TaxTMI 
TaxTMI 
2025 (8) TMI 1655
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the appellant is engaged in manufacturing automotive axles and is registered with the Central Excise Department. The company has been availing CENVAT Credit on inputs and capital goods used in the manufacture of the said goods. During a compliance verification, the department formed a view that the appellant manufactured the finished products below the cost of production and it appeared that the appellant was selling its finished products below the cost of production in the years 2012-13 and 2013-14. A review of their Profit and Loss account for these years showed that the company was incurring significant losses, as the revenue from manufacturing operations was far lower than the incurred expenses, resulting in losses of about Rs. 10.66 crore and Rs. 48.19 crore in the respective years. 3. The Manager (Finance) of the appellant, in his statements deposed that in Chennai they manufactured axles for both M/s. Daimler India Commercial Vehicles Pvt Ltd (DICV) and M/s. Ashok Leyland Nissan on supplier & customer basis with an appropriate sale agreement, that as DICV was a new entrant to the business in India, they were unable to sell the commercial vehicles as expected resultin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g with applicable interest, as well as proposed imposition of penalty under the provisions of Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. The appellant filed a reply contending interalia that the SCN issued beyond even the extended period of limitation of five years as available in Section 11A(4) of the Act is liable to be quashed. After due process of law, the adjudicating authority passed the impugned OIO, aggrieved by which, the appellant preferred this appeal and is now before this forum. 6. Mr. S.C. Kamra, Advocate, appeared on behalf of the Appellant and submitted as under: a) The appellant who had obtained a Central Excise Registration No. AAGCA9388QEM003 on 06.09.2011 for the manufacture of excisable goods, established a new plant in 2012 at Chengalpattu, Kancheepuram, Tamil Nadu, specifically for the manufacturing of axle assemblies. These assemblies were primarily for supply to M/s. Daimler India Commercial Vehicles Pvt. Ltd. (DICV), Chennai, and M/s. Ashok Leyland Nissan, Chennai. Commercial production began in May 2012. b) M/s. DICV entered into a Supply Agreement with the appellant on 05.08.2010 to assemble and supp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re shown in the table below: Period of SCN Sept.' 2012 to March 2013 Date of filing ER-1 return for March 2013 10.04.2013 (relevant date) Extended period of issuing SCN 10.04.2018 (5 years) Show Cause Notice issued on 15.10.2018 g) The Adjudicating Authority mistakenly relied on the ER-4 (Annual Financial Information Statement) filed on 29.11.2013 as the relevant document to determine the extended limitation period. That the ER-4 is an annual return, and not a monthly return like the ER-1. The ER-4 return provides details for the entire financial year, including raw materials consumed, job work done, and CENVAT credit details, whereas the ER-1 return is a monthly statement of excisable goods produced, cleared from the factory, and duty payable. That the ER-4 itself was prescribed only in 2004 whereas the definition of relevant date linking it to periodical return filing date was already in existence in the statute under Section 11A even prior to 2004. Therefore, the ER-4 return cannot be equated with the ER-1 return for determining the relevant date for the SCN. h) That the relevant date for limitation under Section 11A must be based on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gain a competitive advantage. Instead, the losses were a result of insufficient orders placed by M/s. DICV. Due to DICV's operations in the Chennai market being fairly new, the expected order volume did not materialise, leading to lower sales than forecasted. Additionally, the appellant had incurred heavy capital expenditures in setting up the plant, including depreciation costs, which contributed to the financial losses. m) That in Paragraph 16.3 of the impugned order, the Adjudicating Authority incorrectly applied the judgment in Fiat India Pvt. Ltd., suggesting that the appellant's expectation of future profits was an additional consideration influencing the assessable value. However, the appellant contended that the Fiat India case involved deliberate under pricing for market domination, a situation entirely different from the appellant's case, where the losses were a result of genuine business challenges. n) Reliance is placed on the Board's Circular No. 979/3/2014-CX dated 15.01.2014, which clarified that the Supreme Court's judgment in Fiat India does not mandate the rejection of "transaction value" solely because the declared price is lower th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 (All). When a plea that the demand is wholly barred by limitation is raised at the outset, we too find it appropriate to deal with the said contention at first. The question of limitation goes to the root of the matter and involves a question of jurisdiction to raise the demand itself in the first instance. This in turn is premised on the provisions of law that prescribe the situations as well as the attendant ingredients thereto that attract its application. The findings of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question therefore needs to be examined and is to be determined having regard to both the facts and law involved therein. 11. In the instant case, to appreciate whether the demand is wholly barred by limitation, it would be appropriate to reproduce section 11A(4) of the Central Excise Act, 1944 as it stood at the relevant time. Section 11A of the Act deals with recovery of duties not levied or paid or short levied or short paid or erroneously refunded. Section 11A(4) stipulates: "(4) Where any duty of excise has not been levied or paid or has been short levied or short-paid or erroneously refunded, by the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the demand for duty sustainable beyond a period of six months and up to a period of five years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability. Again in Tamilnadu Housing Board v CCE, Madras, 1994(74) ELT 9, the Apex court held as under: "3.Section 11A of the Act empowers the Central Excise Officer to initiate proceedings where duty has not been levied or short-levied within six months from the relevant date. But this period to commence proceedings under proviso to the Section stands extended to five years if the duty could not be levied or it was short-levied due to fraud, collusion, wilful misstatement or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (78) ELT 