TaxTMI 
TaxTMI 
2026 (9) TMI 821
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Central Excise Act, 1944 could be invoked, where the demand was founded solely upon figures appearing in the Cost Audit Report, being a statutory record maintained by the assessee and produced before the Department, and where the facts constituting the basis of the demand were within the knowledge of the Department at all material times; and whether, for the purpose of the said proviso, it is the absence of knowledge on the part of the Department of the material fact, or a positive and deliberate act of suppression of that fact on the part of the assessee, that is relevant? B) Whether the learned Tribunal committed a substantial error of law in setting aside the order of the Appellate Authority without recording any finding that the Department did not have sufficient knowledge of the facts which led to the demand of duty, interest and penalty? C) Whether mandatory penalty is imposable under Section 11AC of the Central Excise Act, 1944? 2. The appellant is a large-scale manufacturer of aluminium and availed CENVAT credit of central excise duty paid on inputs used in the manufacturing of its final products. The period in dispute is Financial Years 2001-02 and 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Adjudicating Authority reasoning that the absence of any attempt by the appellant to bring the shortages and excesses to the notice of the Department amounted to suppression. The Commissioner (Appeals), by four Orders-in-Appeal dated 26th February, 2010, upheld the demand on merits but had set it aside on limitation, holding that the demand rested entirely upon the Cost Audit Report, a statutory record maintained by the appellant. The Tribunal reversed that view, and hence this appeal. 7. Learned Counsel appearing for the appellant submitted that the proviso to Section 11A(1) is attracted only where non-levy or short-levy is occasioned by reason of fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty, and the burden of establishing these ingredients lies squarely upon the Revenue. He further submits that the Department was present at the annual stock verification and was therefore aware of the very shortages now alleged and that the Cost Audit Report is a statutory record, which Rule 22 of the Central Excise Rules, 2002 empowers the Department to call for and obliges the assessee to produce; that the statutory returns conta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l enquiries, and the distinction between them lies at the heart of this appeal. The first is anterior and jurisdictional: do the ingredients described in the proviso in fact exist, that is to say, is the escapement of duty attributable to fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty? That is a question of fact on which the burden lies wholly upon the Revenue. The second enquiry arises if, and only if, the first is answered in the affirmative: from what point, and for what span, is the notice to be reckoned? On that question the statute is exhaustive, prescribing five years from the "relevant date" as defined. The first enquiry governs the availability of the extended period; the second governs its measurement. Authorities addressed to the second cannot be transplanted to resolve the first, and it is precisely that transplantation which the Revenue invites us to make. 11. In the case of Neminath Fabrics (supra) it was decided that, and with respect decides correctly that once the ingredients of the proviso are satisfied, a Tribunal cannot substitute a fresh period of limitation of six months running from the date on whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny register which the appellant was bound to maintain. There is nothing beyond a figure appearing in the appellant's own statutory record, prepared by a Cost Accountant in discharge of a statutory obligation, and handed to the Department when the Department asked for it. 15. We must further observe that departmental knowledge is invoked by the appellant before us for a purpose wholly different from that condemned in Neminath Fabrics (supra). The appellant does not ask us to substitute a six-month period of limitation running from the date of knowledge. The appellant asks us to treat the Department's contemporaneous knowledge as a fact from which the absence of suppression is to be inferred. That is a permissible, and indeed a necessary, use of the fact. Suppression is a relational concept, presupposing a person from whom something is kept back. One cannot suppress from another that which the other already possesses, and possesses because one has oneself invited him to come and see it. To say so is not to read the word "knowledge" into the statute; it is to give the word "suppression" the meaning it bears in the statute. 16. Turning then to the ingredients of the proviso, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y entitles the proper officer to enter and search the registered premises and to require the assessee to make available, inter alia, the cost audit report under Section 233B of the Companies Act, 1956. It follows that the very document on which the Department founds its charge of concealment is a document which the law compelled the appellant to prepare, to preserve and to produce on demand, and which the law empowered the Department to call for at any time. A demand built entirely upon such a document cannot simultaneously be a demand built upon suppression. The two propositions cannot stand together. 20. This Court has already taken that view in Commissioner of Service Tax, Kolkata v. M/s. Electro Steel Casting Ltd., reported in 2025 (5) TMI 1218 (Cal.), holding that the extended period is not available where the entire basis of the demand is information contained in the assessee's own books of account, financial statements or statutory records. The Karnataka High Court is to the same effect in Commissioner of Central Tax v. ABB Ltd., reported in 2022 SCC OnLine Kar 1132. Where the discrepancy was available in the assessee's records and was capable of detection by the jurisdic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erred. The principle finds support in CCE, Mangalore v. Pals Microsystems Ltd., reported in 2011 (270) E.L.T. 305 (S.C.), and in Mopeds India Ltd. v. Collector of Central Excise, reported in 1991 (56) E.L.T. 241 (Tri.), affirmed at 1991 (53) E.L.T. A79 (S.C.). 24. Finally, and not without any significance on the question of intent, the Cost Audit Report disclosed excesses as well as shortages, and these offset one another so that there was no net shortage over the relevant period. A record which discloses excesses against the assessee's own interest alongside shortages is not the record of a person engaged in concealment. 25. The Revenue's reliance on Union of India v. Rajasthan Spinning & Weaving Mills, reported in 2009 (238) E.L.T. 3 (S.C.) is, with respect, misplaced. That decision holds that penalty under Section 11AC is attracted where, and because, the conditions of the proviso to Section 11A are satisfied. It is conditional, not free-standing. The passage relied upon in Neminath Fabrics (supra) itself records the converse proposition in the plainest terms, namely that in the absence of any element of deception or malpractice the recovery of duty can only be for a perio....