Custom, Excise & Service Tax Tribunal
Omega Biotech Ltd vs Commissioner, Cgst-Dehradun on 14 November, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Excise Appeal No. 50487 of 2021 [DB]
[Arising out of Order-in-Original No. 32/Commr/DDN/2020 dated 16.12.2020
passed by the Commissioner of Central Goods and Service Tax, Dehradun]
M/s. Omega Biotech Ltd. ...Appellant
7th Mile Stone, Dehradun Road,
Saliyar Salhapur, Roorkee,
Uttarakhand - 247667
VERSUS
Commissioner of C.G.ST. - Dehradun ...Respondent
E-Block, Nehru Colony, Haridwar Road, Dehradun, Uttarakhand - 248001 APPEARANCE:
Shri Pravin Sharma, Advocate for the Appellant Shri Sanjay Kumar Singh, Authorized Representative for the Respondent CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) DATE OF HEARING: 20.07.2023 DATE OF DECISION: 14.11.2023 FINAL ORDER No. 51548/2023 DR. RACHNA GUPTA This appeal is arising out of Order-in-Original No. 32/2020 dated 16.12.2020. The facts relevant for the disposal of the appeal are as follows:
2. The appellant is engaged in manufacturing of pharmaceutical products and was availing area based exemption from payment of central excise duty under Notification No. 49/2003 dated 10.06.2003 till 14.01.2015. On 14.01.2015, the appellant had applied for Central Excise Registration but was paying Central Excise Duty at the rate of 2% in view of Notification No. 01/2011-
CE dated 01.03.2011 as amended by Notification No. 16/2012-CE 2 Excise Appeal No. 50487 of 2021 [DB] dated 17.03.2012. The department observed that the appellant was granted license dated 15.12.2004 renewed up to 14.12.2019 but for manufacture of drugs specified in Schedule C, C(1) and X excluding those of Schedule X to Drugs and Cosmetics Rules, 1945. Notification No. 01/2011-CE however exempts the excisable goods of the description specified in column (3) of the table of said notification from so much of duty of excise leviable thereon as in excess of the amount calculated at the rate of 2% ad valorem subject to such conditions as mentioned in the said notification, the appellant was found claiming benefit of Entry No. 37 of Notification 01/2011-CE.
2.1 The department observed that the said entry is with respect to Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems, whereas the appellant was manufacturing allopathic drugs which are not covered under First Schedule to the Drugs and Cosmetics Act. With these observations Show Cause Notice No. 133/2017 dated 03.05.2019 was served upon the appellant proposing denial of exemption of Notification No. 01/2011-CE dated 01.03.2011 to the appellant on the goods manufactured and cleared from the period 15.01.2015 to 30.06.2017. Central excise duty amounting to Rs.3,26,44,796/- on the said goods was proposed to be recovered along with the appropriation of the excise duty of Rs.1,63,22,408/- as was already deposited on 30.06.2017. The proportionate interest and appropriate penalties were also proposed to be recovered from the appellant. The said proposal has been confirmed vide the order under challenge. Being aggrieved the appellant is before this Tribunal.
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Excise Appeal No. 50487 of 2021 [DB]
3. We have heard Shri Pravin Sharma, learned Advocate for the appellant and Shri Sanjay Kumar Singh, Authorized Representative for the department.
4. Learned counsel for the appellant has mentioned that appellant is the manufacture of allopathic generic medicaments. These medicines were mainly supplied to Central as well as State Governments and their departments. At the time of applying the Central Excise Registration on 14.01.2015 when the area based exemption under Notification No. 49/2003-CE ended, the appellant had submitted a complete list of medicaments manufactured by them along with the respective chapter headings, list of major raw materials used for their manufacture and the process flow chart. They also informed the department that they will avail exemption under Notification No. 01/2011-CE and will pay excise duty at the rate of 2% on final products.
4.1 Learned counsel further mentioned that in Entry No. 37 word "including" has been used after the word "medicaments". Thus, the description given is not restrictive but expansive. Therefore all the medicaments including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems and even Allopathic medicaments are eligible for the benefit of the impugned notification. It is also impressed upon that the language of notification is ambiguous and thus, the assessee cannot be held responsible for the same. Learned counsel has relied upon the decision in the case of Commissioner of Trade Tax Vs. SS Ayodhya Distillery1 1 2009 (233) ELT 146 (SC).