401 (SC), the Apex Court went on to reiterate the dictum as under: "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful 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 omis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sidered view, is insubstantial. The view of a previous three judge ruling, in Cosmic Dye Chemical v. Collector of Central Excise [(1995) 6 SCC 117 = 1995 (75) E.L.T. 721 (S.C.)] - in the context of Section 11A of the Central Excise Act, 1944, which is in identical terms with Section 73 of the Finance Act, 1994 was that : "Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful." 63. This decision was followed in Uniworth Textiles v. Commissioner ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this count alone. In fact, we see that even the SCN dated 15.10.2018 demanding the differential duty payable for the period from September 2012 to March 2013, does not put the appellant to notice as to how the relevant date for invoking the extended period of limitation has been determined and also does not explain how the notice is within the extended period of limitation. 20. That apart, we find that the adjudicating authority has been dismissive of the reliance placed by the appellant on the relevant date that is required to be noticed for invoking the extended period of limitation, only on the ground that the monthly return does not contain the details of the cost of production of a product. We note that this is at variation with the allegation in the SCN which was that the details of their selling the finished goods less than the manufacturing cost was not indicated separately in the periodical returns. Incidentally, the SCN acknowledges that the appellant was filing periodical returns while raising the aforesaid allegation. The adjudicating authority too does not dispute that the appellant was filing the prescribed monthly return. But the finding is that the monthly retur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appellant has filed the monthly ER-1 returns for the month of March 2013 on 10-04-2013. A copy of the efiled return for the month of March 2013 submitted, is also seen to have been acknowledged by the Jurisdictional Range. Given such facts and circumstances as well as the legal provisions, we see considerable merit in the submission of the appellant that the relevant date to invoke extended period of limitation to demand the differential duty for the period from September 2012 to March 2013, when the appellant had filed the return on 10-04-2013, in view of clause (b) (ii) to Explanation 1 of Section 11A, is therefore 10-04-2013 and the outer limit for invoking the extended period of limitation would be five years from the said dated of 10-04-2013, even assuming that the ingredients for invoking the extended period did exist, and would in any event be only upto 10-04-2018. Therefore, we are of the considered opinion that the present SCN dated 15.10.2018 issued to the appellant, raising the demand of differential duty for the period from September 2012 to March 2013, being more than six months even beyond the outer limit of the extended period of limitation that could possibly h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is evident from the definition of relevant date given in Explanation 1(b) below Section 11A, relevant date, in so far as in relation to the returns filed, means (i) in the case of excisable goods on which duty of excise has not been levied or paid or has been short levied or short-paid, and no periodical return as required by the provisions of this Act has been filed, the last date on which such return is required to be filed under this Act and the rules made thereunder; (ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid and the return has been filed, the date on which such return has been filed. We note that the appellant is correct in its contention that Form ER-4 was prescribed as an Annual Financial Information Statement only vide notification No.36/2004-CE (NT) dated 01.11.2004. Thus, inasmuch as the said definition of relevant date in relation to the returns filed was in the statute even before Form ER4 was introduced, and the Central Excise Rules, 2002 in Rule 12(1) stipulates a monthly return in the form specified to be filed within ten days after the close of the month to which the return relates, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not deemed it fit to put the appellant to notice as to how the relevant date for invoking the extended period of limitation has been determined and also has chosen not to explain in the notice as to how the SCN dated 15.10.2018 demanding the differential duty payable for the period from September 2012 to March 2013 is within the extended period of limitation. While we refrain from any opprobrious remarks, it would be remiss of us to turn a blind eye to such statutory impropriety occasioned by misplaced revenue zeal, that has resulted in burdening the appellant with unwanted litigation. Hence, we are constrained to castigate such attempts and hope that they would be eschewed henceforth. 25. Given our findings above that the extended period of limitation was not invokable and that the demand was wholly barred by limitation, we are disinclined to go into the merits of the dispute as a finding on merits is now rendered inconsequential. 26. Furthermore, we find that the Honourable High Court of Allahabad, in Commr of Cus, C.Ex & S.Tax v. Monsanto Manufacturer Pvt Ltd, 2014 (35) STR 177 (All), has held as under: "20. Though in the appeal by the assessee several questions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e barred, there was no occasion for the Tribunal to enter upon the merits of the dispute. We, accordingly, answer the question of law as framed by the assessee in the affirmative and in favour of the assessee. 25. The appeal by the assessee shall stand disposed of in the aforesaid terms." (Emphasis supplied) 27. We also find that the Honourable Supreme Court in Commissioner of Customs, Mumbai v B.V. Jewels, 2004 (172) ELT 3 (SC), has observed that " If, in reality, the CEGAT found that the action taken by the departmental authorities was beyond the period of limitation, it could have disposed of the appeals before it only on that ground without examining the merits". This decision of the Apex Court in B.V. Jewels ibid is noticed to have been followed in Commr of Service Tax, Mumbai IV v. Rochem Separations (I) P Ltd, 2019 (366) ELT 103 (Bom). It is also seen that the jurisdictional High Court in E.T.A General Pvt Ltd v Additional Commissioner of C.Ex, Chennai, 2016 (44) STR 409 (Mad) has held as under: "11. In Commissioner of Customs, Central Excise & Service Tax v. M/s. Monsanto Manufacturer Pvt. Ltd., reported in 2014-TIOL-550-HC-ALL-ST, while declar....