Custom, Excise & Service Tax Tribunal
Gryphon Appliance Ltd vs Commissioner, Cgst-Delhi East on 18 February, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO.III
Excise Appeal No.50451 of 2023
[Arising out of Order-in-Original No.109-110/Commr./Delhi East/AP/2022
dated 02.09.2022 passed by the Commissioner, Adjudication, Central Tax,
GST, Delhi East]
M/s.Gryphon Appliance Ltd., .....Appellant
B-1/A-6, Mohan Cooperative Industrial Estate,
New Delhi-110 044.
VERSUS
Commissioner of Central Tax, ....Respondent
GST Delhi East, C.R. Building, I.P.Estate,
Delhi-110 002.
AND
Excise Appeal No. 50452 of 2023
[Arising out of Order-in-Original No.109-110/Commr./Delhi East/AP/2022
dated 02.09.2022 passed by the Commissioner, Adjudication, Central Tax,
GST, Delhi East]
Shri Rajesh Mohan, Director .....Appellant
M/s.Gryphon Appliance Ltd.,
B-1/A-6, Mohan Cooperative Industrial Estate,
New Delhi-110 044.
VERSUS
Commissioner of Central Tax, ....Respondent
GST Delhi East, C.R. Building, I.P.Estate,
Delhi-110 002.
APPEARANCE:
Shri Prasanjit Pathak and Shri Shantanu Mishra, Advocates for the appellant.
Shri Rakesh Agarwal, Authorised Representative for the respondent.
CORAM:
HON‟BLE MS. BINU TAMTA, MEMBER (JUDICIAL)
HON‟BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NOS. 50323-50324/2025
DATE OF HEARING:28.01.2025
DATE OF DECISION:18.02.2025
2
BINU TAMTA:
1. Two separate appeals have been filed by M/s. Gryphone
Appliance Ltd. 1 and Shri Rajesh Mohan, Director of the appellant
company assailing the common order-in-original No.109-
110/Commr./Delhi East/AP/2022 dated 02.09.2022, whereby the
activity carried out was held to be „manufacture‟ and, therefore,
excise duty was confirmed invoking the provisions of Section 11A(4)
of the Central Excise Act, 19442 and also confiscation and imposition of
penalty under Rule 25 and 26 of the Central Excise Rules, 20023.
2. The facts are that the appellants had imported various electrical
goods i.e. vaccum cleaner, juicer, toaster, oven, electric water heater,
etc. for further sale in the local market. Bills of Entry were filed based
on the RSP and on payment of appropriate duty. After approval of the
self-assessment, out of charge was issued. According to the appellant,
after the receipt of the goods, keeping in view the market conditions,
overhead expenditure trade margins of dealers/retailers, higher MRP
were declared on the packages of the goods and the goods were sold
on payment of appropriate VAT paid by them. In addition to the
import, the appellant had also purchased goods from Bangalore based
importing firm, M/s. Stanley „Black & Decker India Pvt. Ltd.‟ and some
goods were manufactured on job work basis from the units situated at
Baddhi & Parmanu, Himachal Pradesh. Based on intelligence, searches
were conducted at the business premises and the residence of the
Director, whereby it was revealed that the activity of altering MRP of
the goods amounted to „manufacture‟ in terms of Section 2(f)(iii) of
1
The Appellant
2
The Act
3
The Rules
3
the Act rendering the goods liable to payment of excise duty. During
the course of investigation, statements of Shri Rajesh Mohan, Director
and Shri A.K. Jindal, General Manager of the Company were recorded,
wherein it was stated that they were not aware that the activity
carried out by them amounted to „manufacture‟ under the provisions of
Excise Act and after going through the provisions of Section 2(f)(iii)
and the Third Schedule of the Act, he understands that their goods
were covered under the Third Schedule and the process carried out by
them amounts to manufacture and was leviable to central excise duty.
He, therefore, voluntarily agreed to pay the duty liability. It was also
admitted that the Company was not registered with the Central Excise
Department but was registered with the VAT Department for the last
15 years and they were regularly paying the VAT amount.