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Excise Appeal No. 50487 of 2021 [DB] 4.2 Learned counsel further submitted that the show cause notice dated 03.05.2019 has been issued by invoking the extended period of limitation despite that there is no suppression of any fact with mala fide intention on the part of the appellant. As everything was duly informed to the department even in the quarterly ER-8 Returns, the appellant clearly mentioned about availment of exemption under the said notification. The department had full knowledge of the claim, hence the extended period should not have been invoked. The demand is liable to be set aside on this ground of limitation.
4.3 Finally it is submitted that in case the confirmation of demand is opined justified then the amount of freight as paid may be deducted from the confirmed amount of demand due to the reason that prices charged by the appellant from their buyers were FOR destination based prices. Also, once the benefit of notification is denied, the appellant will become entitled for the Cenvat credit as the same has not been availed on the inputs used as it was the condition of the said notification. With these submissions, learned counsel has prayed for setting aside of the order under challenge else at least for the modification as pleaded above.
5. Learned DR on the other hand has brought to our notice the scope of Entry no. 37 of Notification No. 01/2003-CE to impress upon that this entry extends benefit of concessional rate of duty to those goods which are falling under Chapter 30 and the allopathic medicaments manufactured by the appellant are not covered under the said entry. It is mentioned that there is no ambiguity in the language of the notification. The wordings are absolutely clear, hence there cannot be a ground for bona fide while forming a wrong 5 Excise Appeal No. 50487 of 2021 [DB] interpretation of said wordings. This itself become a justified ground for invoking the extended period of limitation. Penalty has rightly been imposed upon the appellant. Cum duty benefit has already been granted by the adjudicating authority below. Impressing upon no infirmity in the order under challenge, appeal is prayed to be dismissed.
6. Having heard the rival contentions and perusing the records, we observe and hold as follows:
To adjudicate the appeal the moot question to be decided is:
Whether the allopathic medicaments are eligible for the exemption of central excise duty but for at the rate of 2% in terms of Notification No. 01/2011 dated 01.03.2011.
For the purpose, we foremost look into the notification. The notification exempts the excisable goods of the description in column (3) of the table in the notification falling under chapter, heading, sub-heading or tariff item of the First Schedule to Central Tariff Act, 1985, specified in corresponding entry in column (2) from so much of duty of excise leviable thereon under Central Excise Act, as is in excess of the amount calculated at the rate on 1% ad valorem. The said 1% stands amended to 2% ad valorem vide Notification No. 16/2012 dated 17.03.2012. The proviso to the notification is:
"nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or tax on input services has been taken under the provisions of Cenvat Credit Rules, 2004."6
Excise Appeal No. 50487 of 2021 [DB] 6.1 The appellant admittedly has availed the benefit of Entry No. 37 of this notification. It reads as follows:
Column no. 1 Column no. 2 Column no. 3
36 28 Potassium Iodate
37 30 Medicaments
(including those used
in Ayurvedic, Unani,
Siddha, Homeopathic
or Bio-chemic
systems),
manufactured
exclusively in
accordance with the
formulae described in
the authoritative
books specified in the
First Schedule to the
Drugs and Cosmetics
Act, 1940 (23 of
1940) or Homeopathic
Pharmacopoeia of
India or the United
States of America or
the United Kingdom or
the German
Homeopathic
Pharmacopoeia, as the
case may be, and sold
under the name as
specified in such
books or
pharmacopoeia
38 30 Intravenous fluids,
which are used for
sugar, electrolyte or
fluid replenishment
6.2 No doubt chapter 30 as mentioned in column (2) is about all
pharmaceutical products whether allopathic or Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems accept under separate tariff entries. Learned counsel also has laid much emphasis on the word 'including' following word 'medicaments' in column (3) that word including mean that in addition to Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic system, the medicaments includes the allopathic medicaments also. We are of the opinion that 7 Excise Appeal No. 50487 of 2021 [DB] interpretation of a word of expression must depend on the text and the context. The resort to the word "includes" by the legislature often shows the intention of the legislature that it wanted to give extensive and enlarged meaning to such expressions. Sometimes, however, the context may suggest that word "includes" may have been designed to mean "means". The setting context and object of an enactment may provide sufficient guidance for interpretation of the word "includes" for the purpose of such enactment. Hon'ble Apex Court in the case of Peerless General Finance and Investment Co. Ltd., summarized the legal position that inclusive definition by the legislature is used; one, to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute whishes to attribute it; two, to include meaning about which there might be some dispute; three, to bring under one nomenclature all transactions possessing certain similar features but going under different names. In the case of Lord Watson in Dilworth Vs. Commissioner of Stamps2 made the classic statement:
