Custom, Excise & Service Tax Tribunal
Jindal Steel & Power Ltd vs Principal Commissioner, Central Gst, ... on 18 October, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
EXCISE APPEAL NO. 50607 OF 2018
[Arising out of the Order-in-Original No. RPR/EXCUS/000/COM/068/2017 dated
28/11/2017 passed by The Principal Commissioner, Central GST, Central Excise and
Customs, Raipur - 492 001 (Chhattisgarh).]
M/s Jindal Steel & Power Limited, .....Appellant
Coal Mines, Village - Donga Mahua,
Post - Dhurabhata, Tehsil - Tamnar,
Distt. - Raigarh (Chhattisgarh).
VERSUS
Principal Commissioner, Raipur, .....Respondent
Central GST, Central Excise & Customs,
Central GST Bhawan, Dhamtari Road, Tikrapara,
Raipur (Chhattisgarh).
APPEARANCE
Shri B.L. Narasimhan, Ms. Sukriti Das and Ms. Mehak Mehra, Advocates for
the appellant.
Shri Rajpal Sharma, Special Counsel for the Department
CORAM: HON'BLE SHRI JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE SHRI P.V. SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NO. 51473/2023
Date of Hearing/Decision: 18.10.2023
JUSTICE DILIP GUPTA:
The order dated 28.11.2017 passed by the Principal
Commissioner confirming the demand of central excise duty on coal
extracted and cleared by Jindal Steel & Power Ltd. 1 and for its
recovery under section 11A (4) of the Central Excise Act, 19442 with
interest and penalty has led to the filing this appeal.
2. It transpires from the record that the appellant is engaged in
the production/extraction of raw coal and washing coal which coal
1. the appellant
2. Central Excise Act
2 EX/50607 OF 2018
was supplied by the appellant to its own steel plant at Raigarh where
it was consumed captively in the manufacture of duty paid final
products. According to the appellant, it adopted the cost of
production as per the Cost Accounting Standards-43 as it was
supplying coal to the Raigarh unit for captive consumption and paid
duty @ 110% of such cost at the time of raising invoices in terms of
rule 8 of the Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 20004.
3. The Ministry of Coal, Government of India, by a letter dated
20.06.1996 alloted coal to the appellant at the Gare Palma Coal Block
area in Raigarh coalfields for captive mining. Such allocation of coal,
as also the allotment made to other persons, was challenged before
the Supreme Court in a Writ Petition filed by Manohar Lal Sharma and
by a judgment dated 25.08.2014 the Supreme Court held that the
allocation of coal blocks in question was arbitrary and illegal. The
Supreme Court, therefore, cancelled 42 out of the 46 coal blocks
effective from 31.03.2015 and an additional levy of Rs. 295 per
metric ton of coal that was extracted was directed to be paid to
correct the wrong done by the Union of India. The name of the
appellant was also included at Serial No. 19 of Annexure I to the
judgment of the Supreme Court. The relevant portion of the
judgment of the Supreme Court is reproduced below:
―33. In Sheela Barse it was observed, and we
endorse that view, that the relief to be granted in a
case always looks to the future. It is generally
corrective and in some cases it is compensatory. The
present case takes within its fold all three elements
3. CAS - 4
4. the Valuation Rules
3 EX/50607 OF 2018
mentioned in Sheela Barse. Our judgment
highlighted the illegality and arbitrariness in
the allotment of coal blocks and these
consequence proceedings are intended to
correct the wrong done by the Union of India;
these proceedings look to the future in that by
highlighting the wrong, it is expected that the
Government will not deal with the natural
resources that belong to the country as if they
belong to a few individuals who can fritter
them away at their sweet will; these
proceedings may also compensate the
exchequer for the loss caused to it, in the
manner suggested by the learned Attorney
General, and which we now propose to
consider.
*****
39. In view of the submissions made, although we have quashed the allotment of 42 out of these 46 coal blocks, we make it clear that the cancellation will take effect only after six months from today, which is with effect from 31st March, 2015. This period of six months is being given since the learned Attorney General submitted that the Central Government and CIL would need some time to adjust to the changed situation and move forward. This period will also give adequate time to the coal block allottees to adjust and manage their affairs. That the CIL is inefficient and incapable of accepting the challenge, as submitted by learned counsel, is not an issue at all. The Central Government is confident, as submitted by the learned Attorney General, that the CIL can fill the void and take things forward.
