Custom, Excise & Service Tax Tribunal
Aam India Manufacturing Corporation ... vs Chennai-Iii on 6 August, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Excise Appeal No. 40113 of 2023
(Arising out of Order-in-Original No.52/2022 (COMMR), dated 22.12.022 passed by the
Commissioner of Central Excise, Chennai Outer, Newry Towers, No.2054 - I, II Avenue,
Anna Nagar, Chennai 600 040)
M/s. AAM India Manufacturing Corporation ...Appellant
Pvt. Ltd.
Plot No.62, 8th Avenue
Mahindra World City
Chengalpatu, Tamil Nadu 603 002
Versus
Commissioner of GST & Central Excise ...Respondent
Chennai Outer Commissionerate Newry Towers, No.2054 - I II Avenue, 12th Main Road, Anna Nagar Chennai 600 040 APPEARANCE:
Shri S.C.Kamra, Advocate for the Appellant Shri M. Selvakumar, Authorised Representative for the Respondent CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER No. 40802/2025 DATE OF HEARING : 16.04.2025 DATE OF DECISION : 06.08.2025 Per Mr. AJAYAN T.V.
M/s. AAM India Manufacturing Corporation Pvt Ltd, a registered manufacturer and the appellant herein, has preferred this appeal against the impugned Order in Original No.52/2022(COMMR) dated 22.12.2022 (OIO) passed by the adjudicating authority, whereby the demand of Rs.3,36,85,997/- being the differential duty payable for the period from September 2012 to March 2013 was confirmed under Section 11A(4) of the Central Excise Act, 1944 along with appropriate interest thereon and an equivalent penalty imposed under Section 11AC of the Act ibid read with Rule 25 of the Central Excise Rules, 2002.2
E/40113/2023
2. The relevant facts are 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 resulting in lesser orders. However, the price was fixed and there was no compensation clause even if lesser quantity was ordered and that they had sold at a loss absorbing the losses during the current period anticipating business to do well in future. The Department was of the view that since the appellant sold their finished goods at a lower rate than the manufacturing cost to compete with other manufacturers by wilful means, due to the sale prices being lower than the manufacturing costs, the declared sale value could not be considered a "normal price" under Section 4(1)(a) of the Central Excise Act, 1944 (Act), and therefore, the excise duty paid based on these prices was insufficient. The authorities were of the opinion that the value of the goods for excise duty purposes should be re-assessed, factoring in the cost of production and a notional profit, as per Section 4(1)(b) of the Act read with Rule 9 and Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CEVR, 2000).
4. Since AAM India did not submit the necessary cost of production information in the prescribed CAS-4 form, the duty shortfall was 3 E/40113/2023 calculated by the Department based on their Profit and Loss accounts for the years 2012-13 and 2013-14 as per Cost Accounting Standard-4. It was found that in 2012-13, the sales price was lower than the cost plus profit, leading to a short payment of about Rs. 3.36 crore in excise duty.
5. The Department therefore issued a Show Cause Notice dated October 15, 2018 to the appellant invoking extended period of limitation alleging that the appellant had not brought to the notice of the department that they were selling goods less than the manufacturing cost nor did they indicate such details separately in the periodical returns filed with the Department under Rule 12 of the Central Excise Rules, 2002 and the fact of adoption of sale price below the cost of production of the goods would not have come to light but for the verification of records by the officers and that therefore it appeared that the appellant had suppressed substantial information about the goods manufactured and cleared for sale much below the cost of production from the department deliberately with intention to evade payment of duty. The SCN proposed to reassess the value of the goods cleared during the impugned period, demanded differential duty along 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 4 E/40113/2023 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 supply front and rear axle assemblies to M/s. DICV for use in manufacturing heavy vehicles. The unit price for various types of axle assemblies was determined as part of this agreement, covering the period from 2012 to 2020, with projected volumes of orders that DICV would place with the appellant.
c) The Revenue was of the view that the price of axles for automobiles sold by the appellant was lower than the manufacturing expenses or cost of production during the period 2012-13 and 2013-14 and therefore, the price declared by the appellant for excise duty purposes could not be considered the "normal price" under Section 4(1)(a) of the Central Excise Act (CEA), 1944. This led to the conclusion that there was a short payment of duty and placing reliance on the judgment in the case of CCE, Mumbai Vs. Fiat India Pvt. Ltd. (2012) 283 ELT 161 (S.C.), a show cause notice dated 15.10.2018 came to be issued demanding differential duty for the period from September 2012 to March 2013.
