Gujarat High Court
Salasar vs Commissioner
Author: Akil Kureshi
Bench: Akil Kureshi
TAXAP/132/2011 16/ 16 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 132 of 2011 ========================================================= SALASAR DYEING & PRINTING MILLS (P) LTD & 4 - Appellant(s) Versus COMMISSIONER OF CENTRAL EXCISE & CUSTOMS SURAT-I - Opponent(s) ========================================================= Appearance : MR PARESH M DAVE for Appellant(s) : 1 - 5. MS AMEE YAJNIK for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 27/01/2012 ORAL ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) Appellant-manufacturer has challenged the judgment of the CESTAT raising following questions for our consideration:
(a) Whether a show cause notice issued under section 11A of the Central Excise Act, 1944 was not barred of limitation when the same was issued beyond the normal period of limitation computed from the date on which the case was discovered by the department against the assessee, and still the show cause notice was issued beyond the normal period of limitation from the date on which the investigation was fully over and completed ?
(b) Whether the orders of the Appellate Tribunal in upholding issuance of show cause notice under section 11A of the Act on 9.5.05 though the entire investigation was completed on 30.7.03 are not illegal and invalid ?
(c) Whether confirmation of demand of duty and imposition of penalties on the appellants is sustainable in the facts and circumstances of this case ?"
Brief facts leading to this appeal are as follows:
Appellant No.1 is a company engaged in processing of textile fabrics. On 10.7.2003, a group of Central Excise Officers visited the factory of appellant No.1 Company. Departmental Authorities through a panchnama recorded shortage of 1.82 lacs meters of unprocessed grey fabrics. Statement of the Director of the Company was recorded. Statements of the merchants supplying fabrics to the appellant Company were also recorded.
On the premise that that appellant No.1 and its officers had indulged in clandestine removal of goods, a show cause notice came to be issued on 9.5.05 raising duty demand of Rs.2.78 lacs. The show cause notice also proposed charging of interest and imposing penalties on the Company as well as on the responsible persons.
The appellants opposed the proposals by filing replies and participating in the adjudication. The Assistant Commissioner, by his order dated 25.1.2006 confirmed the duty demand of Rs.2.78 lacs with interest and also imposed various penalties against other appellants under the provisions of the Central Excise Act, 1944 and the Rules made thereunder.
Against the order of the Assistant Commissioner, the appellants preferred appeals before the Commissioner (Appeals), who rejected the appeals by an order dated 23.8.2007.
Aggrieved by the orders of the revenue authorities, the appellant approached the Tribunal. The Tribunal rejected the appeals by the common judgment dated 23.6.2008 accepting the evidence on record to confirm the clandestine removal of goods. The Tribunal rejected the contention of the appellants that the show cause notice was barred by limitation. The contention of the appellant was that once the alleged clandestine removal of goods came to the notice of the Department, notice for recovery of duty ought to have been issued within one year from such knowledge.
After the Tribunal rejected the appeals, the appellants preferred an application for rectification of the order raising once again the ground of limitation in issuing show cause notice. The appellants relied on various decisions of the Tribunal on the issue. The Tribunal by its order dated 5.3.2009, rejected the application for rectification. The Tribunal came to the conclusion that there was no mistake which can be rectified and the application was therefore dismissed. At that stage, the appellants approached this Court by filing the present Tax Appeal challenging the orders of the Tribunal.
When the Tax Appeal was taken up for hearing, counsel for the appellant pressed only one ground in appeal, namely, that the show cause notice issued by the Assistant Commissioner was barred by limitation. In essence, the contention was that even in case where under proviso to section 11A of the Act, extended period of limitation is available, once such clandestine removal is noticed by the Department or in any other manner comes to its knowledge, show cause notice could be issued only within one year from such date and not thereafter.
Counsel for the appellants candidly stated that such a contention was raised before a Division Bench of this Court in the case of Commissioner of C.Ex., Surat-1 v. Neminath Fabrics Pvt. Ltd., 2010 (256) E.L.T. 369. Counsel, however, desired that the question be reexamined on the ground that several decisions on the point could not be presented before the Court when the case of Neminath Fabrics Pvt. Ltd. was decided.
Before referring to the several authorities cited by the counsel for the appellant, we may notice the statutory provisions contained in section 11A of the Act. Section 11A of the Central Excise Act pertains to recovery of duties not levied or not paid or shorty levied or short-paid or erroneously refunded. Section 11A which is relevant for our purpose reads as under:
"11A.
Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. -(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the persons chargeable with the duty which has not been levied or paid or which has been 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:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, 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, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words one year, the words, "five years" were substituted :
Explanation.
- Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of [one year] or five years, as the case may be".(2)
The Central Excise Officer shall after considering the representation, if any, made by the person on whom the notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being the excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
xxxx xxxx (3) For the purposes of this section -
(i) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(ii) "relevant date" means,-
(a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid -
(A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excisable goods removed during the period to which the said return relates, is to be filed by a manufacturer or a producer or a licensee of a warehouse, as the case may be, the date on which such return is so filed;
(B) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(C) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder;
(b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;
(c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund."