40. In addition to the request for deferment of cancellation, we also accept the submission of the learned Attorney General that the allottees of the coal blocks other than those covered by the judgment and the four coal blocks covered by this order must pay an amount of Rs. 495/-
per metric ton of coal extracted as an
4 EX/50607 OF 2018
additional levy. This compensatory amount is based on the assessment made by the CAG. It may well be that the cost of extraction of coal from an underground mine has not been taken into consideration by the CAG, but in matters of this nature it is difficult to arrive at any mathematically acceptable figure quantifying the loss sustained. The estimated loss of Rs. 295/- per metric ton of coal is, therefore, accepted for the purposes of these cases. The compensatory payment on this basis should be made within a period of three months and in any case on or before 31st December, 2014. The coal extracted hereafter till 31st March, 2015 will also attract the additional levy of Rs. 295/- per metric ton.‖ (emphasis supplied)
4. An audit memo dated 13.04.2016 was issued by the department to the appellant mentioning that as a consequence of the order passed by the Supreme Court, the value of coal cleared by the appellant would increase by Rs. 295/- per metric ton. The appellant was, therefore, directed to pay central excise duty on such additional amount paid for the period from April 2011 to March 2015.
5. The appellant, by a letter dated 08.06.2016, explained the accounting treatment adopted by the appellant for payment of additional levy of Rs. 295/- per metric ton. By letter dated 08.06.2016, the appellant also informed that the payment of additional levy of Rs. 295/- per metric ton would not form part of the cost of production and consequently would not invite excise duty.
6. However, a show cause notice dated 20.05.2016 was issued to the appellant proposing a demand of central excise duty on the additional levy of Rs. 295/- per metric ton. The extended period of 5 EX/50607 OF 2018 limitation covering the entire proposed demand was also invoked in the said show cause notice. The relevant portion of the show cause notice dated 20.05.2016 is reproduced below:
―2. During the course of audit of books and accounts of the Noticee, it was noticed that the Noticee during the period 2011-12 to 2014-15 have not paid the Central Excise duty on the additional levy of coal @ Rs. 295/- per metric ton of coal extracted from the date of extraction as per order passed by the Hon'ble Supreme Court of India in respect of Writ Petition No. 120, 463, 515 of 2012 and W.P. No. 283 of 2013 in the case of Manohar Lal Sharma V/s. the Principal Secretary and others. The non-payment of Central Excise duty by the notice on additional levy of coal resulted into short payment of Central Excise duty amounting to Rs. 80,02,80,419/- on total quantity of coal 4,16,74,453.97 metric ton cleared during the period from May 2011 to March 2015.
*****
5. From the paras supras, it appears that the Noticee have suppressed the material facts from the knowledge of department and have deliberately not paid central excise duty on additional levy of Rs. 295/- per metric ton on coal extracted from mines by the Noticee during the period from F.Y. 2011-12 to F.Y. 2014-15. The additional value of coal @ 295 per metric ton has not been included by the Noticee in their invoices for payment of duty and also did not disclose the same in the statutory return i.e. ER-1. Thus, the notice appears to have contravened the provisions of Rule 6, Rule 11 and Rule 12 of Central Excise Rules, 2002. The issue of non-payment of central excise duty was unearthed unless the audit was conducted by the central excise department. Therefore, extended period of five years as provided under Section 11A (4) of Central Excise Act 1944 appears to be invokable in the instant case for the recovery of 6 EX/50607 OF 2018 Central excise duty amounting to Rs. 80,02,80,419/.
The Noticee have also rendered themselves liable for penal action under Section 11AC of Central Excise Act, 1944.‖ (emphasis supplied)
7. The appellant filed a detailed reply to the aforesaid show cause notice contending that the additional levy imposed was in relation to allocation of mines and not production of coal, and even otherwise the cost of production as per CAS-4 read with rule 8 of the Valuation Rules would not include abnormal/exceptional cost and since the additional levy was an abnormal cost, it would not be included in the cost of production. The appellant also stated that in any view of the matter, the extended period of limitation could not have been invoked in the facts and circumstances of the case.
