TaxTMI 
TaxTMI 
2015 (7) TMI 957
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....nd for period even beyond extended period of limitation i.e. five years from the date of issuance of the show cause notice? (b) Whether the Appellate Tribunal is correct to hold that relevant date for the purpose of computing period of limitation should be date of knowledge to the Central Excise Department under section 11A of the Central Excise Act, 1944?" 3) With the consent of the Advocates appearing for both sides, we have heard these Appeals finally at the admission stage itself. The facts necessary to appreciate the rival contentions are that the Appellant in Appeal No. 96 of 2014 is a sole proprietor carrying on business in the name and style of M/s. Vibha Impex and claims that it is a 100% Export Oriented Unit (EOU). The factory was earlier located at Malegaon and later on it shifted to another village but within the same district, namely, Nashik. The Appellant is engaged in the manufacturing of various types of Polyester Yarn and Fabrics falling under Chapter 54 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant was availing the exemption benefit under Notification 1/95CE dated 1st April, 1995. The Appellant procured the raw material without paym....
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.... issuance of show cause notice dated 27th November, 2009. That notice proposed to recover Central Excise Duty amounting to Rs. 2,73,41,250/for alleged diversion of inputs (Yarn), during the period April, 2002 procured without payment of duty under CT3 procedure. The diversion into local domestic market is in utter violation of the terms and conditions of the Notification No. 1/95CE dated 4th January, 1995 and the conditions of B17 Bond executed. That is how the Central Excise duty and penalty was proposed to be recovered. 6) We are not concerned with the merits of these allegations, for the simple reason that the only argument canvassed before us by Mr. Sridharan learned Senior Counsel appearing for the Appellant is that the Tribunal, while confirming the order of the adjudicating authority lost sight of the fact that the demand raised in the show cause notice is barred by limitation prescribed in section 11A of the Central Excise Act, 1944. 7) This plea was specifically raised in the reply to the show cause notice by the Appellant. It was argued that the disputed period is April, 2002 to January, 2003. However, the show cause notice is dated 27th November, 2009. Therefore, even ....
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....se, if the breach and violation of the Notification attracts the situation where the duties levied are not paid, then, the legislature in terms of the statute permits the authorities to recover the amount of duty within one year. That is the ordinary and normal period of limitation. However, proviso to sub section (1) of section 11A clarifies that when any duty of excise has not been levied or paid or has been short levied or paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty by such person or his agent, sub section (1) will have effect and for the words "one year" the words "five years" ought to be substituted. The Explanation in this case, according to Mr. Sridharan is not attracted. For, there is no stay against any recovery. In the present case, according to Mr. Sridharan, language of this provision postulates that the recoveries have to be made within the above period but from relevant dates. Mr. Sridharan submitted that this case is covered by section 11A(3)(ii) (C) of the Central Excise Act, 194....
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....e been interpreting section 11A. The principal amongst them are Judgments in the case of J. K. Spg and Wvg Mills Ltd. vs. Union of India reported in 1987(32) ELT 234, Ahmedabad Manufacturing and Calico Printing Co., Ltd. v. S.G. Mehta, reported in (1963) 48 ITR 154 and S. S. Gadgil vs. Lal and Co. reported in (1964) 53 ITR 231. 12) On the other hand, Mr. Pakale appearing for the Revenue submitted that the Tribunal's view reflects the correct understanding of the law. Mr. Pakale would submit that the distinction as made by Mr. Sridharan can be of no assistance in this case. Mr. Pakale's submission is that provisions in Chapter II of the Central Excise Act, 1944 are to enable collection of levy of duty. He would submit that sections 3, 4, 5 and 5A of the said Act should be read together. Reading of the same would disclose as to how, when there is Exemption Notification, the law postulates a inquiry into the violation or breach of the conditions upon which the exemption has been granted. If the breach or violation of the conditions of the Notification has to be probed and investigated, then, the duty liability would occur only after such probe or inquiry is complete. It is on....
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....9;ble Supreme Court of India, the Hon'ble Supreme Court has not reversed the view taken by the Division Bench of this Court but has interpreted the word "payable" in the light of the relevant statutory provisions is the submission. Mr. Pakale has also invited our attention to the compilation which was tendered by Mr. Sridharan and particularly the Central Excise Rules. Mr. Pakale submits that the language of the Rules would enable in this case to determine the time and manner of payment of duty. In the present case, Mr. Pakale would submit that this being a case of fraud, the law laid down in the case of S. P. Chengalvaraya Naidu vs. Jagannath reported in 1994 AIR (SC) 853 would apply. 14) With the assistance of Mr. Sridharan and Mr. Pakale, we have perused the paper book in this Appeal. We have perused the impugned orders and to the extent relevant for us. Before proceeding further, it would be necessary to reproduce section 11A of the Central Excise Act, 1944 as it stood then. The said section reads as under:" SECTION 11A. Recovery of duties not levied or not paid or short levied or short-paid or erroneously refunded. ( 1) When any duty of excise has not been levied or paid....
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....nder subsection (1), the Central Excise Officer ( a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, where it is possible to do so, shall determine the amount of such duty, within a period of one year; and (b) in any other case, where it is possible to do so, shall determine the amount of duty of excise which has not been levied or paid or has been short-levied or short-paid or erroneously refunded, within a period of six months; from the date of service of the notice on the person under subsection (1). (2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty before service of notice on him under subsection (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under subsection (....
