TaxTMI 
TaxTMI 
2024 (8) TMI 1142
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....ohol/rectified spirit, extra neutral alcohol, potable alcohol i.e. country liquor and Indian Made Foreign Liquor which are non excisable goods as also denatured spirit which is a dutiable product. 3. The appellant claims that it purchases sugarcane and obtains cane juice by crushing the sugarcane; the raw cane juice is boiled in different phases and impurities are removed to a certain extent; the boiled material is then allowed to evaporate to obtain concentrated form of juice, which is cooled; the product so obtained is known as RAB in the northern part of the country; this RAB is stored in storage tanks and transferred to distillery section of the appellant as per the requirements; in the distillery section, RAB undergoes the process of fermentation and distillation and the resultant product 'Rectified Spirit' is obtained; and though part of the Rectified Spirit is denatured and used in the manufacture of various chemicals which are cleared on payment of duty, but some quantity of rectified spirit is used in the manufacture of extra neutral alcohol and potable alcohol which are not chargeable to central excise duty. 4. The Officers of Central Excise Department visited the facto....
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....led the department by insisting that RAB is used in the manufacture of chemicals only and denied consumption of RAB in the manufacture of exempted goods. Thus, as the appellant had willfully suppressed the fact that RAB had been used in the manufacture of non excisable goods, the extended period of limitation under the proviso to section 11A(1) of the Central Excise Act would be invokable. It was, therefore, proposed that the appellant would have to discharge central excise duty on the entire quantity of RAB cleared and consumed captively within the factory. 9. The appellant submitted a reply dated 12.08.2011 to the show cause notice and denied the allegations made therein. The appellant also filed the written submissions. 10. The Commissioner, however, by the order dated 09.05.2019 confirmed the demand of Rs. 10,39,32,564/- for the following reasons: (i) The product RAB is akin to sugar syrups obtained after crushing of sugarcane in the factory and as such covered under ETI 1702 90 90 as 'sugar syrups not containing added flavouring or colouring matter'; (ii) The product RAB obtained from open pans at 102 degree C is cooled down by transient coolers to temperature of 35 degr....
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....e on the intermediate product RAB used in the manufacture of both dutiable and non-dutiable goods; (v) The entire excise duty demand is time barred and hence the extended period of limitation could not have been invoked; and (vi) The valuation of RAB captively consumed has not been properly taken and cost sheets certified by independent cost accountant have been discarded. 12. Shri Reyaz Ahmad and Shri Unmesh Kumar, learned authorized representatives appearing for the department, however, made the following submissions: (i) The order passed by the Commissioner is justified in the facts and circumstances of the case and does not call for any interference; (ii) Simple syrups obtained by dissolving sugar in water is different from juice and syrups obtained from sugarcane; (iii) The Board has clarified that if the sugar syrup is marketable as such, without any reference to percentage of sugar concentration, then the same is excisable when taken for captive consumption or removed as such. Thus, the pre-requisite requirement of sugar concentration in simple sugar syrup has been also done away with; (iv) The requirement of 'marketability' has evolved by a process of judicial ....
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....n-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 why he should not pay the amount specified in the notice: Provided that where 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 willful mis-statement 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, the provisions of this sub-section shall have effect, for the words one year, the words "five years" were substituted"." (emphasis supplied) 16. It would be seen from a perusal of sub-section (1) of section 11A(1) of the ....
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....PR-II/07/723 dated 14.09.2007 (RUD-13). In this connection, an exclusive question was asked from State Excise Department whether the "RAB" manufactured by M/s India Glycol Ltd., Kashipur is exclusively used in the manufacture of potable alcohol. (Refer Question No. 6 of the said letter). In response to this letter, State Excise Officer(in-charge), M/s India Glycol Ltd., Kashipur vide letter C.No.21/AAB/Central Excise/2007-08 dated 19.09.2007 (RUD-14) informed that "RAB", manufactured in M/s. IGL Kashipur, is used in the manufacture of Chemicals & potable alcohol both. Thus, it appears that M/s IGL has will-fully suppressed the facts that "RAB" has been used in the manufacture of non excisable goods. Therefore, extended period of limitation as prescribed in proviso to Section 11 A(1) of the Central Excise Act, 1944 appears to be invokable." (emphasis supplied) 20. The reply filed by the appellant on this aspect is reproduced below: "I.2 The Noticees at the outset submit that the extended period is not invokable as the Department had full knowledge about the activities that were being conducted by the Noticees in the Kashipur Plant. The Noticees in the regard submit that the is....