3. Two show cause notices were issued to the appellant. Show
cause notice dated 03.04.2017 was issued with respect to the seizure
made on 05.10.2016 for confiscation of the goods valued at
Rs.41,71,395/- with penalty under Rule 25 read with Section 11AC of
the Act and personal penalty on Shri Rajesh Mohan under Rule 26 of
the Central Excise Rules. Second show cause notice dated 25.04.2017
was issued for the period 20.12.2013 to 2.6.2017 raising the demand
for recovery of central excise duty of Rs.7,63,83,435/- along with
interest and imposition of penalty under Rule 25 and personal penalty
on Shri Rajesh Mohan. The appellants approached the Settlement
Commission and accepted the duty liability of Rs.1,47,25,406/- along
with interest of Rs.67,62,457/-. The Settlement Commission vide
Order dated 16.01.2019 referred the matter back to the Adjudicating
4
Authority for adjudication in accordance with the provisions of law.
Accordingly, the matter was taken up for adjudication by the
impugned order. The operative portion of the order reads as under:-
"(i) I confirm the demand of Central Excise duty
amounting to Rs.7,32,31,165/- (Rupees seven crore
thirty-
two lakh thirty-one thousand one hundred and sixty-
five only) as detailed in Annexure-4 to the SCN by
invoking extended period of five years under the
provisions of Section 11A (4) of the Central Excise
Act, 1944 (erstwhile proviso to Section 11 A (1) of
the Central Excise Act, 1944).
(ii) I order recovery of Interest on the duty amount
evaded under the provisions of Section-11 AA of the
Central Excise Act, 1944 (erstwhile Section-11 AB of
the Central Excise Act, 1944).
(iii) I impose a penalty of Rs Rs.7,32,31,165/-
(Rupees seven crore thirty-two lakh thirty-one
thousand one hundred and sixty-five only) upon M/s
Gryphon Appliances Ltd., B-1/A-6, Mohan
Cooperative Industrial Estate, New Delhi- 44 under
Rule-25 of the Central Excise Rules, 2002, read with
Section-11AC of the Central Excise Act, 1944.
(iv) The amount of Rs. 70 lakhs already deposited is
ordered to be appropriated against Central Excise
duty confirmed above.
(v) I impose a penalty of Rs. 20,00,000/- (Rupees
Twenty Lakhs only)on Sh. Rajesh Mohan, Director of
M/s Gryphon Appliances Ltd., B-1/A-6, Mohan
Cooperative Industrial Estate, New Delhi- 44 under
Rule-26 of the Central Excise Rules, 2002.
(vi) I order for confiscation of excisable goods valued
at Rs. 41,71,395/-(Rupees Forty-One Lakhs
Seventy-One Thousand Three Hundred Ninety-Five
only) seized on 5.10.16 under Rule 25 of Central
Excise Rules, 2002. However, I give an option to
redeem the goods on payment of redemption fine of
Rs.10,00,000/- (Rupees Ten Lakhs only).
(vii) I impose a penalty of Rs.4,00,000/- ( Rupees
Four Lakhs only)upon M/s Gryphon Appliances Ltd.,
B-1/A-6, Mohan Cooperative Industrial Estate, New
Delhi- 44 under Rule-25 of the Central Excise Rules,
2002, read with Section-11AC of the Central Excise
Act, 1944.
5
(viii) I impose a penalty of Rs. 1,00,000/- (Rupees
One Lakh only) on Sh. Rajesh Mohan, Director of
M/s. Gryphon Appliances Ltd., B-1/A-6, Mohan
Cooperative Industrial Estate, New Delhi- 44 under
Rule-26 of the Central Excise Rules, 2002."
4. Being aggrieved, the appellants have preferred the present
appeals before this Tribunal.
5. Heard Shri Prasanjit Pathak and Shri Shantanu Mishra, learned
counsels for the appellant and Shri Rakesh Agarwal, learned
Authorised Representative for the respondent.
