TaxTMI 
TaxTMI 
2024 (9) TMI 1244
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion notification No. 06/2002-CE dated 01.03.2002 as amended in respect of the clearances of excisable goods during the period December, 2003 to March, 2006. (ii) I confirm the demand of Central Excise duty amounting to Rs. 11,02,12,141/- (Rupees eleven crores two lakhs twelve thousand one hundred and forty one only) not paid by the assessee for the clearance of excisable goods in the guise of exempted goods during the period December, 2003 to March, 2006 in terms of the provision to Sub-section (1) of section 11A of the Central Excise Act, 1944. (iii) I impose penalty of Rs. 11,02,12,141/- (Rupees eleven crores two lakhs twelve thousand one hundred and forty one only) on the assessee under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. (iv) I order for recovery of interest under the provisions of Section 11AB of the Central Excise Act, 1944 on the amount of duty demanded. (v) I impose penalty of Rs. 10,00,000/- (Rs. Ten Lacs Only) on Shri Sanjay Kanoria Managing Director/vice Chairman of M/s. A. Infrastructure Ltd. Hamirghrh, Bhilwara Rajasthan under Rule 26 of the Central Excise Rules, 2002. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the three basic raw materials required for the manufacture of AC Pressure Pipes & Couplings. Of the said three raw materials, the appellant claims that fly ash is available free of cost, but the other two materials namely asbestos fibre and cement are purchased for a price from the market. Asbestos fibre is usually imported and costs around Rs. 45,000/- per metric ton, while the cost of cement is around Rs. 4,000/- per metric ton. 9. During the period from 2003-04 to 2005-06, fly ash was procured by the appellant free of cost from Kota Super Thermal Power Station [KSTPS] at Kota and Suratgarh Thermal Power Station [STPS] at Suratgarh, both in the State of Rajasthan, through contractors. The details of the fly-ash procured, as given by the appellant, are as follows: Details of Fly Ash Procured from KSTPS and STPS Year Qty procured from KSTPS (MT) Qty procured from STPS (MT) Total Qty procured (MT) 2003-04 9,758 - 9,758 2004-05 14,980 (wrongly shown in SCN as 9,758) - 14,980 2005-06 10,803 7,616 18,419 10. The appellant contends that: (i) Contracts for supply of fly ash were given to the transporters, but no contract....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specified thereon under the First Schedule (hereinafter referred to as the First Schedule) to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table; and (b) from so much of the Special duty of excise leviable thereon under the Second Schedule (hereinafter referred to as the Second Schedule) to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (5) of the said Table, subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (6) of the said Table: Provided xxxxxxxxxx Provided xxxxxxxxxx Explanation:-For the purposes of this notification, the rates specified in columns (4) and (5) of the said Table are ad valorem rates, unless otherwise specified:- S.No. Chapter or heading No. or sub-heading Description of goods Rate under the First Schedule Rate under the Second Schedule Condition (1) (2) (3) (4) (5) (6) 158 68 Goods, in which not less than 25% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to non-utilization of fly ash were never raised in any of these audits conducted for the period from December 2003 to March 2006. 17. The Office of the Central Excise Commissionerate, Jaipur II also conducted an audit of the records of the appellant between 27.01.2005 to 31.01.2005 pertaining to the period from April 2003 to April 2004. The appellant asserts that the Office of the Central Excise Commissionerate also did not raise any objection about the non-utilization of fly-ash. 18. The Office of the Accountant General, Rajasthan also conducted an audit of the central excise records of the appellant at the factory premises in Bhilwara during the period from 21.11.2005 to 25.11.2005, but the Office of the Accountant General, Rajasthan did not raise any objection regarding non-utilization of fly-ash. 19. Based on an intelligence, the Officers of DGCEI in association with the officers of the Central Excise Commissionerate, Jaipur-II, searched the factory premises of the appellant on 09.03.2006. The office premises of the appellant at D-83, Gulmohar Park, New Delhi were also searched on 10.03.2006. 20. A show cause notice dated 31.12.2008 was issued based primarily on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on presumptions. In support of this contention, the appellant referred to various decisions of the Supreme Court, the High Court and the Tribunal. 23. The show cause notice was adjudicated upon by the Commissioner by order dated 30.03.2021. The benefit of exemption under the notification dated 01.03.2002 was denied and demand of duty of excise amounting to Rs. 11,02,12,141/- was confirmed with interest and penalty of Rs. 11,02,12,141/-. 24. It is against this order that the appellant had earlier filed an appeal before the Tribunal. The Tribunal, by order dated 03.10.2019, set aside the order of the Commissioner and remanded the matter to the Commissioner with the following directions: "13. As it can been seen from the discussion above that the entire case of the Department is made on the basis of statements of the various persons, who have not been examined by the adjudicating authority while adjudicating the case and also the Appellants were not permitted to cross examine these witnesses and thus the impugned order suffers from the inherent infirmity. In this regard we place reliance on the decision of G. Tech Industries (supra) and Swadeshi Polytex Ltd. (supra) whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of the extended period of limitation first because if this issue is decided in favour of the appellant, it may not be necessary to examine the other issues raised on merit as the entire demand falls within the extended period of limitation. 29. Section 11A (1) of the Central Excise Act, as it stood at the relevant time, is reproduced below: "Section 11A (1) 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 why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n used. However, M/s A Infrastructure Ltd., is using only Fly Ash in the manufacturing of its product viz. Asbestos Cement Pipes and though the content of Fly Ash is less than 25%, they are manipulating their records and showing the content of fly ash as 50% or more and are thus wrongly availed the benefit of Notification No. 6/2002 CE dated 1.3.2002, by violating the conditions laid down under the said Notification. 