TaxTMI 
TaxTMI 
2009 (1) TMI 388
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....en a statement of the appellant's legal and fiscal advisor was recorded on 2-9-87 in which he informed about the execution of the above contract and admitted that about 500 RCC pipes were manufactured for which no excise licence was taken nor any duty was paid. Further inquiries were made from the Bombay Municipal Corporation who confirmed the above facts vide their letter dated 27-6-88. It also transpired that the total no. of pipes manufactured by then was 512 in number. A show cause notice was thereafter issued on 10-2-89 seeking to demand duty amounting to 32,40,595/- along with interest and also proposing to impose penalty. Show cause notices were issued to both Bombay Municipal Corporation and to the appellant. The show cause notices were adjudicated by the Commissioner who confirmed the duty amounting to 34,02,624.35 and imposed a penalty of 2 lakhs under Rule 173Q. The proceedings against the Bombay Municipal Corporation were dropped. 2. The ld. Advocate for the appellant submitted that they are not seriously disputing the dutiability of pipes manufactured during the execution of the works contract and their whole argument is on limitation as the entire demand was time b....
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....Section 11A of the said Act nowhere provides date of knowledge to be a relevant date for issuing demand notice and therefore date of knowledge is of no consequence. This decision was reversed by the Supreme Court as 2006 (197) E.L.T. 465 which inter alia held that allegation of suppression cannot be sustained when on same issue a show cause notice was issued earlier. 4. It was submitted that the Supreme Court decision is not restricted to barring the department from issuing subsequent show cause notice when it had issued show cause notice earlier as is being contended by the revenue. This is further clear from the question posed before the Larger Bench before whom the question was date on which knowledge is acquired by the department. 5. Attention was also invited to the Karnataka High court decision in the case of Bripanil Synthetics - 2006 (203) E.L.T. 11 (Kar.) wherein in para 10 & 11, the court held that the show cause notice issued on 4-9-2001 after being aware of all facts on 6-8-1998 was bad and time barred. This was on the basis on Supreme Court decision in the Nizam Sugar Factory case cited supra. Before the High Court the department relied upon the decision of the L....
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....osed under Rule 173Q without specifying the sub-rule under which it has been imposed which cannot be done as held by the Supreme Court in the case of Amrit Foods - 2005 (190) E.L.T. 433 (S.C.). 10. Referring to the submissions of the ld. DR, who has tried to distinguish the Karnataka High Court decision in the case of Bripanil Synthetics cited supra on the ground that there was no allegation with regard to fraud etc. in the show cause notice and therefore show cause notice was held to be time barred and not on account of knowledge on the part of the department, he submitted that this is not factually correct as in para 8 of the aforesaid decision it has been clearly spelled out that the party before the Karnataka High Court has wilfully suppressd the fact with an intent to evade central excise duty. He then refered to the decision of the Supreme Court in 2008 (221) E.L.T. 481 (S.C.) relied by the department to contend that there is no bar in issuing second show cause notice when earlier notice on the same facts has been issued and submitted that this decision does not deal with the issue of the date of knowledge for the purpose of issuing a demand notice as was dealt by the Supr....
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....gment cannot be considered as a ratio of that judgment. An opinion of the court on any issue not necessary for deciding the dispute cannot be considered as a ratio on that case and for this purpose he referred to the observations of Vaughan CJ in his statement in the case of Bole v. Horton (1673 Vaugh 360 at 382) wherein it was clarified "an opinion given in court, if not necessary to the judgment given on record, but that it might have been as well given if no such or a contrary opinion had been broached, is no judicial opinion, nor more than a gratis dictum". This issue has also been addressed by House of Lords in the case of Penn Texas Corporation v. Murat Anstalt (No. 2) [1964] 2 QB 647. In that case an application was made under the Foreign Tribunals Evidence Act, 1856 (UK) that an English company, by its proper officer should attend to give evidence on oath and produce documents for use in proceedings in New York. The court of appeal decided that while under the statute there was no power to order a company to give evidence, there was power to order it to produce documents, but only if they were specifically identified. The court held, however, that no order would be made bec....