6. Submissions of the Appellant
6.1 The learned counsel has also challenged the findings that the
activity amounts to manufacture in terms of Section 2(f)(iii). Referring
to the Notes for interpretation of Third Schedule to the Act, it was
submitted that there is no Section Notes and Chapter Notes to the
effect that in relation to the goods covered by the show cause notice of
Sl.No.76 to 80 of Third Schedule, the process undertaken by the
appellant would amount to manufacture. Further, even assuming the
activities undertaken by the appellant amounts to manufacture, the
duty is payable only on removal of the goods and stock of goods which
were found in the premises and duly reflected or accounted for in the
records and unless and until, the same are removed, they are not
liable for seizure merely on the ground that by virtue of Section
2(f)(iii), the process undertaken by them amounts to manufacture. In
support, he referred to the decisions of the Tribunal in Commissioner
6
of Central Excise, Jaipur Vs. Karnawat International Pvt. Ltd4
and K.K. Tabacco Company Vs. Commissioner of Central Excise,
Allahabad 5 . Learned counsel also challenged the seizure and
confiscation of the goods recovered from the factory premises.
6.2 The next submission by the learned counsel is that if the activity
undertaken by them amounts to manufacture in terms of Section
2(f)(iii) then the duty paid on the goods at the time of importation has
to be considered as an „input‟ for the purpose of CENVAT Credit Rules,
2002 6 . Learned counsel further challenged the rejection of the
CENVAT Credit on the restriction of one year under Rule 4(1) of CCR,
2004. The plea taken by the learned counsel is that the said provisions
are applicable to a firm/unit, which is already registered with the
Department and paying duty and cannot be made applicable to a firm
or unit, which is not registered.
6.3 Learned counsel has further contested the invocation of the
extended period of limitation. He submitted that the appellants were
engaged in trading activity of imported goods and were not aware of
the liability towards excise duty, which they learnt only at the time of
search. Had they known that the activity carried out by them amounts
to manufacture, they would have obtained the registration and availed
CENVAT Credit and paid the duty on the differential amount of RSP
and MRP. Thus, it is not a case of deliberate and wilfull mis-statement
or suppression of facts to evade payment of duty. The records /books
of accounts were properly maintained and duly recorded in the balance
4
2015 (316) ELT 172 (Tri.- Delhi)
5
2017(349) ELT 510 (Tri.- All.)
6
CCR
7
sheet. The learned counsel cited a series of decisions on the principle
that mere non-payment of duties is not equivalent to collusion, wilful
misstatement or suppression of facts. Hence, demand of duty by
invoking the extended period is not sustainable. On the same analogy,
the appellants have challenged the imposition of penalty also for the
reason that the issue involves interpretation of provisions of law.
Submissions by the Revenue
7. Learned Authorised Representative has contested the appeal by
reiterating the findings of the Authorities below. He submitted that the
CENVAT Credit is statutory right and can be allowed only in terms of
the Statute. He submitted that in view of proviso to Rule 4(1) of CCR,
2004, Credit can be taken within a period of one year of date of issue
of the specified documents w.e.f. 1.3.2015 and within six months
during the period 01.09.2014 to 28.02.2015. Referring to Rule
9(1)(b), he submitted that there is a contravention of the provisions of
Excise Act and the Rules and no supplementary invoice has been
issued. Learned Authorised Representative submitted that once the
goods are subjected to manufacture, levy and collection of duty comes
into play. On the invocation of the extended period, learned Authorised
Representative submitted that the appellants had declared less RSP at
the time of import while submitting an undertaking that "whatever the
RSP is applicable, the same has been truthfully declared". The
subsequent increase in the MRP is evident of their intent to evade
payment of duty knowingly and wilfully in contravention of the
provisions of Central Excise Rules as well as the contravention of the
Customs Act. In addition thereto, learned Authorised Representative
8
has submitted that the Board has prescribed the condition for
registration vide Notification No.35/2001 dated 26.06.2001 and
exemption from taking registration has been provided under the
Notification No.36/2001 of the same date, subject to making a
declaration to the undertaking to apply for central excise registration
as soon as the value of the goods cleared for home consumption
reaches full exemption limit. The appellant in the present case has not
produced any such statutory declaration.
„Manufacture‟ in terms of Section 2(f)(iii) of the Act
8. We may first consider the primary issue as to whether the
activity carried out by the appellant amounts to manufacture. The
allegations against the appellant is that the process of alteration of
MRP on the goods amounted to „manufacture‟ as per Section 2(f)(iii )
of the Act as all the goods were falling under Chapter 85 and were
covered under the Third Schedule to the Act. There is no dispute to
the activity carried out by the appellant as admitted by them in their
statement that the goods received by them did not have MRP printed
on the cartons or boxes in which they were packed. The MRP was
affixed on the boxes through MRP stickers in their premises and
thereafter the goods were sold in the market. As per Section 2(f)(iii):-
"2(f) "manufacture" includes any process --
(iii) which in relation to the goods specified in the
Third Schedule involves packing or repacking of such
goods in a unit container or labelling or re-labelling
of unit container, including the declaration or
alteration of retail sale price on it or adoption of any
treatment on the goods to render the product
marketable to the consumer."