"the word again include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute and when it is so used these words or phrases must be construed as comprehending not only such things as they signify accordingly to their natural import but also those things which the interpretation clause declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the 2 (1899) AC 99 8 Excise Appeal No. 50487 of 2021 [DB] purpose of adding to the natural significance of the words or expressions defined, it may be equivalent to "mean" and "include", and in that case it may afford an exhaustive explanatiion of the meaning which for the purpose of the Act, must invariably be attached to these words or expression. It is this statement that Hon'ble Apex Court has considered in Peerless General Finance and Investment Co. Ltd., (Supra) case.
6.3 Now we look back into the language in the notification column (3) of Entry No. 37 in use of word 'including' in context of the content of column (3) of Entry No. 37 of the notification. But we are of the opinion that Tribunal ought not to have traversed beyond interpreting the provision as per the language employed in the statute itself. It is the settled proposition of law that while interpreting the taxing statutes the authorities cannot import which is not expressed in the provision itself. We rely upon the decision in the matter of Commissioner of Sales Tax, Uttar Pradesh Vs. Modi Sugar Mills Pvt. Ltd.3, applying above discussed principles of interpretation and the meaning/purpose of word "include". When we read column (3) of the impugned notification (Entry No. 37), we observe that it talks about the medicaments manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetic Act, 1940 or Homeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such books or pharmacopeia. The First Schedule of Drugs Act talks about Books of Ayurveda and Siddha 3 AIR 1961 SC 1047 9 Excise Appeal No. 50487 of 2021 [DB] systems. It also talks about 14 books of Unani. Perusal of said column (3) in the light of this Schedule and the meaning of word "include" as discussed above, we are of the opinion that the language of the notification is clearly reflects the intention of legislature that the meaning of medicaments is enlarged to include those used in Ayurveda, Unani, Siddha and even Homeopathic and Bio-chemic systems but only such medicaments as prepared in accordance with the formulae of the books of First Schedule to the Drugs and Cosmetic Act.
6.4 As already observed above, the books mentioned in First Schedule are with respect to the Ayurvedic, Unani, Siddha Formulae. Hence, we are of the opinion that there is no ambiguity created by the legislature by using the word "includes" with the medicaments when medicaments prepared in accordance of books about Ayurvedic, Unani, Siddha are being discussed. From no stretch of imagination such medicaments can mean to include allopathic medicaments within their scope by the mere use of word "include". More so, for the reason that there is no possibility of description of any formula for allopathic medicament in the books meant for medicaments manufactured under Ayurveda and Siddha systems. For the said reasons, the arguments submitted by the appellant are not at all acceptable to set aside the order confirming the demand against them nor for doing away with the penalties. The said findings are therefore upheld.
7. Now we take up the plea as to whether the extended period is invokable in the present case:
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Excise Appeal No. 50487 of 2021 [DB] 7.1 We observe that according to the appellant, it had declared that it will be availing the benefit of the exemption notification for its products based on its interpretation of the exemption notification. It had filed quarterly ER-8 returns clearly indicating that it had availed the benefit of the exemption notification. It is also its submission that the rate of duty on its inputs was 12% while the rate of duty on its final products was only 6%. If it had not availed the benefit of the exemption notification, it would have had to pay 6% duty instead of 2% but it would have been entitled to the benefit of CENVAT credit of 12% of the value of inputs. 7.2 Further, according to the appellant, the department had full knowledge of its claim of the exemption notification and it never raised any objection until 2018 when the audit was conducted.