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....rt decisions in the case of Sales Tax Officer v. Kanhiayalal - AIR 1959 SC 135 and D. Cawasji and Co. - 1979 (2) E.L.T. (J154) and Supreme Court in the case of Madhava Rao - AIR 1971 SC 539 and ADB Jabalpur v. S. Sukla - AIR 1976 SC 1287 it was observed that the court must necessarily examine the precise question or the precise issue which arose before the court and identify the principles of law, applied by the court in resolving the issue and make further effort to find out what is a proposition of law which emerges from the decision of the court. Recently in the case of Ambika Quarry Works v. State of Gujarat - AIR 1987 SC 1073 the Supreme Court has observed as under : "The ratio of any decision must be understood in the background facts of that case. It has been said long time was that a case is only an authority for what it actually decides, and not what logically follows from it." 15. Attention was also invited to the Patna High Court decision in the case of TISCO v. UOI - 1988 (33) E.L.T. 297 (Patna) where a question was whether a crane is not a crane until it is affixed to a gantry, as it cannot function till then. The court held that a crane is a distinct ident....
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.... there could be any suppression, mis-declaration, fraud etc. on the same issue, to justify invoking of the extended time limit. The Apex Court nowhere held that period of limitation would be six months from the date of knowledge, as is being contended by the appellants. 17. It was submitted that the Apex Court did not reverse or overrule the larger bench decision in the case of Nizam Sugar Factory as the decision in dispute before the Supreme Court was the decision passed by the referral bench after taking into account the larger bench decision. The Apex Court did not say that they agreed with the minority view in the larger bench decision but gave its own reasoning after examining the facts of the case in the matter of Nizam Sugar Factory resulting in the final order of the Apex Court. Thus, the ratio of the decision of the Apex Court in the Nizam Sugar Factory case was that if a SCN has been issued invoking extended time limit it would be considered that all the relevant facts are known to the department and thereafter another SCN cannot be issued on the same issue for the subsequent period as suppression can no longer be alleged. In Para 7 of the Supreme Court decision it has....
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....llegation of suppression a full period of five years is available to the revenue. The first of such decision is in the case of Sparr Engineering - 2007 (207) E.L.T. 545 in which the tribunal has noted the Karnataka High Court judgment in the case of Bripanil Synthetics as well as supreme court decision in the case of Nizam Sugar and upheld the issue of second show cause notice for the past period invoking extended time limit after noticing that the first show cause notice for the normal period had already been issued. In the case of Mathania Fabrics - 2008 (221) E.L.T. 481 (S.C.) in para 9 it has been clearly held that in case of suppression, misdeclaration etc. the limitation of five years has to be reckoned backward from the date of show cause notice. A similar view was taken in case of Mukand Limited - 2007 (7) S.T.R. 159 which decision was passed after noting Apex Court decision in the case of Nizam Sugar Factory. Similarly in the case of Sudershan Castings - 2007 (217) E.L.T. 428 (Tri.) it was held that in case of suppression, mis-delcaration etc. show cause notice can be issue with in five years and this decision was passed after noting Karnataka High Court Decision in the ca....
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.....). 23. It was submitted that bona fide belief can be considered if the appellants can show that during the period all court decisions were in their favour and only much later contrary decisions were delivered. However as per appellant's own contention they are conflicting decision on the issue. In such case, they cannot claim bona fide belief. It was submitted that Bombay High Court has in its decision dated 10-12-1985 in the case of Indian Hume Pipe reported in 1986 (26) E.L.T. 685 (Bom.) held that RCC pipes manufactured by them were excisable goods. Similarly Tribunal has in the case of Saurabh Construction Co. - 1987 (27) E.L.T. 677 held RCC pipes as excisable goods. When the law was so clear the appellant cannot claim bona fide belief as has been held by the Tribunal in the case of Triumph Nuclear Medicines - 2008 (223) E.L.T. 74 = 2007 (7) S.T.R. 211 (Tribunal), Vivek Jhangiami - 2008 (226) E.L.T. 735 and Chennai Micro Print - 2008 (229) E.L.T. 264. 24. As regards appellant's plea that since it was works contract, they were under a bona fide belief that manufacture of goods undertaken for execution of work contract was not liable to duty for which they refer to some cou....