The words used in the definition of „manufacture‟ are simple,
clear and unambiguous and as per the cardinal principles of
9
construction of a statute as noted by the Apex Court in U.O.I Vs.
Hansoli Devi 7 , when the language of the statute is plain and
unambiguous, the Court must give effect to the words used in the
statute. Said principle has been further elaborated in Bansal Wire
Industries Ltd. Vs. State of U.P8, where the Apex Court observed
that in a taxing statute, nothing is to be read in, nothing is to be
implied, one can only look fairly at the language used. Examined in
view thereof, we find that the process of affixing MRP by the appellant
on the goods in question i.e. various electrical home appliances, which
are covered under Third Schedule, there is no manner of doubt that
the activity carried out by the appellant amounts to
manufacture. Apart from that, in the statement recorded under
Section 14 of the Act, Shri A.K Jindal, the General Manager of the
company had categorically admitted that he understands that their
products were covered under the Third Schedule of the Act and that
the processes carried out by them in their company amounts to
„manufacture‟ in terms of Section 2(f)(iii) and they were liable to pay
excise duty which they actually paid. In view of their own admission
accepting that the activity amounts to manufacture and is leviable to
excise duty, the issue stands concluded against them and in favour of
the Revenue. We refer to the decision in Komatsu India Pvt. Ltd
9
versus Commissioner of C.EX., Nagpur , where the goods
imported in bulk were subjected to packing, repacking in unit
containers or packages marked with the brand name and affixed with
MRP tags were held to be „deemed manufacture‟ in terms of Section
2(f)(iii) of the Act and, therefore, leviable to central excise duty.
7
(2002) 7 SCC 273
8
2011(269) ELT 145 (SC)
2017 (345) ELT 256 (Tri. - Mum.)
9
10
Eligibility to CENVAT Credit
9. Once the activity has been held to be „manufacture‟, we may
now consider whether the appellant is eligible to CENVAT Credit,
which has been denied on the ground that the claim for the same has
been made beyond the period of six months/one year prescribed by
virtue of the amendment vide Notification No.21/2014-CE dated
11.07.2014 and subsequently by DOF dated 28.02.2015. The learned
counsel for the appellant has contested the findings by referring to
the decision of the Delhi High Court in Global Ceramics Pvt. Ltd.
versus Commissioner Central Excise, Nagpur10, where it has been
held that the amendment to Rule 4(1) of CCR prescribing a time limit
for claiming CENVAT Credit will not apply to the consignments, where
the import took place prior to the date of the amendment and the
deemed manufacture took place when the MRP was altered, which also
happened prior to the amendment. The facts of the present case are
quite identical with the facts of the case before the Delhi High Court
and, therefore, we find merit in the submission of the learned Counsel
that the appellant having paid appropriate duty at the time of import
has to be considered as an „input‟ for the purpose of CENVAT Credit
Rules. Here the Bill of Entries considered were for the period 2011-12
to 2015-16 and, therefore, on the analogy drawn by the Delhi High
Court, the amendment w. e. f. 01.09.2014 prescribing the time limit
for making the CENVAT Credit claim shall not apply to imports covered
prior to the said date. Moreover, once the activity has been held to be
manufacture, exigible to excise duty, the Credit on CVD paid by the
appellant on the goods imported is available. In the case of
2019 (26) GSTL 470 (Del.),
10
11
Komatsu India Pvt. Ltd. (Supra), the Tribunal has held that if the
appellant is saddled with the central excise duty on the ground of
„deemed manufacture‟, the parts which have been imported by the
appellant in bulk if they have suffered CVD, the benefit of
CENVATcannot be denied as the same parts are considered as
manufacture on repacking and central excise duty is paid. However,
for the imports made subsequent to 01.09.2014, the time limit of six
months/one year shall apply and therefore, the claim made by the
appellant on 15.02.2018 is time barred.
