8528 52 00 as claimed by the department.''It is the Committee of Chief Commissioners of Customs who have considered it appropriate to rely upon the order of the Commissioner of Customs rather than the order of the Tribunal covering the same issue in the matter of Ingram Micro.''The appeal, therefore, deserves to be dismissed and is dismissed.'