2026 (1) TMI 512 - HC - Central Excise

Department's prior knowledge of assessee's activities and s.11A extended limitation challenge first raised on appeal rejected

The dominant issue was whether the extended limitation under s. 11A could be questioned for the first time in appeal on the basis that the Department had ... Rejection of legal plea regarding department’s knowledge and time bar by holding that this plea was not raised before the lower authorities - rejection of plea holding that the same was not raised even in the appeal filed before it, but only during the hearings - invocation of extended perido of limitation - HELD THAT:- Normally, limitation, if it were to be a pure question of law may be raised at any stage of the proceeding, and it would not have been fatal for either the Tribunal or even this Court, at the stage of appeal on a substantial question of law, to consider the question of limitation for the first time. The only caveat is that all necessary facts to determine that question are available on record. In the present case, the necessary facts, to determine as to whether invocation of larger period of limitation is correct or otherwise, are unavailable. Section 11A deals with recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. The period of limitation provided for such recovery is one year from the relevant date, being the date of short levy/non-levy. However, in cases where the Revenue is able to establish the ingredients of a) fraud, b) collusion, c) wilful misstatement, d) suppression of facts or e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the Department has in its arsenal, an extended period of 5 years of limitation from the relevant date, to serve a notice for assessment. It is found from the records that relevant form has been filed by MFE before the Assistant Collector of Central Excise, Salem Division, Salem-7 on 26.04.1991 claiming exemption as an SSI unit for the period 1990-91. However, as far as EPI is concerned, there is only a registration certificate dated 03.02.1998 and nothing to indicate that EPI was in existence prior to its registration on the aforesaid date. Hence, it cannot be accepted, as a fact, the position that the Department was well aware of the existence of EPI and its activities. This becomes a very relevant question of fact, one which is critical to determine the question of limitation, in this case thus, a mixed question of law and fact. Thus, and in the absence of necessary facts, there are nothing untoward in the conclusion of the Tribunal rejecting the plea of limitation raised for the first time before it, particularly in the absence of any supporting material. Petiiton dismissed. Issues: (i) Whether the Tribunal was right in rejecting the legal plea regarding the Department's knowledge and time bar on the ground that this plea was not raised before the lower authorities? (ii) Whether the Tribunal was right in rejecting the limitation plea on the ground that it was not raised in the appeal but only during hearings?Issue (i): Whether the Tribunal was right in rejecting the legal plea regarding the Department's knowledge and time bar on the ground that this plea was not raised before the lower authorities?Analysis: The legal framework for recovery of duties includes a one-year limitation from the relevant date and an extended five-year limitation where ingredients such as fraud, collusion, wilful misstatement or suppression of facts are established under Section 11A of the Central Excise Act, 1944. Whether the extended period applies requires factual determination of the Department's knowledge and existence of the incriminating conduct. When the facts necessary to determine invocation of the extended period are absent from the record, the limitation question becomes a mixed question of law and fact. In such circumstances, a tribunal may decline to entertain a limitation plea raised for the first time without supporting material establishing the factual predicates for extended limitation.Conclusion: The Tribunal was justified in rejecting the limitation plea raised for the first time where the necessary factual material to determine the Department's knowledge and the ingredients for extended limitation under Section 11A were not available on record.Issue (ii): Whether the Tribunal was right in rejecting the limitation plea on the ground that it was not raised in the appeal but only during hearings?Analysis: A pure question of limitation may be considered at any stage if all necessary facts to decide it are on record. However, where invocation of an extended period depends on factual findings (for example, prior registration evidence or departmental knowledge), absence of such supporting facts precludes deciding the limitation issue raised belatedly. The Tribunal's rejection of an oral, belated limitation plea is supported where no documentary evidence demonstrating the factual basis for extended limitation was before the authorities or the Tribunal.Conclusion: The Tribunal correctly rejected the belated limitation plea that was not taken in earlier proceedings and was raised only during hearings, given the lack of supporting factual material.Final Conclusion: The decision affirms that invocation of extended limitation under Section 11A requires established factual predicates on the record, and a belated limitation plea may be refused where those facts are absent, permitting tribunals to decline consideration of such pleas raised for the first time at the hearing.Ratio Decidendi: Where invocation of an extended period of limitation turns on factual predicates (such as fraud, collusion, wilful misstatement or suppression of facts and departmental knowledge), a limitation plea raised belatedly may be refused unless the necessary facts to determine the plea are already on the record; absent such facts, the tribunal may decline to entertain the plea.