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.... decision must be understood in the back ground of the facts of that case. A case is only an authority for what it actually decides and not what logically follows from it. Even a difference in one fact can make a world of difference and the outcome may be totally different. An opinion of the court on any issue, not necessary for deciding the dispute, cannot be considered as ratio of that case. Ratio decidendi is a rule deductible from the application of law to the facts and circumstance of a case and not some conclusion based upon facts which may appear to be similar. 28. In view of above for culling out the ratio of the Supreme Court decision in the case of Nizam Sugar factory, it will, be essential to know the facts involved therein. The facts are that in this case a first show cause notice was issued on 28-2-1984 by invoking extended period as the period involved was 2/78 to 9/82 and a second show cause notice was issued on 16-7-87 for the period 1982-83 to 1986-87. It was in this context that the counsel for the appellant Nizam Sugar factory contended before the Tribunal that in a case where the department issued a show cause notice on the basis of certain set of facts to an....
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....er period on the certain set of facts, then on the same set of facts another show cause notice cannot be issued by invoking extended period. This is important because when a show cause notice is issued, then at that time all the relevant facts are known to the department and no further investigations are needed. 29. The above is not the case with the appellants. It is an admitted fact that besides the impugned show cause notice no other show cause notice was issued to the appellants. To say that the department became aware of all facts on 2-9-87 when the statement was recorded is incorrect because as per this statement only 500 RCC pipes were manufactured whereas later on it actually came to 512. The statement is a very brief statement in two pages which simply says that the appellant is a French company which was not supposed to engage itself in any other activity except the execution of sewerage project in Mumbai under work contract with Bombay Municipal Corporation which required fabrication of pipes for laying 3 K.M. within the sea from base line at Bandra and Worli. The pipes were manufactured as per specification of Municipal Corporation and that for the same they have not....
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.... and have to be looked into. The facts involved are that the premises of the appellate were visited by the officers on 6-8-96 wherein shortage of grey tyre cord fabrics and dip tyre cord fabrics were found and show cause notice was issued on 4-9-2001 which was even beyond five years. No further investigations were carried on during intervening period. The Hon'ble court has stated in para 9 "that there is absolutely no allegation forthcoming either with regard to fraud etc. in terms of Section 11A of the Act. Therefore, the case of extended period is not available in the absence of factual foundation in terms of show cause notice. There should be a positive application of mind and positive finding with regard to rejection of extended period under Section 11A of the Act. Mere presumption would not give any such jurisdiction for extended period of limitation". This has to be considered as the ratio of the decision and all other facts or opinion given by the court which were not necessary to the judgment given on record, cannot be considered as ratio as has been held by Vaughan CJ in his statement in the case of Bole v. Hortan (1673 ) Vaugh 360 at 382 and House of Lords in the two case....
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....l be engaged. Further one of the condition in the contract was that of supply of pipes, transporting the same to site etc. whether these were bought out items or manufactured items (without prejudice to the use of word, manufacture in the strict sense) by them is not concern of MCGB, the only criterion being that is SPIE-CAPAG S.A (appellant) shall indemnify MCGB against any liability. The condition being that of charges of duties etc. shall be borne out by the contractor and comply with all such laws and regulations. This makes it abundantly clear that the appellants were put to notice that contract may involve manufacture of pipes on which liability to duty may be there and for which Municipal Corporation has sought indemnity in case the appellant fails to comply with such liability. In view of these clauses in Contract, the least that was expected of the appellant to discharge plea of bona fide belief was to make enquiries from Central Excise authorities or some reputed legal firm regarding dutiability of items manufactured by it. But this was not done. When as contended by the appellant, that there were conflicting decision, they were surely aware of the Mumbai High Court decis....