8. The Commissioner, however, by order dated 28.11.2017 that has been impugned in the present appeal confirmed the demand holding that the extended period was correctly invoked. The relevant portion of the order passed by the Commissioner in connection with the invocation of the extended period of limitation is reproduced below:
―3.15 The Noticee in its defense also contested the invocation of extended period of limitation. In the instant case, it is observed that the Noticee has not disclosed about the additional levy of coal @ Rs. 295/- per metric ton. The Noticee neither included the additional levy ibid, in their invoices for payment of duty nor disclosed in the statutory return i.e. ER-1. This fact of additional levy was noticed by the department during the course of audit of the books and accounts of the Noticee. Thus, the Noticee has suppressed the material facts from the knowledge of 7 EX/50607 OF 2018 department and have deliberately not paid central excise duty on such additional levy of Rs. 295/- per metric ton on coal extracted from mines. Accordingly, I find that the Noticee has contravened the provisions of Rule 6, Rule 11 and Rule 12 of Central Excise Rules, 2002. Therefore, extended period of limitation as provided under Section 11A (4) of Central Excise Act 1944 is righlty invoked in the instant case for the recovery of Central Excise duty. I find in the case of Central India Machinery Co. vs. CCE reported in 1989 (39) ELT 306 (Tri.), the Hon'ble Tribunal held that, ―in case where there is non-levy/short levy arising due to the suppression of facts, extended period of five years is applicable‖. Accordingly, the larger period invoked in this case is sustainable in law.‖ (emphasis supplied)
9. Shri B.L. Narasimhan, learned counsel appearing for the appellant assisted by Ms. Sukriti Das and Ms. Mehak Mehra, learned counsels made the following submissions :-
(i) The additional levy of Rs. 295/- per metric ton is in the nature of compensation and so central excise duty would not be leviable on the said amount and in this connection, learned counsel referred to various paragraphs of the judgment of the Supreme Court rendered on 25.08.2014 in the Writ Petition filed by Manohar Lal Sharma;
(ii) The additional levy is in the nature of ―abnormal cost‖ and, therefore, would not be includable in the cost of production as per CAS-4 read with rule 8 of the Valuation Rules;
8 EX/50607 OF 2018
(iii) The extended period of limitation could not have been invoked in the facts and circumstances of the case as there was no evidence of suppression, much less suppression with intent to evade payment of central excise duty, and in any view of the matter the entire exercise is revenue neutral;
(iv) Neither penalty nor interest could have been invoked;
and
(v) The finding in the impugned order that the additional levy is akin to royalty is beyond the scope of the show cause notice.
10. Shri Rajpal Sharma, learned special counsel appearing for the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned Special Counsel pointed out that as in terms of the order passed by the Supreme Court, the payment of Rs. 295/- per metric ton as additional levy would have a direct bearing on the valuation of coal for the purpose of payment of excise duty, it was imperative for the appellant to have started paying the central excise duty after the judgment was delivered by Supreme Court on 25.08.2014, but with an ulterior motive of avoiding payment of central excise duty, the appellant did not pay the central excise duty. Learned special counsel, therefore, submitted that the extended period of limitation was correctly invoked. Learned special counsel also pointed out that in case the appellant had any doubts, it could have sought a clarification from the department, but it did not do so. Learned special counsel also pointed out that immediately after the audit team 9 EX/50607 OF 2018 conducted the audit, the show cause notice was issued to the appellant.
11. The submissions advanced by the learned counsel for the appellant and the learned special counsel for the department have been considered.
12. It is not in dispute that the show cause notice was issued on 20.05.2016 for the period from May 2011 to March 2015. At the relevant point of time, the normal period prescribed for issuance of the show cause notice was one year, though in the circumstances enumerated in section 11A (4) of the Central Excise Act, the show cause notice could be issued within a period of five years.
13. Though learned counsel for the appellant made submissions, both on merit and on the invocation of the extended period of limitation, it would be appropriate to first examine whether the extended period of limitation was correctly invoked because if this issue is decided in favour of the appellant, it may not be necessary to examine the issue on merits.