d) After a delay of four years, the Adjudicating Authority confirmed the entire excise duty demand of Rs. 3,36,85,997/- along with applicable interest and imposing an equal penalty. The reasoning was that the appellant was incurring significant losses but had expectations that their business would improve in the future. The Adjudicating Authority interpreted this expectation as an additional consideration, which should form part of the assessable value of the goods. As such, the Supreme Court's judgment in Fiat India Pvt. Ltd. was deemed applicable to the appellant's case.
e) The Adjudicating Authority concluded that the acknowledgment receipt of the Annual Return (ER-4) for the year 2012-13, filed on 29.11.2013, This led to the interpretation that the Show Cause Notice (SCN) issued 5 E/40113/2023 by the Department on 15.10.2018 was within the extended limitation period of five years, based on Section 11A(4) of the CEA, 1944.
f) That the SCN was in fact issued beyond the extended period of five years, as the relevant date should be calculated from the filing of the ER-1 return for March 2013, which was submitted on 10.04.2013. The appellant contended that by applying the extended limitation period of five years, the SCN should have been issued by 10.04.2018. Since the SCN was actually issued on 15.10.2018, it was beyond the extended period. The relevant details are shown in the table below:
Period of SCN Sept.' 2012 to March 2013 Date of filing ER-1 return for 10.04.2013 (relevant date) March 2013 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 ER-1 return, as it is the periodical return for monthly excisable goods clearance, rather than the ER-4 annual statement. The extended 6 E/40113/2023 limitation period should, therefore, be calculated from 10.04.2013, when the ER-1 return for March 2013 was filed.
i) That the revenue has not placed any evidence on record to support that the appellant was evading payment of central excise duty by wilfully suppressing vital facts from the Department resulting in undervaluation of goods cleared by the appellant to OEM customers. It has been held by the Apex Court that mere inaction or failure to do the things would not amount to suppression and therefore extended period for issuing SCN was not available to the Department. That in view of the settled position in law the appellant reiterates that in order to invoke extended period of limitation under Section 11A(4) of CEA, 1944 something positive than mere inaction or failure on the part of the manufacturer is necessary, that is there has to be a conscious or deliberate withholding of information. Reliance is placed on the decisions in ITW Signode India Ltd v CCE, 2003 (158) ELT 403 (SC), Tamilnadu Housing Board v CCE, 1995 (74) ELT 9 (SC), Pushpam Pharmaceuticals Company v Collector of Central Excise, Bombay, 1995 (78) ELT 401 (SC), Collector v Chemphar Drugs & Linments, 1989 (40) ELT 276 (SC), J.K.Cotton Spg & Wvg Mills Co Ltd v. Collector of Central Excise, 1998 (99)ELT 8 (SC), Continental Foundation Jt. Venture v CCE, Chandigarh, 2007 (216) ELT 177 (SC) in this regard.
j) That when ER 1 returns are filed regularly, extended period of limitation is not invokable. Reliance is placed on the decision in Accurate Chemical Industries v CCE, Noida, 2014 (300) ELT 451 (Tri-Del) affirmed in CCE Noida v Accurate Chemical Industries, 2014 (310) ELT 441 (All).
k) Reliance is placed on the decision of the Hon'ble Allahabad High Court in Commissioner of Customs, Excise & Service Tax v. Monsanto Manufacturer Pvt. Ltd. (2014) 35 STR 177 (All), where it was held that if the SCN proceedings are barred by limitation, the Tribunal has no jurisdiction to entertain the merits of the case. This decision supports 7 E/40113/2023 the appellant's argument that the SCN issued beyond the limitation period renders the entire proceedings invalid.
l) That it did not deliberately keep the price below the cost of production to 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 underpricing 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 than the manufacturing cost and profit. In fact, the Board's clarification indicated that if no additional consideration is received by the appellant from the buyer, the transaction value should be deemed as the correct value for excise duty purposes. This provision is directly applicable to the appellant's case.
o) That subsequent to the clarification by the Board, the Government amended Rule 6 of the Central Excise Valuation Rules, 2000, by adding a proviso which specifies that if goods are sold below cost and no additional consideration flows from the buyer, the transaction value shall be deemed the value for excise purposes. This amendment supports the appellant's position and therefore the impugned order, which confirmed 8 E/40113/2023 a duty demand of Rs. 3,36,85,997/- along with an equal penalty, is not sustainable on merit. Reliance is also placed on the Supreme Court's ruling in CCE, New Delhi Vs. Guru Nanak Refrigeration Corporation (2003) 153 ELT 249 (SC), where the Apex Court has held that simply because goods were sold below cost did not invalidate the wholesale price unless there was evidence of non-arm's length transactions or flowback of money. Since neither of these circumstances applied to the appellant's case, the sale price of the appellant ought not to have been rejected.
p) That the SCN having been issued beyond the extended limitation period, the excise duty demand, along with the penalty, is not justified based on the facts and clarifications provided.
