TaxTMI 
TaxTMI 
2025 (2) TMI 741
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.... 1985 [the Tariff Act]. The appellant obtained the necessary licences to manufacture such medicines from the Drug Licence-cum- Controlling Authority (Manufacturing). 3. The appellant claims that it had been availing the benefit of Area Based Exemption granted under a Notification dated 10.06.2003 in respect of all the excisable goods manufactured in the factory with effect from 25.12.2004. Since the exemption from payment of excise duty was granted for a period of ten years, the appellant opted to pay excise duty on the goods manufactured by it with effect from 01.04.2014 and intimated this fact to the jurisdictional Assistant Commissioner of Central Excise by a letter dated 07.04.2014. The appellant also claims that the description of excisable goods manufactured remained the same during the period the appellant availed the benefit of the Notification dated 10.06.2003 and the period during which the appellant availed the benefit of Exemption Notification dated 01.03.2011. 4. An Excise Audit of the appellant was conducted by the officers of Central Excise in the month of March, 2016 covering period from April, 2011 to March, 2015. The appellant claims to have provided the fol....
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....pellant had short paid excise duty. 10. Thereafter, a show cause notice dated 26.06.2020 was issued to the appellant. The relevant portion of the show cause notice is reproduced below: "2. Whereas, Audit of the records of party was conducted by the officers of Central Goods & Service Tax Audit Commissionerate, Dehradun for the period from 01.04.2015 to 30.06.2017. During the course of audit, it has been observed that during the audit period, the party was manufacturing and clearing various medicaments. xxxxxxxxxxx by availing the benefit of Notification No. 01/2011-CE dated 01.03.2011 as amended vide notification No. 16/2012-CE dated 17.03.2012 without availing CENVAT credit. 7. Whereas it appears that the intention of the party was to misuse the exemption under Notification No. 01/2011-CE dated 01.03.2011 as amended to avoid payment of higher rate of duty on medicaments falling under Chapter heading 30.04 and food supplements falling under Sub heading No. 21069099 manufactured by them xxxxxx" (emphasis supplied) 11. The show cause notice also invoked the extended period of limitation under section 11A(4) of the Central Excise Act, 1944 [the Central ....
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....cines falling under Chapter 30 and Food/Health Supplements falling under Sub heading No. 21069099 appears to be recoverable from them under the provisions of Section 11A(4) of the Central Excise Act, 1944 by invoking extended period of limitations along with interest under Section 11AA of the Act and a penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944." (emphasis supplied) 12. The show cause notice, therefore, called upon the appellant to show cause as to why: "(i) The exemption under Notification No. 01/2011-CE dated 01.03.2011 as amended should not be denied to them on the goods manufactured and cleared during the period from 01.04.2015 to 30.06.2017. (ii) The differential Central Excise duty amounting to Rs.7,50,33,780/- (Rupees Seven crore, Fifty lakhs, Thirty three thousand, Seven hundred and eighty only) should not be recovered from them under the provisions of Section 11A(4) of the Central Excise Act, 1944 along with interest payable under Section 11AA of the Act ibid. (iii) Penalty should not be imposed upon them under Section 11AC of the Central Excise Act, 1944 read wi....
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....imation to relevant Excise Officers, invocation of Sec 11 A (4) is unjustified and against the basic intention of law (the Central Excise Act 1944) and So this SCN is Time Barred." (emphasis supplied) 14. The Commissioner, however, did not accept the contentions advanced by the appellant, both on merits and on the extended period of limitation. 15. On merits, the Commissioner observed as follows: "Supplements are not 'FOOD' as held above, although they are packaged and ready for consumption. Obviously, a tablet or syrup cannot be eaten in the sense of food being eaten. They are to be swallowed or gulped down the throat. The party has tried to extrapolate the simple literal wording of the notification to wrongfully claim the benefit of the Notification No. 01/2011- CE dated 01.03.2011, as amended. 23. In view of the above facts and discussion, I hold that the benefit of the Notification No. 01/2011- CE dated 01.03.2011, as amended, is not applicable and available on the 'Food/ Health Supplements' falling under Chapter Sub Heading 21069099 of the First Schedule to the Central Excise Tariff Act, 1985, being manufactured and cleared....
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....dministration and corresponding legislative provisions that were in prevalence before in an era which was also known as the era of physical control, wherein, before clearance of goods was undertaken, there was a presence of tax inspectors at the factory premises checking and supervising the clearance of goods. Likewise, when any new product was manufactured by a party, the party was supposed to file a classification list and also a valuation list before the departmental designated authority. Only after approval by the said authority, could the manufacturer clear the goods under that classification heading and with that valuation. Obviously, in this kind of a scenario if the department did not agree with the classification as proposed by the manufacturer or with the availment of the exemption notification as proposed by the manufacturer, it would have been incumbent and mandatory on part of the department to point out the error and if the said error or the correction would not be pointed out by the departmental authority, it would be logical for the party to argue that the said information was very well in the knowledge of the department and therefore, the extended period cannot be ....
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....excise duty to deny the legitimate right of the government to charge and collect its rightful duty is proved and hence the extended period of limitation is invokable." (emphasis supplied) 19. It is this order dated 13.09.2021 passed by the Commissioner that has been assailed in this appeal. 20. Ms. Priyanka Goel, learned counsel for the appellant submitted that the appellant was entitled to avail the benefit of the Exemption Notification and denial of the same by the impugned order is unjustified. Learned counsel also submitted that the entire period of dispute, which is from 01.04.2015 to 30.06.2017, covered by the show cause notice dated 26.06.2020 falls under the extended period of limitation provided for under section 11A(4) of the Central Excise Act, but in view of the facts and circumstances of the case the extended period of limitation could not have been invoked. In this connection, learned counsel placed reliance upon certain decisions to which reference shall be made at the appropriate stage. 21. Shri Rakesh Agarwal, learned authorized representative appearing for the department, however, submitted that the appellant was not entitled to claim the benefit....