14. It is not in dispute that the appellant had been paying central excise duty on the coal that it transferred to the plant at Raigarh, which is also under the management and ownership of the appellant. The central excise duty was paid by the appellant on the cost of production as per the CAS-4 @ 110% of such cost at the time of raising invoices in terms of rule 8 of the Valuation Rules. The unit at Raigarh, to which the appellant had supplied coal, paid central excise duty using both CENVAT credit as well as Personal Ledger Account5
5. PLA 10 EX/50607 OF 2018 (cash payment) in the following manner for the period from 2011-12 and 2014-15:
Year CENVAT PLA Total 2011-12 5,19,10,95,669 4,37,49,69,622 9,56,60,65,291 2012-13 6,19,33,37,244 5,72,56,25,824 11,91,89,63,068 2013-14 6,81,84,92,632 3,33,41,43,319 10,15,26,35,951 2014-15 6,15,18,93,477 4,18,04,68,490 10,33,23,61,967 TOTAL 27,08,50,30,241 21,93,19,29,877 49,01,69,60,118 In Cr. 2,708.50 2,193.19 4,901.70
15. It is in August 2014 that the Supreme Court directed that additional levy of Rs. 295/- per metric ton of coal would have to be paid by the appellant and similarly placed allottees of coal. According to the appellant, it entertained a belief that since the additional levy of Rs. 295/- per metric ton was in the nature of compensation, such cost would not be included in the cost of production.
16. Learned counsel for the appellant has placed much emphasis on the Revised Guidance Note on Cost Accounting Standard on Cost of Production for Captive Consumption (CAS-4), and in particular to determination of cost of production for valuation of goods meant for captive consumption. The relevant portions are reproduced below:
―1.1 Cost Accounting Standard 4 (CAS-4) was issued to specify the principles for determination of cost of production for valuation of goods meant for captive consumption, as required under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. CBEC, vide Circular No. 692/8/2003-CX dated 13.02.2003 had clarified that in case of captive consumption, cost calculation should be as per CAS-4 only.
***** Definitions 11 EX/50607 OF 2018 4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and/or due to some abnormal situation of the production or operation.
***** 5.28 Fines, penalties, damages, demurrage and similar levies paid to statutory authorities or other third parties shall not form part of the cost of production or acquisition or supply of goods or provisions of services‖.
17. Reliance on the aforesaid provisions has been placed by the learned counsel for the appellant to contend that the belief of the appellant that the compensation of Rs. 295/-per metric ton imposed by the Supreme Court would not be included in the cost of production was bonafide and based on material.
18. The show cause notice that was issued to the appellant emphasises that the appellant had suppressed material facts from the department, as the additional value of coal was not included by the appellant in the invoices for payment of excise duty and this fact was not disclosed in the statutory ER-1 returns.
19. The show cause notice is for the period from May 2011 to March 2015, which period includes the period prior to August 2014. The appellant could not have included this amount for the period prior to August 2014 and for the period post the judgment of the Supreme Court, the appellant contends that it had a bonafide belief that the said amount was not to be included in the cost of production.
20. Learned special counsel appearing for the department, however, submitted that the appellant should have included Rs. 295/- per metric ton directed to be paid by the Supreme Court in the cost 12 EX/50607 OF 2018 of production and in any case the appellant could have sought appropriate clarification from the department in case of any doubts and, therefore, it is clearly a case where the motive of the appellant was to avoid payment of central excise duty.
21. Sections 11A(1) and 11A (4) of the Central Excise Act, as it stood at the relevant time, which deal with issuance of notices for recovery of date not paid or levied are reproduced below:
―SECTION 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.--
(1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful mis-
statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,--
(a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;
(b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,--
(i) his own ascertainment of such duty; or
(ii) duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.
(2) ***** (3) ***** (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 -
13 EX/50607 OF 2018
(a) fraud; or
(b) collusion; or
(c) any wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice‖.
22. It would be seen from a perusal of sub-section (4) of section 11A of the Central Excise Act that where any excise duty has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice to the person chargeable with the duty requiring him to show cause why he should not pay the amount specify in the notice. Sub-section (4) of section 11A, however, provides 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 for fraud; or collusion; or any wilful mis- statement; or suppression facts; or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of duty, the Central Excise Officer shall, within five years from the relevant date service notice on such person requiring into show cause why he should not pay the amount specified in notice with interest and penalty.