7. Shri. M. Selvakumar, Ld. Authorised Representative, appearing for the Respondent, reiterated the findings in the impugned Order in Original.
8. We have heard the rival submissions at length, carefully perused the appeal records as well as the case laws submitted as relied upon.
9. The issues that arise for determination are :
A. Whether the Demand is wholly barred by limitation as contended by the Appellant?
B. If the demand is not barred by limitation, then on merits whether the demand confirmed along with applicable interest and imposition of penalty is tenable?
10. The appellant has contested the demand strenuously urging that the demand is wholly barred by limitation and placing reliance on the decision of the Hon'ble Allahabad High Court in Commissioner of Customs, Excise & Service Tax v. Monsanto Manufacturer Pvt. Ltd. (2014) 35 STR 177 (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 9 E/40113/2023 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 reason of--
(a) fraud; or
(b) collusion; or
(c) any wilful misstatement; 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 11-AA and a penalty equivalent to the duty specified in the notice." (emphasis supplied)
12. The "relevant date‟ has been defined in clause (b) of the Explanation 1 below Section 11A, which provides as follows:
(b) "relevant date" 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;10
E/40113/2023
(iii) in any other case, the date on which duty of excise is required to be paid under this Act or the rules made thereunder;
(iv) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;
(v) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund;
(vi) in the case where only interest is to be recovered, the date of payment of duty to which such interest relates." (emphasis supplied)
13. The ingredients mentioned in Section 11A(4) for invoking the extended period of limitation of five years has come up for analysis repeatedly by the Honourable Supreme Court, even in the earlier avatars of section 11A, when the proviso to Section 11A specified the very same ingredients for invoking the extended period of limitation. As early as in 1989 the Honourable Apex Court in CCE v Chemphar Drugs & Linments, 1989 (40) ELT 276 (SC), has laid down that in order to make 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 suppression of facts etc. The proviso to Section 11A reads as under :
"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, 11 E/40113/2023 collusion or any wilful misstatement 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, as if for the words" Central Excise Officer", the words "Collector of Central Excise" and for the words "six months", the words "five years" were substituted."
A bare reading of the proviso indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years, it has to be construed strictly. The initial burden is on the Department to prove that the situations visualised by the proviso existed. But once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, the burden shifts and then applicability of the proviso has to be construed liberally. When the law requires an intention to evade payment of duty then it is not mere failure to pay duty. It must be something more. That is, the assessee must be aware that the duty was leviable and it must deliberately avoid paying it. The word `evade' in the context means defeating the provision of law of paying duty. It is made more stringent by use of the word `intent'. In other words the assessee must deliberately avoid payment of duty which is payable in accordance with law. In Padmini Products v. Collector of Central Excise 1989 (43) E.L.T. 195, it was held that where there was scope for doubt whether case for duty was made out or not, the proviso to Section 11A of the Act would not be attracted." (emphasis supplied)
14. In Pushpam Pharmaceuticals Company v CCE, Bombay, 1995 (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 12 E/40113/2023 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 omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied)
15. In 2013, in Uniworth Textiles v CCE, Raipur, 2013 (288) ELT 161 (SC), the Apex Court noticed a slew of its earlier judgements and after reproducing therefrom, held as under:
"17. In fact, the Act contemplates a positive action which betrays a negative intention of willful default. The same was held by Easland Combines, Coimbatore v. The Collector of Central Excise, Coimbatore - (2003) 3 SCC 410 = 2003 (152) E.L.T. 39 (S.C.) wherein this Court held :-
"31. It is settled law that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or willful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation."
[Emphasis supplied]
18. We are in complete agreement with the principle enunciated in the above decisions, in light of the proviso to Section 11A of the Central Excise Act, 1944"
16. In its judgement in Uniworth Textiles Ltd supra, the Apex Court also reiterated that "It is a cardinal postulate of law that the burden of proving 13 E/40113/2023 any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Ors. - (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility."