10. The decision cited by the learned Authorised Representative in
Osram Surya (P) Ltd. Vs. Commissioner of Central Excise,
Indore 11 , where the Apex Court interpreted the amendment
introducing second proviso to Rule 57G which prescribed the time limit
of six months to the manufacturer to take Credit, to the effect that the
time limit is not retrospective. It was clarified that it operates
prospectively in regard to those manufacturers who seek to take Credit
after coming into force of this Rule and to the cases, where the
manufacturer is seeking to do so after a period of six months from the
date when the manufacturer received the inputs. The plea taken by
the appellant that restriction under Rule 4(1) of CCR is applicable to a
unit which is registered is not correct. The said provisions would
equally apply to the appellant though not being registered on
the simple analogy that the benefit of CENVAT Credit is being
claimed by
2002 (142) ELT 5 (SC)
11
12
them under the said Rules. The appellant cannot be permitted to
appropriate and reprobate. The appellant cannot be allowed to pick
and choose selectively, the applicability of the Rules.
Seizure and Confiscation of the Goods
11. We may now consider whether the goods seized by the Department on
5.10.2016 were liable to seizure and confiscation. The submission of the
learned Counsel that even assuming that the activity amounts to
manufacture, the duty is payable only on the removal of the goods and,
therefore, the stock of goods which was lying in the factory premises cannot
be held liable for seizure. It is a settled principle of law that the taxable event
is the removal of the goods and not the manufacture. Reliance is placed on
the decision in Caltex Oil Refining (India) Ltd versus Union of India &
Ors. 12 where the Delhi High Court observed as:-
"17. The legislative intent for levy and collection
of excise duty, on a reading of the Excise Act and the
Excise Rules, appears to be that no duty is payable
on intermediate products if the intermediate
products by themselves are not the end products
being manufactured by a particular factory provided
however, the intermediate products and the end
products are obtained by one continuous
uninterrupted integrated process as opposed to
distinct or independent processes. We find force in
Mr. Palkhiwala‟s contention that the concept of
making assessment only at the stage of removal
supports this legislative intent. Indeed though a
particular article produced may attract levy of
excise duty, as contemplated by Section 3 of
the Act, which is the charging section, removal
is the essence of the crystalisation of the
charge as would be apparent from a reading of
Section 4 of the Act and Rule 49 of the Excise
Rules. The quantum of the charge is on the
value at the time of removal and the
value at the time of removal is the yard-stick
for quantifying the charge. Though levy is
12
1979 (4) ELT (J581)(Del.)
13
attracted on production the power to collect
duty is only on removal. There may be
circumstances where production may take place and
yet the product may not be issued out, utilised, or
marketed in which case the scheme of the Act and
the Rules tend to show that no excise duty would be
collected on the product. For example the glut of a
particular article in the market may make it
expedient for a manufacturer to hold back his
product or financial circumstances may prevent the
finished product to be marketed. It is in this context,
therefore, that the provisions of Section 3 of the Act
and Rules 9 and 49 of the Excise Rules have to be
harmonised. Indeed, these provisions complement
each other. Section 3 lays down the legislative policy
on what products excise duty may be levied. Rule 9
is an injunction on the manufacturer that he has not
to remove any excisable goods from the place of
manufacture or any specified premises appurtenant
thereto, whether for consumption, export or
manufacture of any other commodity in or outride
such place unless he first pays the excise duty
leviable on those goods. Rule 49 is a direction to the
excise authorities that the payment of excise duty
shall not be demanded until excisable goods are
about to be issued out of place or premises specified
under Rule 9 or are about to be removed from a
store room or other place or storage approved by tile
Collector under Rule 47. Thus, the point of time
when duty must be paid or may be collected is
clearly given. Similarly, it is provided that there
must be removal from the specified place to
attract the payment of duty. If there is no
removal there would be no question of
payment. Removal is a positive act and cannot
have any reference to disappearance of the
product."