35. Thus, it appears from the above evidence that AIL have suppressed the facts by giving wrong information in the statutory returns about the production and clearance and utilization of fly ash with an intent to evade Central Excise Duty. AIL have intentionally fabricated their statutory documents suppressing the actual receipt of fly ash from the Department and thus the extended period as laid down in proviso to Section 11A (1) of Central Excise Act, 1944 appears to be invocable against them. Accordingly they also appear to be liable for imposition of penalty and interest under Section 11AC read with rule 25 of Central Excise Rules 2002 and Section 11AB of the Central Excise Act, 1944 respectively." (emphasis supplied) 34. In regard to the invocation o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt and Public Companies were for AC Pipes containing fly-ash of more than 25%. The tenders also clearly a mentioned that the excise duty on fly ash pipes would be nil; (ii) State Government issue tenders for purchase of AC Pressure Pipes through the Public Health Engineering Department [PHED] and Urban Development Departments, specifying the required percentages of cement, asbestos fibre, and fly ash in the pipes. There is also a stipulation for pre-delivery inspection by external agencies such as RITES/ D.G.S. & D or other nominated agencies. The AC Pipes were found to be in accordance with the tender conditions; (iii) The appellant had been maintaining all the required records, and had filed the required returns and intimations, as provided for in Trade Notice dated 16.05.1997 issued by Commissioner of Central Excise, Jaipur, including Form A, Form B, Form C (monthly return), and Form D (D3 Intimations); (iv) The factory of the appellant was audited on regular basis by the Officers of the Commissioner, Central Excise, Jaipur and Accountant General Rajasthan but allegations relating to non-utilization of fly-ash were never raised in any of the audits con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sh of more than 25% by weight. Under the notification dated 01.03.2012, AC Pressure Pipes containing not less than 25% of fly-ash by weight are exempted from payment of the whole of duty of excise. The tender notice also provides for pre-delivery inspection by external agencies and only when the conditions are satisfied that the material is procured by the government. It is, therefore, the contention of the appellant that there can be no doubts that the AC Pressure Pipes contained fly-ash of more than 25% by weight. The appellant also contends that it had been maintaining all the requisite records as contemplated in the Trade Notice dated 16.05.1997. These include Form A, Form B, Form C. They also include Form D-3 intimations which contain receipts of fly-ash and these were submitted to the jurisdictional division and range offices. The appellant also claims to have maintained a register for fly-ash stock on monthly basis for use of fly-ash above 25% in the manufacture of AC Pressure Pipes. 40. When the records were duly maintained by the appellant and intimation was also given in form D-3 to the jurisdictional division and range offices, it was for the Officers to put the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvestigation revealed that the appellant had manipulated the records regarding the actual receipts of fly-ash. Only a general statement has been made that the appellant had suppressed facts with an intent to evade payment of central excise duty. There is no reason given in the show cause notice to conclude that the appellant had suppressed facts with an intent to evade payment of central excise duty nor the impugned order passed by the Commissioner gives any reason as to why the appellant had suppressed facts with an intent to evade payment of central excise duty. In fact, the order passed by the Commissioner states that suppression means failure to disclose full information with intent to evade payment of duty. It is not so. The department has to establish that not only the assessee suppressed facts but also that such suppression was with an intent to evade payment of duty. 44. It needs to be remembered that mere suppression of facts is not enough. There has to be a deliberate attempt to evade payment of excise duty. The show cause notice must specifically deal with this aspect and the adjudicating authority is also obliged to examine this aspect in the light of the facts state....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made hereinabove that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in the proviso to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts." (emphasis supplied) 47. In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore (2003) 3 SCC 410 the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with knowledge that the statement was not correct." (emphasis supplied) 50. It is, therefore, clear that the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. 51. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) 2018 (12) GSTL 368 (Del.) also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act, 1994 [the Finance Act] and held as follows: "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A (1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73 (1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return." (emphasis supplied) 53. In M/s. Raydean Industries vs. Commissioner CGST, Jaipur Excise Appeal No. 52480 of 2019 decided on 19.12.2022, the Tribunal in connection with the extended period of limitation, observed that even in the case of self assessment, the department can always call upon an assessee and seek information and it is the duty of the proper off....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It is thus evident that not only do the 2002 Rules mandate officers to scrutinise the Returns to verify the correctness of self assessment and empower the officers to call for documents and records for the purpose, Instructions issued by the department also specifically require officers at various levels to do so." (emphasis supplied) 54. This issue was also examined at length by a Division Bench of the Tribunal in M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South Service Tax Appeal No. 51787 of 2022 dated 21.08.2023. After referring to the provisions of section 73 of the Finance Act, the Bench observed: "13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Superintendent to scrutinize the returns and ascertain if the service tax had been paid correctly or not. If the assessee either does not make the returns under section 70 or having made a return, fails to assess the tax in accordance with the provisions of Chapter or Rules made thereunder, the Superintendent of Central Excise can make the best judgment assessment under section 72. For this purpose, he may require the assessee to produce such accounts, documents or other evidence, as he may deem necessary. Such being the legal position, if some tax has escaped assessment which came to light later during audit, all it shows is that the Superintendent of Central Excise with whom the returns were filed had either not scrutinized the returns or having scrutinized then found no error in self-assessment but the audit found so much later. Had the Superintendent scrutinized the returns calling for whatever accounts or records were required, a demand could have been raised within the normal period of limitation. The fact that the alleged short payment came to light only during audit does not prove the intent to evade payment of service tax by the appellant, but it only proves that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elieves that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be mala fide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona-fide manner. The relevant portion of the judgment of the Supreme Court is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were tw....