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.... "Section 11A(4) Where any duty of excise has not been levied or paid or has been short-levied or shor-paid or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice." 27. It would be seen from a perusal of sub-section (1) of section 11A of the Central Excise Act that where any duty of excise has not been levied or paid, for any reason, other than the reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act or the Rules made thereunder with intent to evade payment of duty, the Central Excise Officer, shall....
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....y. 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 stated by the assessee in reply to the show cause notice. 31. The relevant facts have to be examined for considering whether the provisions of section 11A(4) of the Central Excise Act dealing with the invocation of the extended period of limitation could have been invoked. 32. In the present case, as noticed above, all that has been stated in the show cause notice regarding invocation of the extended period of limitation is that the appellant wrongly availed the benefit of the Exemption Notification deliberately with the sole intent to evade payment of central excise duty. The Commissioner also held that there was an intent to evade payment of central excise duty merely because the benefit of the Exemption Notification was wrongly availed. 33. Mere wrong availment of an Exemption Notification would not lead to a conclusion that it was with an intent to evade payment of central excise duty unless the department is able to not only allege but substantiate that the said suppression was deliberate with an intent t....
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.... 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 7 (2005) 7 SCC 749 11 E/52953/2018 not open to CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts." (emphasis supplied) 36. 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 fa....
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....ssion. When the Revenue 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) 39. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) [2018 (12) GSTL 368 (Del.)] also examined 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 suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes ....
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....ct 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) 41. 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 r....
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....the benefit of the Exemption Notification. This contention deserves to be accepted. 44. In this connection, it may be pertinent to refer to the decision of the Supreme Court in Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)]. The Supreme Court held that if an assessee bonafide believes 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 malafide. 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 bonafide manner. The relevant portion of the judgment 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 ultimatel....
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....tail the product which they were manufacturing at that material time namely 'zarda/jarda scented tobacco'. Though the classification in the letter shows entry CET SH 2403 9910 ('chewing tobacco'), it would depict a picture as though it is a new product. A plain reading of the letter would not indicate that the author of the said letter intended to reveal any details about the product that is being manufactured. However, the assessee cannot feign ignorance as to the necessity of furnishing such relevant details necessary for determination of payment of duty. The assessee having been in this industry for a long period was well aware of this statutory requirement. Upon a deeper examination of the said letter, the suppression becomes more apparent, namely the nonmentioning of change of the name and classification of the goods which they were currently manufacturing and which they ought to have disclosed. It is this hiding of the fact and not specifying the details in their letter that led to the issuance of the show cause notice and invocation of Section 11A and Section 11 AC of the CE Act, by the Department. It cannot be ignored that till filing of the letter dated 30.03....
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....ration for the provision of services and on the other hand reflected the same as donation in the books of account. This decision also, therefore, would not come to the aid of the department. 48. The show cause notice also alleged that in an era of self-assessment in assessee in required to correctly discharge the duty liability but the appellant wrongly availed the benefit of the exemption notification with an intent to evade payment of duty. The Commissioner also held that mere intimation to the department in the periodic returns does not mean any kind of approval or validation by the department. 49. This approach of the Commissioner cannot be countenanced. It is the duty of the officers scrutinizing the returns to examine the information disclosed by an assessee and the department cannot be permitted to take a plea that it is the duty of the assessee to disclose correct information and it is not the duty of the officers to scrutinize the returns. 50. In this connection, reference can be made to the decision of the Tribunal 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....
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....xxx 26. The Central Excise Manual published by CBEC on May 17, 2005, which is available on the website of CBEC, devotes Part VI to SCRUTINY OF ASSESSMENT. xxxxxxxxxx 27. 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) 51. The view that has been taken by the Commissioner was also not accepted by the Tribunal in G.D. Goenka and the observations are as follows: "16. Another ground for invoking extended period 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-asses....
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....ment, the officers of the department can always call upon the assessee to submit further documents and he may also conduct an enquiry. In fact when the audit was conducted, the officers of the audit team would have scrutinized the records and, therefore, notice should have been issued within the stipulated time from the date the audit was conducted. Even otherwise merely because facts came to light only during the audit does not prove that there was an intent on the part of the assessee to evade payment of duty." (emphasis supplied) 54. Learned authorized representative appearing for the department has, however, referred to a decision of the Tribunal in M/s. Godawari Power & Ispat Limited vs. Commissioner of Central Excise & Service Tax, Raipur [2024 (4) TMI 816 - CESTAT New Delhi], and in particular to paragraph 20, to contend that the extended period of limitation was correctly invoked. The relevant observations of the Tribunal are: "20. The contention of the learned counsel of the appellant that they were subjected to the audits earlier may not immune them as they have not provided any evidence of the disclosures to the audits earlier which render them to prove th....
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.... 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) 58. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs and Central Excise vs. Sunshine Steel Industries) filed by the department before the Supreme Court 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 the appellant. 3. This Court is not inclined to interfere with the impugned order of the High Court (Sic). 4. The appeal is dismissed. 5. Pending applications, if any, are disposed of." 59. It would also be relevant to refer to the decision of 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], wherein it was observed: "11. Both the SCNs further state that had the audit not conducted scrutiny of the rec....