12. In the light of the principles enunciated, the goods lying in the
factory premises and duly recorded in the books of account are not
liable to be seized as the act of removal is the essence of the charge of
levying the duty. In the context of imposition of Clean Environment
Cess despite the repeal of Section 83(3) of the Finance Act, 2010, by
the 2017 Taxation Amendment Act, the Principal Bench in South
Eastern Coalfields Limited Vs. Commissioner (Audit), CGST and
14
C. Ex, Raipur 13 set aside the demand on the ground that the goods
were removed only on or after 1.07.2017, even though they were lying
in the stock as on 30.06.2017, observing that though Cess may be
attracted when the article is produced, but removal is the essence of
the crystallization of the charge. It was further held that there has to
be removal from the specified place to attract the payment of Cess,
and if there is no removal, there would be no question of payment of
Cess.
13. Following the aforesaid principle, we are of the considered view
that action of seizure of the goods lying in the premises is unjustified,
more so when the daily stock status as on 5.10.2016 was made
available by the appellant to the Central Excise Officers and the goods
were duly recorded. The learned counsel has relied on the decisions of
the Tribunal in Karnawat International Pvt. Ltd versus
Commissioner of C. EX, Jaipur (supra), where seizure of excess
stock on which duty was not paid was set aside as they were still
within the factory premises and there was no requirement of duty
payment. Consequently, the confiscation was also held to be uncalled
for. Similarly, in K.K. Tobacco Company versus Commissioner of
Central Excise, Allahabad (supra), the basic principle enunciated
was that the duty is to be paid only when the goods are cleared from
the factory and only such goods are liable for confiscation, which are
removed without payment of duty and therefore, seizure and
confiscation of goods manufactured in the factory and not cleared is
not sustainable in law. It is also relevant to refer the decision of the
Mumbai Bench in Nakoda Enterprises versus Commissioner
13
Final Order No.50001/2024 dated 3.1.2024
15
Central Excise, Mumbai-V 14 , where all the goods were covered
under the SSI exemption, except few and therefore, they were
under bonafide belief that since the unit is eligible for SSI exemption,
they were not required to obtain any registration. It was held that just
because the exemption notification is not applicable on one of the
products, the goods lying within the factory should not be confiscated
and it cannot be equated with the case of attempt to clear the goods
clandestinely. Therefore, in the present case, we hold that the seizure
and confiscation is unsustainable.
Extended Period of Limitation
14. The period in dispute is from 01.4.2012 to 5.10.2016. Show
cause notice was issued on 25.0 4.2017 and 3.04.2017 invoking the
provisions of Section 11A(4)of the Act, for the extended period of
limitation from 01.04.2012 to 28.02.2015. We may now examine
whether the basic ingredients for invocation of the extended period
exists in the present case. From the statements recorded under
Section 14 during the course of investigation, it is apparent that the
appellant was unaware of the fact that the activity of affixing MRP on
the imported goods amounts to manufacture and the consequent duty
liability. The appellant bonafide believed that they were into the
trading activity and were, therefore, registered with the VAT
Department and were paying the VAT regularly. Had they known that
the activity amounts to manufacture under the excise law, they would
have registered themselves with the Excise Department and availed
the benefit of CENVAT Credit. The Supreme Court in Motilal
14
2017 (357)ELT 474 (Tri.-Mumba)
16
Padampat Sugar Mills Vs. State of U.P. 15 in the context that
every litigant cannot be said to be aware of the law observed as
under:-
"...............................Moreover, it must be remembered
that there is no presumption that every person knows
the law. It is often said that every one is presumed to
know the law, but that is not a correct statement :
there is no such maxim known to the law. Over a
hundred and thirty years ago, Maule, J., pointed out in
Martindala v. Faulkner, (1846) 2 CB 706 "There is no
presumption in this country that every person knows
the law : it would be contrary to common sense and
reason if it were so". Scrutton, also once said : "It is
impossible to know all the statutory law, and not very
possible to know all the common law." But it was Lord
Atkin who, as in so many other spheres, put the point in
its proper context when he said in Evans v. Bartlem,
1937 AC 473 "......the fact is that there is not and never
has been a presumption that every one knows the law.
There is the rule that ignorance of the law does not
excuse, a maxim of very different scope and
application." It is, therefore, not possible to presume, in
the absence of any material placed before the Court,
that the appellant had full knowledge of its right to
exemption so as to warrant an inference that the
appellant waived such right by addressing the letter
dated 25th June, 1970. We accordingly reject the plea
of waiver raised on behalf of the State Government.
