2026 (2) TMI 177 - AT - Central Excise

Extended-period limitation for excise fraud and suppression requires intent to evade; absent such intent, extended limitation and penalty were not sustained.

Extended-period limitation requires proof of fraud, collusion, wilful misstatement or deliberate suppression of facts with intent to evade duty; mere ... Extended period of limitation - fraud or collusion - wilful mis-statement or suppression of facts - intent to evade payment of duty - penalty u/s 11AC - self-assessment and duty disclosure obligations - remand to the original adjudicating authority for de-novo adjudication - HELD THAT:- The SCNs invoked extended period of limitation on the ground that the respondents did not maintain proper records of the job work, never disclosed the work to the department, never obtained a central excise registration, never paid any duty nor filed any returns. The investigation commenced on the basis of an information from the Income Tax department which revealed the entire activities and the duty liability. The undisputed legal position is that to invoke extended period of limitation, fraud or collusion or wilful mis-statement or suppression of facts or violation of the Act or Rules with an intent to evade must be established. Suppression of facts does not merely mean omission of something which one was supposed to declare but the positive act of suppression with an intent. According to the Revenue, the respondents had not only suppressed the values of their job work goods but had also violated all the Rules which required them to take registration, pay duty and file returns. All this was done, according to the Revenue, so as to keep their turnover within the SSI exemption when in fact, they had crossed the limits if the value of goods cleared through job work was also considered. According to the respondents, they had entertained a belief that no duty was payable and therefore did not obtain registrations, pay duty or file returns. We note that in the first round of litigation, the Commissioner (Appeals) had also dropped the entire demand which decision was reversed by the Final Order of this Tribunal. We, therefore, find that it is perfectly possible for the respondents also to have entertained a belief that no duty was payable. If they were under such a belief, they obviously had no reason to pay duty, take registration or file returns. Thus, we find that the demand for extended period of limitation were correctly dropped by the Commissioner (Appeals). Consequently, the Commissioner (Appeals) also set aside the penalty under section 11AC. Accordingly, both impugned orders are upheld and both appeals are dismissed. The cross objections filed by the respondents are also disposed of accordingly. Issues: Whether the Commissioner (Appeals) correctly set aside demands made for the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 and penalties under Section 11AC of the Act.Analysis: The statutory test for invoking the extended period requires proof of fraud or collusion or wilful mis-statement or suppression of facts or contravention of the Act or Rules with intent to evade duty. The factual record showed that prior proceedings produced differing conclusions on liability and there was evidence that the respondents could have reasonably entertained the belief that no duty was payable on job work. The Tribunal's earlier remand concerned calculation and quantum, not fresh findings of intentional suppression; the adjudicating authorities' factual findings were weighed against the requirement that positive acts of suppression with intent must be established to extend limitation. The burden of proof to establish ingredients for extended limitation rests with the department; mere omission to register, file returns, or pay duty, without clear evidence of intent to evade, does not satisfy the statutory threshold for invoking extended limitation and consequent penalty.Conclusion: The demands for extended period of limitation under Section 11A(4) and the penalties under Section 11AC were correctly set aside; the impugned orders upholding that relief are to be upheld and the Revenue appeals dismissed.Ratio Decidendi: Extended period of limitation under Section 11A(4) can be invoked only upon proof of fraud, collusion, wilful mis-statement or suppression of facts or contravention of law with intent to evade duty; absent such positive proof, demands for extended limitation and associated penalties cannot be sustained.