Therefore, according to the appellant, there were no grounds to invoke extended period of limitation in the matter. 7.3 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. 11
Excise Appeal No. 50487 of 2021 [DB] (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
(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". 7.4 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 misstatement; 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.
7.5 The reasons for invoking extended period of limitation given in the SCN are as follows:
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Excise Appeal No. 50487 of 2021 [DB]
a) The appellant had itself declared in its ER 8 Returns and on the aluminum foils and boxes of the medicaments that they are were manufactured as per the Indian Pharmacopeia or British Pharmacopoeia. It further declared that on its medicaments that they were Schedule H drugs and marketed them as meant for Government supply and NOT FOR SALE and had not mentioned the maximum retail price (MRP).
b) this shows that the appellant had full knowledge of the fact that it was not eligible for the exemption notification and yet cleared the goods claiming its benefit.
c) therefore, the appellant appears to have wilfully contravened Rule 4, 6, 8 and 12 of the Central Excise Rules, 2002 with an intent to evade payment of duty.
d) In an era of self assessment and self removal, the assessee is required to assess their duty liability correctly and is required to correctly discharge the same in the prescribed manner and the appellant deliberately wrongly availed the benefit of an ineligible exemption notification;
e) Therefore, extended period of limitation under 11A (4) can be invoked because the appellant wilfully mis-stated as well as contravened the provisions of the Act and Rules with intent to evade payment of duty.
7.6 The reasons given in the impugned order for invoking extended period of limitation are as follows:
a) The appellant was in the business of manufacture of medicaments and was fully aware that the drugs which it manufactured were not manufactured as per the formulae given in any of the books listed in the First Schedule or any of the five other pharmacopoeia mentioned against entry no. 37 of the notification and yet paid duty at a lower rate; 13
Excise Appeal No. 50487 of 2021 [DB]
b) where the wordings of the notification are very clear and it is not a question of bonafide interpretation, invocation of longer period is correct and therefore, extended period of limitation is invokable in this case.
7.7 In order to examine if the extended period of limitation can be invoked, it is necessary to examine the procedures laid down under the Act and Rules. Duties of excise are levied on 'excisable goods' manufactured or produced in India (section 3) but the duty becomes payable on removal of the goods (Rule 4) and it must be paid by the fifth of the following month (Rule 8). The assessee is expected to self-assess the duty (Rule 6), pay it and file Returns (Rule12). The officer may scrutinize the returns to ascertain the correctness of the duty paid [Rule 12(3)] and for this purpose call for all documents and records which the assessee is bound to provide [Rule 12(4)]. Thus, although the assessee is required to self-assess and pay duty, scrutiny by the officer is an in-built check under the Rules against any such mistakes in the self-assessment. 7.8 Departmental instructions to officers also emphasise the duty of officers to scrutinize returns. CBEC's instructions issued on December 24, 2008 through F.No. 224/37/2005-CX.6 deal with "Duties, functions and responsibilities of Range Officers and Sector Officers". It has a table enumerating the duties, functions and responsibilities the relevant portion of which is a below:
LIST OF DUTIES, FUNCTIONS AND RESPONSIBILITES OF RANGE OFFICER AND SECTOR OFFICER SNo. Subject Sector officer's duties Range officer's duties 2.1 Scrutiny of To ensure that these To ensure date entry of ER-1/ER- returns are entered in returns and preliminary 2/ER-3 database. To carry out scrutiny of returns by the SO Returns preliminary scrutiny of ER- as per the 1/ER-2/ER-3 Returns guidelines/instructions 14 Excise Appeal No. 50487 of 2021 [DB] within a fortnight of contained in the Return receipt & submit the same Scrutiny Manual. He should to the Range officer along also take necessary action for with his observations. The recommendation of units for Preliminary scrutiny is to detailed scrutiny and to carry be carried out on the basis out detailed scrutiny as per of guidelines/instructions guidelines/instructions contained in Return contained in Return Scrutiny Scrutiny Manual Manual.