17. Couple of years ago, in CCE v Northern Operating Systems, 2022 (61) GSTL 129 (SC), while considering the invocation of extended period under Section 73 of the Finance Act, 1994, which is pari materia with Section 11A(4) of the Central Excise Act, 1944 reproduced supra, the Apex Court went on to hold as under:
"62. The revenue's argument that the assessee had indulged in wilful suppression, in this Court's considered 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 of Central Excise [(2013) 9 SCC 753 = 2013 (288) E.L.T. 161 (S.C.)] where it was observed that "(t)he conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts" is "untenable". This view was also followed in Escorts v. Commissioner of Central Excise [(2015) 9 SCC 109 = 2015 (319) E.L.T. 406 (S.C.)], Commissioner of Customs v. Magus Metals [(2017) 16 SCC 491 = 2017 (355) E.L.T. 323 (S.C.)] and other judgments."
14E/40113/2023
18. We find that in the impugned OIO the Adjudicating Authority while dealing with the question of the extended period of limitation invoked has acknowledged that the appellant has claimed that the relevant date for issuance of notice lapsed on 09.04.2018 as the ER1 return for March 2013 was filed on 10.04.2013. Yet, without controverting the contention, the contention on relevant date is sought to be dismissed holding that the appellant had taken into account only the monthly return which does not contain the details on cost of production of a product. As regards the appellant's claim of having filed the ER4 annual return duly acknowledged, the adjudicating authority was of the view that the acknowledgement for filing of ER4 return produced by the appellant had inconsistencies and thus the adjudicating authority is unable to accept the acknowledgement as valid proof of submission of ER4. It was also held that when the appellant could show the purported acknowledgement, they could very well produce the copy of the return filed and failure on their part only shows malafide intention of misleading the adjudicating authority. It was also held that the department was not in the knowledge of the costing details before compliance verification and thus it is wrong to say that the notice is time barred and therefore the SCN dated 15.10.2018 was issued well within the extended period of limitation.
19. Keeping the principles laid down in the series of Apex Court Judgements reproduced above as to when the extended period of limitation is attracted, we find that the adjudicating authority has not rendered any finding in the impugned OIO of any positive or deliberate act of wilful misstatement or suppression of facts with intent to evade payment of duty on the part of the appellant, so as to substantiate the invoking of the extended period of limitation. The impugned OIO is liable to be set aside on 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.
15E/40113/2023
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 return does not contain the details of the cost of production of a product. However, we note that it was neither the allegation in the SCN nor was it the case of the Adjudicating Authority that the said monthly return had provision seeking such details, and despite the same, it has not been furnished by the appellant. It is no more res integra that the accusation of non-disclosure can only be made if there was in the first instance a requirement to disclose. In this regard, we find that the decision of the Honourable Apex Court in CCE & Cus v Reliance Industries Ltd, 2023 (385) ELT 481 (SC) merits reproduction, wherein the Honourable Apex Court held as under:
"20. We have seen the format of the ER-1/RT-12 return which the assessee was required to file on a monthly basis for intimating to the department the value of clearances effected and the amounts of duties paid thereon. We do not find any separate column or requirement in these forms for declaring the value and other details of clearances effected to the deemed export buyers i.e. holders of advance licenses. Note 4 under Form ER-1 does require separate details to be mentioned for exports under bond. Indisputedly clearance made to domestic buyers even if they are considered deemed exports are not clearances for "exports under bond" for which category of clearances alone requirement existed for separate disclosure in the ER-1/RT- 12 returns. In the absence of any specific column or note similar to Note 4, requiring separate disclosure of the value of deemed export clearances, we do find any merit in the findings of the adjudicating authority that there was suppression of facts as a consequence of assessee's failure to separately disclose the value of deemed export clearances. An accusation of non-16
E/40113/2023 disclosure can only be made if there is in the first instance a requirement to disclose." (emphasis supplied) Therefore, the adjudicating authority has grossly erred in discarding the appellant's contention on the relevant date premised on their filing of the periodical ER-1 returns on specious grounds which are wholly untenable.