23. Learned counsel for the appellant has placed the relevant provisions of CAS-4 to substantiate that the appellant was justified in believing that it was not required to add Rs. 295/- per metric ton of 14 EX/50607 OF 2018 coal, as directed by the Supreme Court, to the cost of production and, therefore, it did not pay the central excise duty.
24. The provisions of CAS-4, do support the contention of the appellant and it may have been under a bonafide belief that the amount of Rs. 295/- per metric ton of coal was not required to be added to the cost of production. The appellant supplied coal to its Raigarh unit which used the said coal for production of electricity, which in turn was used for manufacture of final products. Thus, the valuation was required to be determined in terms of rule 8 of Valuation Rules, which provides that duty is payable on 110% of cost of production. The CBEC, by a Circular dated 13.02.2003, also clarified that in case of captive consumption, calculation of cost of production should be as per CAS-4 only. The appellant had been clearing the goods in terms of CAS-4 by adopting contemporaneous costs of production. CAS-4 standards provide that abnormal cost shall not form part of cost of production. CAS-4 Standards (2012) states that cost of production does not include any abnormal or non- recurring cost. The revised CAS-4 Standards (2018) provide for non- inclusion of abnormal and non-recurring costs. They also state that even fines, penalties or similar levies paid to statutory authority shall not form part of cost of production.
25. It cannot, therefore, be said that there was no justification for the appellant to form a view that the amount directed to be paid by the Supreme Court would not form part of the cost of production.
15 EX/50607 OF 2018
26. The contention of the learned special counsel for the department is that if the appellant had doubts it could have sought clarification from the department.
27. This contention of the learned special counsel for the department cannot be accepted in view of the recent decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. versus Union of India and others6, wherein the Delhi High Court observed as follows:
―32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious.‖ (emphasis supplied)
28. Even assuming that there was suppression, it has to be examined whether suppression of facts by the appellant was wilful and with an intent to evade payment of central excise duty. The Supreme Court and the Delhi High Court have held that suppression
6. W.P. (C) 7542 of 2018 decided on 06.04.2023 16 EX/50607 OF 2018 of facts has to be ―wilful‟ and there should also be an intent to evade payment of duty.
29. In Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay7, the Supreme Court examined whether the department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Central Excise Act. The proviso to section 11A of the Central Excise Act which was considered by the Supreme Court carved out an exception to the provisions that permitted the department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since ―suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations of the Supreme Court are as follows:
―4. Section 11A empowers the Department to re- open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding
7. 1995 (78) E.L.T. 401 (SC) 17 EX/50607 OF 2018 it is not different that what is explained in various dictionaries unless of court 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)
30. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise8 and the observations are as follows:
―26. ***** This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression ―suppression of facts‖ in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :-
―In taxation, it (―suppression of facts‖) can have only one meaning that the correct information was not disclosed deliberately to escape 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.‖
8. 2005 (188) E.L.T. 149 (SC) 18 EX/50607 OF 2018
27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co.
v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that ―suppression of facts‖ can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act.‖ (emphasis supplied)
31. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur9 and the observation are:
―18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944.‖
32. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I10 also held:
9. 2013 (288) E.L.T. 161 (SC)
10. 2007 (216) E.L.T. 177 (SC) 19 EX/50607 OF 2018 ―10. The expression ―suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty.
When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.‖ (emphasis supplied)
33. In Mahanagar Telephone Nigam Ltd. vs. Union of India and others11, the Delhi High Court also observed as follows:
―28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade
11. W.P. (C) 7542 of 2018 decided on 06.04.2023 20 EX/50607 OF 2018 service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable.
*****
41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return.‖ (emphasis supplied)
34. This issue was also examined at length by this Bench of the Tribunal in M/s G.D. Goenka Private Limited vs. The 21 EX/50607 OF 2018 Commissioner of Central Goods and Service Tax, Delhi South12 and after referring to the provisions of section 73 of the Finance Act, the Bench observed:-
―13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked.
