2025 (11) TMI 853 - AT - Central Excise

Extended limitation can't override retrospective NIL duty under Notification No.12/2013-C.E.; exemption applies throughout interregnum and revenue position upheld

M/s. Bharat Sago Factory, SPA Company, Sri Karthikeyan Sago Factory, Sri Vinayaka Sago Factory Versus The Commissioner of GST & Central Excise

CESTAT CHENNAI - AT held that invocation of extended limitation based on alleged suppression must account for the exemption notification granted during ... Invocation of extended period of limitation by alleging suppression - requirement to consider exemption granted, retrospectively - HELD THAT:- The Hon’ble Court also relied on the decisions of Apex Court in W.P.I.L limited Vs. CCE, Meerut [2005 (2) TMI 137 - SUPREME COURT], Ralson (India) Ltd. Vs. CCE, Chandigarh [2015 (4) TMI 74 - SUPREME COURT], apart from its’ own decision in Gujarat Paraffins Pvt. Ltd. Vs. UOI [2012 (5) TMI 210 - GUJARAT HIGH COURT]. It was thus concluded by the Hon’ble Gujarat High Court that the exemption notification would apply during the interregnum as well. Following therefore the ratio decidendi of the Hon’ble Gujarat High Court, the Notification No. 12/2013-C.E., dated 1-3-2013 must be read as a clarification or curative one which means that the ‘NIL’ rate of duty would become applicable even in the interregnum as well which means that the same would operate retrospectively. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a subsequent notification restoring an exemption operates retrospectively to cover the interregnum between withdrawal and restoration (i.e., whether the notification is clarificatory/curative and applies to the earlier period). 2. Whether the extended period of limitation (invoked under the proviso to Section 11A by alleging suppression/fraud) and consequential penalties (under Section 11AC and Rules 25 & 27 CER, 2002) are justified where representations were pending with the Board and disclosure of relevant facts was made to supervisory authorities. 3. Whether an appeal dismissed as time-barred should be remitted to the first appellate authority where the order-in-original was not validly served on the authorized person/partners and the certified copy was obtained only later. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Retrospective effect of notification restoring exemption (clarificatory/curative nature) Legal framework: Statutory power to amend effective rates via notification under section 5A of the Central Excise Act; principle that an executive notification may be classificatory/clarificatory or curative and thereby operate with retrospective effect where intended to correct an inadvertent or unintended withdrawal of exemption. Precedent Treatment: The Court followed and relied upon earlier decisions holding that a notification restoring an exemption to cure an inadvertent error or unintended consequence is clarificatory/curative and covers the interregnum (examples cited in the reasons include authorities treating analogous restoration notifications as retrospective). Interpretation and reasoning: The Court noted undisputed facts-initial nil rate, levy introduced, representations made to the Board (with copies to the Commissioner), and subsequent issuance of a notification specifically inserting an entry providing 'Tapioca sago (sabudana)' as nil effective from 01.03.2013. The Court analogized the circumstances to instances where the Government reintroduced an exemption to correct an inadvertent result that was not intended by policy and held that the notification must be read as clarificatory/curative. The Court relied on the objective and content of the notification (the insertion of an express entry granting nil rate and the extension of the proviso date) and on prior judicial reasoning that such corrective notifications are retrospective so as to avoid unintended fiscal consequences during the interregnum. Ratio vs. Obiter: Ratio - A notification that restores an exemption to remedy an inadvertent or unintended withdrawal, and which is manifestly curative/clarificatory in purpose and text, operates retrospectively to cover the interregnum. Obiter - Illustrative reliance on particular out-of-state or fact-specific authorities was supportive but not treated as strictly binding beyond the principle applied. Conclusions: The Court concluded that the notification restoring 'nil' rate in respect of the product is curative/clarificatory and hence applies retrospectively to the interregnum; consequentially, orders imposing duty for that period (in the appeals identified) were set aside and benefits granted as per law. Issue 2 - Invocation of extended period of limitation and imposition of penalties where representations were pending and disclosure made Legal framework: Proviso to Section 11A (extended period for assessment/confirmation in cases of suppression/fraud); Section 11AC (penalty for fraud/suppression/contravention); Rules 25 & 27 CER, 2002 (penalties for violations of central excise rules). Provision requiring a higher degree of proof before invoking extended period and penalties where suppression or fraud is alleged. Precedent Treatment: The Court considered authorities holding that mere non-filing of returns or cessation of payments is not automatically sufficient to invoke extended period; that when the issue is one of interpretation or when representations disclosing facts are pending with the Board, invocation of extended period is improper unless clear suppression or deliberate concealment is established. The Court distinguished decisions relied on by Revenue insofar as they addressed different statutory schemes or factual findings of deliberate suppression. Interpretation and reasoning: The Court observed that appellants (through their association) had made representations to the Board, had disclosed manufacturing process and other relevant facts, and had copied the Commissioner. The Court emphasized settled law that a pending representation and disclosure to a supervisory statutory body weigh against finding suppression sufficient to trigger extended limitation unless there is a higher degree of proof of deliberate concealment. The Court also noted that where the central question involves interpretation of notification/ classification, extended period is generally not invocable. The Court distinguished authorities cited by Revenue where facts established wilful suppression or where the statutory provision considered was not pari materia with Section 11A. Ratio vs. Obiter: Ratio - Extended period of limitation and penalties under Section 11AC cannot be invoked where the assessee has made full disclosure to the Board/ supervisory authority and where the dispute centers on interpretative issues addressed (or capable of being addressed) by a curative/clarificatory notification, absent clear evidence of suppression or fraud. Obiter - Observations distinguishing specific precedent on GST or other non-pari materia provisions were explanatory. Conclusions: In respect of appeals where retrospective operation of the notification applied, the question of extended limitation became academic and the impugned invocation of extended limitation/penalties was set aside (as to those appeals). The Court further directed that penalties under Rules 25 & 27 could not stand where suppression under Section 11AC is not established and relied upon relevant High Court/tribunal reasoning to disallow penalties in such circumstances. Issue 3 - Restoration/remand of time-barred appeal where order-in-original not validly served Legal framework: Section 37C (service of orders) and statutory timelines for filing appeals; principles permitting condonation or remand where there is defective or improper service and the appellant acts promptly upon receipt of a certified copy; duty to consider genuine extenuating circumstances and principles of natural justice. Precedent Treatment: The Court followed earlier tribunal decisions remanding appeals for merits where the order-in-original was served on an unauthorized person/servant, or where the appellant vacated premises and did not receive the order, such that strict time-bar dismissal was inappropriate in light of defective service. Interpretation and reasoning: The Court accepted the factual stance that the order-in-original was initially served on a worker and not on an authorized agent or the partners; that the firm received the certified copy only much later after correspondence; and that comparable tribunal orders had remanded similar matters for merits. The Court found the lower authority's rigid approach to dismissing the appeal on time-bar unduly harsh where service defects and genuine delay were established and remitted the appeal to the first appellate authority for decision on merits with directions to apply principles of natural justice. Ratio vs. Obiter: Ratio - Where an order is not validly served in accordance with statutory service provisions, and the appellant obtains the certified copy belatedly and files promptly thereafter, the appeal should be remanded for decision on merits rather than being dismissed on strict time-bar grounds. Obiter - Comments on the extent of liability for taxes pending adjudication were illustrative and not dispositive. Conclusions: The Court remanded the time-barred appeal to the first appellate authority for adjudication on merits, directing that the lower authority decide the matter after affording full opportunity and issuing a reasoned order; the miscellaneous application seeking condonation was disposed accordingly.