21. We also find that inasmuch as these returns are being filed online by the appellant on ACES (Automation of Central Excise and Service Tax) Portal, nothing prevented the adjudicating authority from accessing and verifying the same. In any event the Appeal records reflect that 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 have been invoked, is wholly illegal and cannot sustain. We hold that the impugned Order in Original is therefore liable to be set aside in toto on this count too.
22. In this regard, we also find the reliance placed by the appellant on the decision of a coordinate bench of the tribunal in Accurate Chemical Industries v CCE, Noida, reported in 2014(300) ELT 451 (Tri-Del), quite apposite. The Tribunal has dwelled upon the effect of non-scrutiny of the returns filed by the assessee upon self-assessment, within the stipulated time frame by the jurisdictional Central Excise officers. The 17 E/40113/2023 Tribunal has held that the assessee cannot be penalized by invoking extended period under proviso to Section 11A(1) for demand of duty and penal provisions of Section 11AC for indolence on the part of the jurisdictional Central Excise officers. The said decision of the Tribunal has been affirmed in CCE Noida v Accurate Chemical Industries, 2014 (310) ELT 441 (All). There is a catena of decisions in similar vein wherein, various High Courts as well as this Tribunal, have consistently held that when the assessee is registered and filing returns regularly, the range officer had a duty to scrutinize returns, detect any irregularity, and to raise pertinent queries in this regard; and that in light of any negligence or failure to do so, the allegation of suppression by the assessee, cannot be countenanced. To cite a few, apart from those cited above, the decisions in Jagadamba Power & Alloys Ltd v CCE, Jaipur, 2025(391) ELT 478 (Chhattisgarh) affirmed in CCE v Jagadamba Power & Alloys Ltd, 2025 (391) ELT 465 (SC), Swastik Engineering v CCE, Bangalore, 2010 (255) ELT 261 (Tri-Bang) upheld in CCE Bangalore II v Swastik Engineering,2014 (302) ELT 333 (Kar) and the decisions of the Principal Bench of the Tribunal at Delhi in Final Order No.50511/2025 dated 23-04-2025 in the case of M/s. Indian Railway Catering and Tourism Corporation Ltd v. The Commissioner of Service Tax, Delhi-I and in Final Order No.50515/2025 dated 23-04-2025 in the case of M/s. Industrial Sales & Services v Commissioner of CGST &Service Tax, Jaipur, would suffice.
23. We also find that the attribution of malafide to the appellant for non-
production of copy of ER4 return and that being treated as an attempt to mislead the adjudicating authority, rather facetious. For invoking the extended period of limitation as 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 18 E/40113/2023 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, it is pellucid that the date of filing of the monthly ER-1 return/date on which it was required to be filed, is the date that is required to be considered in order to determine the relevant date for the purposes of Section 11A. We are therefore of the considered opinion that the filing of ER-4 had no relevance in determining the relevant date under Section 11A. Be that as it may, when the appellant contends that it had filed the ER-4 and produces an acknowledgement in this regard, if the adjudicating authority so desired, nothing prevented the adjudicating authority from verifying such online filing stated to have been submitted on 29.11.2013. Therefore, since filing of ER-4 online was contemporaneous and already available with the Department, to our mind, malafide can hardly be attributed for non-production of a physical copy, much less attribute it as an attempt to mislead the adjudicating authority. Furthermore, we also note that it was incumbent on the jurisdictional officers to have verified these filings within the time frame stipulated for the said purpose as per the extant instructions as was held by the decisions of various judicial forums noted above. Thus, we are of the considered view that the adjudicating authority has grossly erred in his findings that the non- production of a physical copy of the ER-4 return was a malafide attempt by the appellant to mislead.
24. We have reproduced from the decisions of the Honourable Apex Court over the years right from 1989 onwards till the year 2022 expounding on the necessary ingredients that are required to be established by the Revenue whenever it seeks to invoke the extended period of limitation. The law has been repeatedly reiterated in emphatic and unambiguous terms not only by the Apex Court, but also in the decisions of various High 19 E/40113/2023 Courts and benches of this Tribunal, by implicitly following the same. The multitude of decisions on this aspect ought to have by now cemented the settled position in law in the memory of the tax authorities. Yet, seemingly impervious to the law laid down, and in utter disregard to judicial discipline, Revenue has gone ahead in this instance to issue a show cause notice even beyond the extended period of limitation available under the statute, by resorting to disingenuous interpretations and disregarding the applicable relevant date. We are appalled that the Revenue has 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 of law have been framed, the following question has been pressed at the hearing :
"Whether the Tribunal having held that proceedings were barred by limitation and proceedings were liable to be quashed on the ground of limitation, the Tribunal committed an illegality in deciding the question on merits. Hence is the finding of Tribunal on merits liable to be set aside?"20