........."
There is no reason to doubt the statement made by Shri A. K. Jindal or
by Shri Rajesh Mohan and on the other hand, Revenue has not
produced any further evidence to show that non-registration and non-
payment of excise duty was deliberate and wilful to evade payment of
duty. In view of the fact that all the records/books of accounts were
properly maintained and duly reflected in the balance sheet, it cannot
be said that there was any misstatement or suppression of facts with
intent to evade payment of duty. Therefore, the demand of excise duty
is justified only qua the normal period i.e., 01.03.2015 to 05.10.2016.
15
AIR 1979 SC 621
17
15. The learned Counsel in support of his arguments have cited
series of decisions, which needs to be referred now. The settled
principle of law enunciated by the Apex Court in Collector of Central
Excise versus Chemphar Drugs & Liniments 16 is that extended
period of limitation is applicable only when something positive other
than mere inaction or failure on the part of manufacturer is proved.
Conscious or deliberate withholding of information by manufacturer is
necessary to invoke larger limitation of five years. Similar view was
expressed by the Apex Court in Uniworth Textiles Ltd versus
Commissioner of Central Excise, Raipur 17, where the Court was
concerned with the invocation of extended period under Section 28 of
the Customs Act and it was observed:-
"19. Thus, Section 28 of the Act clearly contemplates
two situations, viz. inadvertent non-payment and
deliberate default. The former is canvassed in the main
body of Section 28 of the Act and is met with a limitation
period of six months, whereas the latter, finds abode in
the proviso to the section and faces a limitation period of
five years. For the operation of the proviso, the intention
to deliberately default is a mandatory prerequisite."
16. Laying emphasis on the word "willful", which introduces a mental
element and requires looking into the mind of the appellant by gauging
its actions, the Apex Court noted that from the evidence adduced by
the appellant one will draw an inference of bonafide conduct in favour
of the appellant. The relevant para of the aforesaid decision is quoted
below:-
"24. Further, we are not convinced with the finding of
the Tribunal which placed the onus of providing evidence
in support of bona fide conduct, by observing that "the
16
1989 (40) ELT 276 (SC)
2013 (288) ELT 161 (S.C.)
17
18
appellants had not brought anything on record" to prove
their claim of bona fide conduct, on the appellant. It is a
cardinal postulate of law that the burden of proving 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.
.....
(Emphasis supplied)
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant."
17. Following the decision of the Apex Court in Uniworth Textile Ltd. (supra), the Tribunal in the case of Savira Industries versus Commissioner of Central Excise, Chennai18 held that the assessee was under bonafide belief that mere cutting, welding of steel pipes and sheets did not amount to manufacture as no new commodity emerges and there was no marketability and, therefore, would attract excise duty. In the circumstances, the demand was held to be hit by limitation. We are conscious of the fact that in the said case the activity of such fabrication was the subject matter of decision in favour of the assessee and was finally decided in favour of the Revenue by the Larger Bench in Mahindra & Mahindra Ltd.19. The fact is that the concept of bonafide belief is not unknown in the taxation laws and the assessee has to be given benefit in the facts and circumstances of the 2016 (331) ELT 504 (Tri.-Chennai) 18 2005 (190) ELT 301 (LB) 19 19 case, where bonafide belief can be on variant account. We, therefore, hold that the invocation of the extended period in the present case is not justified in the absence of any strong allegation or positive act, pointing towards fraud, collusion, or any willful statement or suppression of facts with intent to evade payment of duty.