*****
14. In this appeal, the case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit.
Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self- assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts.
*****
16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an
12. Service Tax Appeal No. 51787 of 2022 dated 21.08.2023 22 EX/50607 OF 2018 obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-
assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment.‖ (emphasis supplied)
35. It would transpire from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked.
36. In the present case, the show cause notice merely alleges that because the appellant did not pay central excise duty on additional levy at the rate of Rs. 295 /- per MT, the appellant suppressed material facts. There is no allegation in the show cause notice that such suppression was with an intent to evade payment of central 23 EX/50607 OF 2018 excise duty. This was an important aspect, which was required to be not only alleged in the show cause notice, but also to be proved by the department before the extended period of limitation of five years could have been invoked. However, it has neither been alleged nor proved.
37. In such circumstances, it is not possible to hold, even if there was suppression of facts, that the appellant had any intent to evade payment of central excise duty.
38. The issue can be examined from another aspect. The appellant had been transferring the goods to its plant at Raigarh which is under the management and ownership of the appellant. The said unit had been paying central excise duty using both CENVAT credit as well as PLA. This is clear from the chart contained in paragraph 14 of this order. Therefore, even if there was any additional duty payable by the appellant, the same would be admissible as CENVAT credit to its own Raigarh unit. Such CENVAT credit would have been utilized by the Raigarh unit for payment of central excise duty at its end. Therefore, the entire exercise of demanding any further excise duty would be revenue neutral.
39. It is settled legal position that in case the situation is revenue neutral, suppression cannot be alleged. In this connection reliance can be placed on the decision of the Tribunal in M/s. Gripsurya Re- Cycling LLP vs. Commissioner of Central GST and Central Excise, Indore13 and M/s. Continental Engines Ltd. vs. Commissioner, Central Excise & Service Tax, Alwar (Raj.)14.
13. 2023 (9) TMI 717-CESTAT New Delhi
14. 2023 (8) TMI 697-CESTAT New Delhi 24 EX/50607 OF 2018
40. In Gripsurya Re-Cycling, the Tribunal observed as follows:
―20. As far as the question of Revenue neutrality is concerned, the Commissioner (Appeals) was correct in stating that even if a related person would get CENVAT credit, duty has to be paid if it is to be paid as per law. Revenue neutrality is a concept which has evolved through a series of decisions only for the limited purpose of determining if the assessee could have had an intention to evade payment of duty. This intention is an essential ingredient to invoke extended period of limitation. If it is Revenue neutral situation where, the excess duty, if paid, would have been available to the appellant itself or its another unit or a related unit as CENVAT credit, there cannot be an intention to evade because the assessee would gain nothing by evading. If the duty is chargeable or differential duty is chargeable such charge flows from the charging section- Section 3 of the Act. If such duty or differential duty is not paid, the remedy is available to the Revenue under Section 11A. This section places limitation on when a notice can be issued- within the normal period or extended period. Beyond the limitation, Revenue has no remedy although the charge remains. It is like a time-barred debt which, though owed, cannot be recovered by the creditor. If differential duty was chargeable but was not paid and it is later discovered by audit and it gets time barred under Section 11A, the responsibility for it rests squarely on the officers mandated to scrutinize the returns in time and raise a demand in time.‖ (emphasis supplied)
41. In Continental Engines, the Tribunal held as follows:
―***** We also find that the appellant was supplying the goods to its own sister unit and, therefore, every rupee which the appellant paid as duty would have been available to its sister unit 25 EX/50607 OF 2018 as Cenvat credit. Therefore there cannot be any intention to evade.‖
42. It, therefore, follows that the extended period of limitation could not have been invoked in the facts and circumstances of the case. As the entire demand of central excise duty has been confirmed after invoking the extended period of limitation, the confirmation of the demand would have to be set aside.
43. In this view of the matter, it would not be necessary to examine whether the additional levy of Rs. 295/- per MT was actually required to be added to the cost of production.
44. Thus, for all the reasons stated of above, the order dated 28.11.2017 passed by the Commissioner is set aside and the appeal is allowed.
(Dictated and pronounced in open court.) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) PK, Shreya, Jyoti