E/40113/2023
21. The appeal is admitted on the following question of law and is by consent taken up for final hearing.
22. The Tribunal came to the conclusion that the demand by the Revenue was beyond the period of limitation of one year prescribed under Section 73(1) of the Finance Act, 1994 and that the period of five years could not have been invoked. That part of the judgment of the Tribunal has been confirmed in the companion appeal. Once that be the position and the Tribunal having come to the conclusion that the extended period of limitation could not have been validly applied, the Tribunal, in our view, acted outside its jurisdiction in entering upon the merits of the dispute on whether the demand for duty should be confirmed. Once it is held that the demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the issues raised by the Revenue.
23. In State Bank of India v. B.S. Agricultural Industries (I)- (2009) 5 SCC 121, the Supreme Court dealt with a situation where the consumer forum had held that the complaint was barred by limitation but had nonetheless proceeded to decide the issue on merits. Holding that this would amount to an illegality, the Supreme Court observed :
"12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside."
24. Consequently, since the Tribunal was justified, as we have held, in coming to the conclusion that the demand was time 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 21 E/40113/2023 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 declaring the demand as beyond the period of one year, the Tribunal, entered into the merits of the appeal filed by the assessee and passed an adverse order. Before the Allahabad High Court, one of the substantial questions of law raised by the assessee, was when the Tribunal having held that proceedings were barred by limitation, has committed any illegality in deciding the question on merits. Whether the finding of the Tribunal on merits, is liable to be set aside?"
12. While addressing the above said substantial question of law, decision of the Hon'ble Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, has been pressed into service, wherein, the Hon'ble Supreme Court had an occasion to deal with a situation, where the consumer forum held that the complaint was barred by limitation, but nonetheless had proceeded to decide the issue on merits. Dealing with the issue, which is similar to the case on hand, at Paragraph 12, the Hon'ble Supreme Court in State Bank of India's case (cited supra), held as follows :-
"12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside."
Applying the ratio of the Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, the Allahabad High Court in Commissioner of Customs, Central Excise & Service Tax v. M/s. Monsanto Manufacturer Pvt. Ltd., reported in 2014-TIOL-550-HC-ALL-ST, answered the question of law in favour of the assessee.
22E/40113/2023
13. Judgment of the Supreme in State Bank of India's case (cited supra), followed in Commissioner of Customs's case (cited supra), squarely applies to the facts on hand, wherein, CESTAT, Madras, while dismissing the appeal as time-barred, has entered into the merits of the case and dismissed the same, on merits. In the words of the Hon'ble Supreme Court, that would be an illegality.
14. Though Mr. A.P. Srinivas, learned counsel appearing for the Revenue submitted that the correctness of the order impugned before us, can be decided in an appeal before the CESTAT and prayed to sustain the order, dated 15-2- 2016 in W.P. No. 5501 of 2016, in the light of the above discussion and the decision in State Bank of India's case (cited supra), we are not inclined to accept the said contention. When the Hon'ble Supreme Court has described the manner of disposal of an appeal, as illegality, the same can be corrected by this Court, in exercise of the powers under Article 226 of the Constitution of India and no useful purpose would be served in relegating the appellants to approach the alternative remedy. Courts have held that a writ petition is maintainable, when the act committed is per se illegal, and contrary to the statute.
15. In the light of the above discussion and decisions, we are inclined to interfere with the order of the Writ Court as well as the Order-in- Appeal No. 349/2015 (STA-II), dated 30-11-2015, passed by the Commissioner of Service Tax (Appeals-II) and the same are set aside."
28. Given our findings that the demand is wholly barred by limitation for the reasons stated above, adhering to judicial discipline and respectfully following the binding judicial precedents of the Honourable Apex Court and High Courts cited supra, we refrain from delving into the merits of the matter and rendering a finding on merits. Inasmuch as we have found the demand unsustainable and liable to be set aside, the consequential demand of interest and penalty imposed is also found to be untenable and liable to be set aside.
23E/40113/2023
29. For the reasons stated above, we allow the appeal and set aside the impugned Order in Original. The appellant is entitled to consequential relief in law, if any.
(Order pronounced in open court on 06.08.2025)
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)
ra