18. The decision cited by the learned Authorised Representative in the case of Schneider Electrical versus Commissioner of Central Excise, Nasik (Mumbai) 20 , where the issues were decided by the Third Member and on the issue of extended period of limitation, the finding recorded was that the appellant was fully aware of the legal requirements to declare the RSP on the packages, however, despite such knowledge, they chose not to comply with the law. The relevant para is quoted below:
"29.4 From the facts available on record, it is seen that the appellants were aware that they were required to declare RSP on the packages of the goods manufactured and sold by them. They were so advised by the Director of Legal Metrology as early as in 2002. However, in spite of being aware of their legal obligations, the appellants did not comply with the statutory directions. After a gap of five years, they challenged the decision of the Director, Legal Metrology before the Hon‟ble Bombay High Court and the Bombay High Court directed the Director, Legal metrology to pass a speaking order which the Director, Legal Metrology has done in 2007. The said decision of the Director, Legal Metrology was challenged unsuccessfully by the appellants before the Hon‟ble Bombay High Court and the Hon‟ble Bombay High Court upheld the decision of the Director, Legal Metrology and held on the products manufactured by the appellants were covered under the Standard of Weights and Measures Act and the Packaged Commodities Rules and the appellants were required to declare RSP on the packages. Thus, the appellants were fully aware of the legal requirements. In spite of such knowledge, 20 2014(1) TMI 1642 20 the appellant chose not to comply with the law in complete defiance of the law. There was no reason for the appellant to entertain any reasonable belief that they were not required to declare the RSP on the packages. The question is when an appellant deliberately defies a statutory requirement, can they be allowed to get away with it and obtain the benefit under some other law."
19. The reliance placed by the learned Authorised Representative on the decision in Commissioner of C. EX, Mumbai versus Kalvert Foods India Pvt. Ltd. 21 dealt with the case involving clandestine removal, where the Managing Director had admitted the clandestine clearance and, therefore, it was held that the period of limitation would have to be computed from the date of their knowledge arrived at upon reads on the premises. It was a case of suppression of facts with the intention to evade the central excise duty as they did not account for the manufactured goods in the prescribed records. Hence, the said decision is distinguishable and is not applicable to the facts of the present case. Similarly, the decision of the Apex Court in Commissioner of CEX Visakhapatnam versus Mehta and Company22 referred to by the learned Authorised Representative is distinguishable and, therefore, not applicable. In the said case, the specific allegations in the show cause notice were that the respondent manufactured excisable goods covered under different chapter headings at the site of the customer and removed the same without payment of duty of excise when the contract clause between the respondent and M/s Adyar Gate Hotel Ltd clearly mentioned that the contractors quoted rate shall also include the excise duty and therefore, the conscious action on the part of the contractor has 21 2011 (270) ELT 643 (S.C.) 22 2011 (264) ELT 481(SC) 21 clearly established the intention to evade payment of duty of excise. In the circumstances, it was held that the relevant date for computation of the extended period for show cause notice is the date of the knowledge.
Interest and Penalty
20. As the activity has been held to „manufacture‟ and, therefore, leviable to excise duty, the appellant is liable to pay interest on the delayed payment of duty. The liability to interest is mandatory and automatic which the appellant cannot escape.
The levy of penalty under Rule 25 read with Section 11 AC is not sustainable as we have already held that extended period of limitation is not invokable in the absence of any mis-statement or willful suppression of facts. The penalty under Section 11 AC is mandatory only when duty is confirmed by invoking the extended period of limitation.
Excise Appeal No. 50452 of 2023
21. The personal penalty imposed on Shri Rajesh Mohan under Rule 26 of the Rules is also not sustainable as the penalty under Rule 26 can be imposed for actions related to goods which were rendered liable for confiscation. In this case, we have already set aside the confiscation of goods. Hence, there is no reason to impose penalty when the goods itself were not to be confiscated. The second situation in which penalty under Rule 26 can be imposed is where invoices are 22 issued without supplying goods so as to enable the recipient to avail ineligible CENVAT Credit, which is also not the case here.
22. We, therefore conclude as under:
A. The activity of affixing MRP on the imported goods, which are covered under Third Schedule amounts to manufacture in terms of Section 2(f)(iii) of the Act and are exigible to excise duty along with interest.
B. Since the activity amounts to manufacture, the appellant is entitled to CENVAT Credit, as discussed above.
C. Seizure and confiscation of the goods is unsustainable D. Extended period of limitation is not invocable in the facts of the present case.
E. Penalty under Rule 25 cannot be imposed on the appellant.
F. Penalty under Rule 26 cannot be imposed on Shri Rajesh Mohan.
23. For the reasons set-out above, we remand the matter to the Adjudicating Authority for limited purpose of computation of the duty liability along with interest and entitlement of CENVAT Credit. The appeals are, partly allowed in above terms, by way of remand.
[order pronounced on 18th February, 2025] (BINU TAMTA) Member (Judicial) (P.V. SUBBA RAO) Member (Technical) Ckp.