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....der, the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund." 15) A perusal of the above section would reveal that the same confers powers for recovery of duty not levied or not paid or short levied or short paid or erroneously refunded. Sub section (1) clarifies that when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, whether or not such non levy or non payment, short levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause as to why he should not pay the amount specified in the notice. It is stated in the first proviso that ....
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.... the rules made thereunder with intent to evade payment of duty." 16) A perusal thereof would indicate as to how sub section (2B) will not apply in case where the duty was not levied or was not paid or was short levied or was short paid or was erroneously refunded by reason of fraud, collusion etc. Sub section (2C) states that the provisions of sub section (2B) shall not apply to any case where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President. For the purpose of section 11A, the term "relevant date" has been defined. Thus, a perusal of this section and carefully would denote that it enables recovery of duty not levied or not paid or short levied or short paid or erroneously refunded. The recovery is after issuance of a show cause notice within the meaning of sub section (1). The issuance of the show cause notice is permitted and within the period specified by sub section (1) and its proviso. However, the period has to be calculated and computed from the relevant date. The relevant date means in the case of excisable goods on which duty of excise has not been levied or paid or has been short ....
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....nd Rule 173G(2A) read with the proviso thereto would indicate as to how goods which are exempted have to be removed and cleared. However, Mr. Pakale's reliance on para (d) of the Exemption Notification No. 54 and the Form B17 (General Surety/Security) is entirely misplaced. By recourse to that, the period of limitation prescribed in section 11A of the Act cannot be enlarged. Once it is possible to scrutinise and verify the compliance of the terms and conditions on which the exemption has been issued in this case, then, it will not be possible to hold that a separate period is prescribed for recovery of duty in case of this nature or that the period of five years prescribed would have to be computed only when the breach or violation of the Exemption Notification has come to the knowledge of the Department subsequently. It may be that such fact is discovered or comes to the knowledge of the authorities subsequent to the clearance, however, when the Department desires to recover the amount of duty, then, it must adhere to the period prescribed. If the period is prescribed of five years and that has to be computed from the relevant date, then, we cannot read into this definition of....
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....nfers power to grant exemption from duty of excise. If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon. 19) The Assessing Officer merely assessees and recovers the duty on the goods and when they are removed. Therefore, the Assessing Officer and who is obliged to ensure compliance of the terms and conditions of the Notification, if the Notification is claimed in this case is conditional, then, it is not for him either to grant or withdraw the exemption. Therefore, there is no question of withdrawal of Exemption Notification by him on breach or violation of the conditions thereof. If he notices such breach, then, what is to be done by him is then provided by the Act and we find that the logical consequence of all this is that the goods then do not enjoy exemption but become liable to payment of duty and the duty can be recovered. That pow....
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....n S. 11A of the Act can be liberally construed or that it should be a strict construction, we think it useful to recall how this Court approached the challenge made against S. 51 of the Finance Act, 1982 which afforded retrospective operation to the amended Rules 9 and 49 of the Central Excise Rules. Those provisions were assailed in the case of J. K. Spinning and Weaving Mills Ltd. (AIR 1988 SC 191) (supra) attributing arbitrariness and unreasonableness to them besides being violative of Art. 19(1)(g) of the Constitution. 19. It was contended in that case that excessive retrospective operation prescribed by a taxing statute would amount to contravention of fundamental rights, and in support of that contention, those appellants made reliance on the decision of this Court in Rai Ramakrishna v. State of Bihar (1964) 1 SCR 897 : (AIR 1963 SC 1667) and Jawaharmal v. State of Rajasthan (1966) 1 SCR 890 : (AIR 1966 SC 764). In the former decision, this Court has pointed out that if the retrospective feature of a law is arbitrary and burdensome, the statute will not be sustained and reasonableness of the extent of retrospective operation of a statute will depend upon the circumstances of....
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....ctor of Central Excise have issued a notice under subsection (1) to S. 11A of the Act. The answer is, that the Collector could still have issued a notice. If so, the suspension of the circular by the order of the Court would not have prevented the Collector from issuing the notice. The effect of the Court order dated 1281981 was only to keep the circular in suspended animation so far as the appellant is concerned and nothing more." 21) Mr. Pakale's reliance on the Judgment of the Hon'ble Supreme Court of India in the case of Fortis Hospital Ltd. vs. Commissioner of Customs, Import reported in 2015 (318) ELT 551 cannot be of any assistance. The controversy there was whether the Institute which applied for exemption from payment of duty and took shelter of the Exemption Notification could ignore the conditions set out therein. The conditions have to be fulfilled not at the time of the import but in future by the importer as well utilising the imported equipments. Therefore, the conditions were found to be continuing in nature. It is upon such conclusion that the Hon'ble Supreme Court sustained the show cause notice and the demand. It then interpreted section 125(2) of th....
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....voluntarily came forward to sort out the issue and to pay the excise duty and paid excise duty to the extent of Rs. 11,00,000/on different dates. It is in this context that the argument of the Revenue before the Hon'ble Supreme Court was that the issue with regard to clandestine removal of excisable goods as non-excisable goods from their premises and selling to its dealers and distributors is clearly proved from the materials on record. In the aforesaid position and since there was clandestine removal of excisable goods the period of limitation in the present case would have to be computed from the date of their knowledge, arrived at upon raids on the premises. This observation in para 27 cannot be read in isolation. That paragraph will have to be read as a whole. That paragraph read as a whole and with the preceding paragraphs as also the subsequent one indicate that the extended period of limitation was available when there was suppression of facts by the said company and with intent to evade the Central Excise Duty. The issue clearly therefore was whether the period of one year or the extended period of five years would apply. Given the fact situation, the extended period w....