7.9 The Central Excise Manual published by CBEC on 17th May 2005 which is available on the website of CBEC devotes Part VI to SCRUTINY OF ASSESSMENT. Paragraphs 2.2,2.3 and 2.4 of this Part are reproduced below:
2.2 The Superintendent of Central Excise in-charge of the Range Office, with assistance of the Inspectors in-charge of the factory of an assessee, will scrutinize all the returns. They shall in selected cases, call all connecting documents including invoices and the records and scrutinize the correctness of assessment.
2.3. The Deputy/Assistant Commissioner of Central Excise will scrutinize the returns of the units, which pay duty exceeding rupees one crore but less than Rs. 5 crores from PLA per annum every six months. They shall requisition all connected documents including invoices and the records and scruntinse the correctness of assessment.
2.4 The Additional/Joint Commissioner of Central Excise will scrutinize the returns of the units which pay duty of Rs. 5 crores or more from PLA per annum every six months. They shall requisition all connected documents including invoices and the records and scrutinize the correctness of assessment.
(emphasis supplied) 7.10 It is thus evident that not only do the Rules provide for the officers to scrutinise the Returns to verify the correctness of self assessment and empower the officers to call for documents and records for the purpose, instructions issued by the department specifically require officers at various levels to do so. 7.11 If scrutiny by officers reveals short payment or non-payment of duty, a demand can be raised under section 11A. Quite logically, 15 Excise Appeal No. 50487 of 2021 [DB] as per section 11A, the relevant date prescribedfor reckoning the time limit under section 11A is 'the date of filing of the return' and if no return is filed, 'the last date on which the return should have been filed'. This is the date on which the officer acquires knowledge of the activities of the assessee in the form of the Return if it is filed. He can scruntinise the Return calling for all documents and records which he considers necessary and he has one year within which to issue an SCN under section 11A. If no Return is filed by the due date, the officer can initiate appropriate action. If the officer fails scrutinise the Returns and raise a demand within time and audit points it out later, the fault lies at the doorstep of the officers who failed to scrutinize the return and issue an SCN demanding duty within time and not on the assessee, even if the assessee has wrongly self-assessed the duty. Extended period of limitation can be invoked ONLY if one or more of the elements necessary to invoke it are present.
7.12 The SCN alleges that in an era of self-assessment and self- removal, the responsibility for correctly assessing the duty liability rests on the assessee and since the appellant failed to do so, extended period of limitation can be invoked. This argument cannot be upheld firstly because, operating under self-assessment is not one of the grounds for invoking extended period of limitation under the Act and secondly since every assesseee operates under self assessment, if extended period is invoked in every case, the provisions related to normal period of limitation become otiose. 7.13 The SCN clearly states that the appellant had mentioned on the packets, cartons, aluminium foils and in its returns very clearly the names of the allopathic medicines which it was manufacturing 16 Excise Appeal No. 50487 of 2021 [DB] and also indicated that they were Schedule H drugs meant to be sold only on prescription and therefore, asserts thatit had full knowledge that it was not eligible for the exemption under the notification which shows that the appellant had wilfully mis-stated. Evidently, the appellant had NOT mis-stated any facts but only claimed the benefit of an ineligible exemption notification while self- assessing duty. Claiming the benefit of an exemption notification cannot, by any stretch of imagination, be called mis-statement, let alone, wilful mis-statement.
7.14 The SCN also alleged that the appellant had violated Rules 4,6,8 and 12 of the Central Excise Rules, 2002 with an intent to evade payment of duty.
7.15 As per Rule 4,every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided. Undisputedly, the appellant did pay the duty as per its assessment. 7.16 Rule 6 mandates that the assessee shall himself assess the duty payable on any excisable goods which the appellant did in this case.
7.17 Rule 8 mandates that duty on the goods removed from the factory or the warehouse during a month shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any 17 Excise Appeal No. 50487 of 2021 [DB] other case. There is no allegation let alone evidence that this has not been done in this case.
7.18 Rule12 requires the assessee to file returns with the jurisdictional superintendent of Central Excise which the appellant did.
7.19 Therefore, the appellant had not violated any of these rules alleged in the SCN let alone with an intent to evade. Of course, the appellant self-assessed duty claiming the benefit of an exemption notification and paid duty accordingly which according to the impugned order and also according to this order of the Tribunal, it was not entitled.