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.... information available. The Excise officers have periodically visited the plant of the Noticees at Kashipur for statutory checks. Therefore, by no means did the Noticees ever willfully suppress any fact from the Department. ***** ***** I.11 From the above correspondence, it is clear that Department has been in the full knowledge of the fact and especially Department itself right from the very beginning has been of the view that 'rab' is not excisable and not classified anywhere. In such circumstances, suppression can be alleged against the Noticees. I.12 Further, a special audit under Section 14AA of the Central Excise Act, 1944 was conducted by M/s S.K. Bhatt & Associates, Cost Accountants for the period 2004-05 to 2007-08 (up to Feb. 08), as per letter dated 7.3.2008, a copy of which is enclosed as Annexure-23. I.13 From time to time, Noticees have provided all records asked for by the Audit Parties as per copies of letters collectively enclosed as Annexure-24. Therefore, the question of suppression by the Noticees does not arise. I.14 In view of the aforementioned submissions, it is clear that the Noticees were under a bona-fide belief that 'Rab' is non-excisable ....
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.... to the show cause notice. 24. The appellant had filed a detailed reply to the show cause notice pointing out why the extended period of limitation could not have been invoked in the facts and circumstances of the case, but the Commissioner upheld the invocation of the extended period of limitation merely for the reason that it was after a considerable enquiry that correct facts could be ascertained from the appellant which proves that the appellant resorted to suppression and wilful mis-statement of facts with intent to evade payment of duty. It needs to be noted that the show cause notice did allege that suppression of facts by the appellant was with an intent to evade payment of central excise duty but such a finding has been recorded by the Commissioner. This apart, there is no discussion in the order as to why the appellant suppressed facts with an intent to evade payment of excise duty. The reply filed by the appellant on this aspect has not been considered at all by the Commissioner. The appellant had pointed out in reply to the show cause notice that the issue involved was complex in nature and the department also was not sure about the classification of RAB. Initially, b....
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....circumstances mentioned in the proviso, one of it being suppression of facts. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. The relevant observations are: "2. ***** The Department invoked extended period of limitation of five years as according to it the duty was shortlevied due to suppression of the fact that if the turnover was clubbed then it exceeded Rupees Five lakhs. ***** 4. A perusal of the proviso indicates that it has been used in company of such strong works as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 26. This decision of the Supreme Court in Pushpam Pharmaceuticals was followed by the Supreme Court i....
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....re non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso." (emphasis supplied) 29. The Supreme Court in Continental Foundation Joint Venture vs. Commissioner of Central Excise, Chandigarh [2007 (216) E.L.T. 177 (S.C.)] also observed, in connection with section 11A(4) of the Excise Act, that suppression means failure to disclose full information with intention to evade payment of duty and the observations are as follows: "10. The expression "suppression" has been used in the p....
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....ch intention and was acting under a bonafide belief." (emphasis supplied) 32. The Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [W.P. (C) 7542 of 2018 decided on 06.04.2023], also observed as follows: "28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable. ***** 4....
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....rule 6 of the Central Excise Rules, 2002 that the assessee is expected to self assess the duty and sub-rule (3) of rule 12 of the 2002 Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules. 25. Departmental instructions to officers also emphasise upon the duty of officers to scrutinize the returns. The instructions issued by the Central Board of Excise & Customs on Decem....
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....riod of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect selfassessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment." (emphasis supplied) 35. The Tribunal in M/s. Kalya Constructions Private Limited vs. The Commissioner, Central Excise Commissionerate, Udaipur [Service Tax Appeal No. 54385 of 2015 decided on 15.11.2023] observed as f....
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....information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules." (emphasis supplied) 37. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs and Central Excise vs. Sunshine Steel Industries) filed by the department to assail the aforesaid decision of the Tribunal in Sunshine Steel Industries was dismissed by the Supreme Court on 06.07.2023 and the judgment is reproduced below: "Delay condoned. 2. Heard learned counsel for t....
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....se returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee's action of including the value of deemed exports within the value of domestic clearances." (emphasis supplied) 39. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and Revenue and an assessee may genuinely believe that it is not liable to pay duty. On the other hand, the department may have an opinion that the assessee is liable to pay duty. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self assessment. If some duty escapes assessme....