7.20 Claiming the benefit of an ineligible exemption notification during self-assessment by an assessee does not lead to presumption of intent to evade payment of duty. The in-built remedy against errors in self-assessment is scrutiny of the return by the officer and if the officer had done his job, theclaim of ineligible exemption notification would have been found and an SCN could have been issued within time.
7.21 Learned adjudicating authority held that extended period of limitation is invokable for the reason that the appellant had been in the business of making pharmaceuticals and should have known that it was not eligible to the benefit of the exemption notification and since the exemption notification is clear, claiming the benefit of an ineligible exemption notification shows the intent to evade. 7.22 Section 11A does not provide for extended period of limitation because someone is in that line of business for any length of time. While the appellant was in this line of business, the department was 18 Excise Appeal No. 50487 of 2021 [DB] in the business of issuing exemption notifications, applying them and scrutinising tax returns for a much longer period. In this case, even as per the SCN, the nature of the goods manufactured by the appellant was explicitly stated not only on the packets but also in the ER 8 Returns filed by the appellant. The irresistible conclusion is that the officer had not either scrutinised the returns or having scrutinised, did not issue the demand within time. 7.23 The appellant was only required to self-assess duty and file returns which it did. It had also declared to the department that it had availed the benefit of the exemption notification. There was not even an obligation on the appellant to seek any clarification from the department. In a recent decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. versus Union of India and others4 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) 7.24 Another reason for invoking extended period of limitation in the SCN was that the appellant was operating under self-
assessment and in an era of self-assessment and self-removal, it was required to correctly self-assess duty and pay it and the appellant did not do so by claiming the benefit of an ineligible exemption notification. In the context of demand of service tax under section 73 of the Finance Act, 1994 which is similar to section 4 W.P. (C) 7542 of 2018 decided on 06.04.2023 19 Excise Appeal No. 50487 of 2021 [DB] 11A of the Central Excise Act, this issue was examined at length by a Bench of this Tribunal in M/s G.D. Goenka Private Limited vs. Commissioner of Central Goods and Service Tax, Delhi South 5 and after referring to the provisions of section 73 of the Finance Act, the Bench observed:-
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 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 selfassessment 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. 7.25 To sum up, the facts that the appellant was operating under self-assessment and that it was in the business of manufacturing pharmaceuticals are both not relevant to invoking extended period of limitation. The appellant was under no obligation to seek any clarification from the department during self-assessment as has been held by the Delhi High Court in Mahanagar Telephone Nigam Ltd. There is no mis-statement as all the facts have been correctly indicated in the ER-8 Returns filed by the appellant and also on the aluminium foils and packing of the goods even as per the SCN. The appellant had also not violated Rules 4,6,8 and 12 of Central Excise Rules 2002 as the appellant had self-assessed and paid duty and filed returns as per its understanding. The appellant had claimed the benefit of an exemption notification in its self- assessment which it was not entitled to. It has been the assertion of the appellant from the time of self-assessment up to and 5 Service Tax Appeal No. 51787 of 2022 dated 21.08.2023 20 Excise Appeal No. 50487 of 2021 [DB] including in this appeal before us that it was entitled to the benefit this exemption notification. Wrong claim of an exemption notification is not a ground provided under section 11A for invoking extended period of limitation.
7.26 For these reasons, that demand for extended period of limitation cannot be sustained. Consequently, the penalty under section 11AC imposed on the appellant also needs to be set aside.
8. With the above discussion the question framed above is answered holding:
(i) Allopathic medicaments are not eligible for the exemption given under Entry No. 37 of the Notification No 01/2011-CE dated 01.03.2011. We therefore hold that the benefit of duty exemption has rightly been denied to the appellant, order under challenge is upheld to the said extent.
(ii) Extended period is not invokable. Thus the demand is confined to the normal period.
9. In light of the above discussions, the order under challenge is hereby modified to the extent that demand is confirmed for the normal period. For the extended period it is set aside. Resultantly, the appeal, in hand, stands partly allowed.
[Order pronounced in the open court on 14.11.2023] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (P.V. SUBBA RAO) MEMBER (TECHNICAL) HK