We may notice that the question which is being debated before us was precisely the question which the Division Bench in the case of Neminath Fabrics Pvt. Ltd. (supra) was confronted with. It was a case wherein the respondent was engaged in manufacture of man-made fabrics on job work basis. Officers of the Central Excise Department carried out preventive checks on the factory of the respondent on 21.6.2002. During such checks, when the Departmental Authorities found shortage of grey fabrics, a show cause notice for recovery of the duty, penalties and interest for such clandestine removal of goods was issued on 9.5.2005, which came to be adjudicated and the Adjudicating Authority passed order in original on 22.2.2006 confirming the duty demand of Rs.4 lacs with interest and penalties. The manufacturer thereupon carried the matter in appeal before the Commissioner (Appeals), who dismissed the appeal. However, in further appeal, the Tribunal reversed the decisions of the Departmental authorities and quashed the demand on the ground of limitation. This decision of the Tribunal came to be challenged by the Department before the High Court. On behalf of the manufacturer, it was contended before the High Court that once the case of evasion of duty comes to the notice of the Department, thereafter extended period of limitation cannot be pressed in service.
The High Court reversed the decision of the Tribunal and allowed the Department's appeal by making following observations :
"14. Thus the scheme that unfolds is that in case of non levy where there is no fraud, collusion, etc., it is open to the Central Excise Officer to issue a show cause notice for recovery of duty of excise which has not been levied, etc. The show cause notice for recovery has to be served within one year from the relevant date. However, where fraud, collusion, etc., stands established the period within which the show cause notice has to be served stands enlarged by substitution of the words "one year" by the words "five years".
In other words the show cause notice for recovery of such duty of excise not levied etc., can be served within five years from the relevant date.
15. To put it differently, the proviso merely provides for a situation whereunder the provisions of sub-section (1) are recast by the legislature itself extending the period within which the show cause notice for recovery of duty of excise not levied etc. gets enlarged. This position becomes clear when one reads the Explanation in the said sub-section which only says that the period stated as to service of notice shall be excluded in computing the aforesaid period of "one year" or "five years" as the case may be.
16. The termini from which the period of "one year" or "five years" has to be computed is the relevant date which has been defined in sub-section (3)(ii) of section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub-section (1) of section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal.
17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be permitted in law when the statute itself has provided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation.
18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term "relevant date" nugatory and such an interpretation is not permissible.
19. The language employed in the proviso to sub-section (1) of section 11A, is clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom.
20. Thus, what has been prescribed under the statute is that upon the reasons stipulated under the proviso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of section 11A would be applicable. However, such reasoning appears to be fallacious in as much as once the suppression is admitted, merely because the department acquires knowledge of the irregularities the suppression would not be obliterated.
21. It may be noticed that where the statute does not prescribe a period of limitation, the Apex Court as well as this Court have imported the concept of reasonable period and have held that where the statute does not provide for a period of limitation, action has to be taken within a reasonable time. However, in a case like the present one, where the statute itself prescribes a period of limitation the question of importing the concept of reasonable period does not arise at all as that would mean that the Court is substituting the period of limitation prescribed by the legislature, which is not permissible in law."
From the above recorded portion of the judgment of the Division Bench, it can be seen that the entire issue was considered threadbare and after detailed exercise, the Division Bench rejected the same contention which has been raised before us now. We are bound by the view of a cognate Bench. Even otherwise, we are in respectful agreement with the view expressed. Section 11A of the Act, pertains to recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. The main body of sub-section (1) of section 11A enables the Department to seek recovery of such duties by serving a notice on the person chargeable with such duty within a period of one year from the relevant date. Proviso to sub-section (1) of section 11A, however, applies in case where such duty of excise has not been levied, paid or short paid or short levied or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts or in contravention of any of the provisions of the Act or the Rules with an intent to evade payment of duty. In such a case, period of one year for service of notice would be substituted by five years.
Sub-section (3) of section 11A defines different terms used in the section. Clause (2) thereof pertains to relevant date and specifies, relevant date under different circumstances.
Upon reading the relevant provisions contained in section 11A of the Act, it becomes clear that in case of duty which has not been levied or paid, or has been short-levied or short paid or erroneously refunded by reason of fraud, collusion, willful misstatement, suppression of facts, etc. period of service of notice on the person chargeable with such duty would be five years instead of one year provided in normal circumstances. Nowhere does this provision refer to the period of service of notice after fraud, collusion, willful misstatement or suppression, etc. comes to the knowledge of the Department. In simple terms, the Department could recover unpaid duty upto a period of five years anterior to the date of service of notice when the case falls under proviso to sub-section (1) and such omission is on account of fraud, collusion, willful misstatement, etc. The contention of the appellant that the period of one year for service of notice should be reckoned from the date of the knowledge even in case of fraud, collusion, willful misstatement, etc. simply cannot be accepted and for the same reason the decisions of the Tribunals taking such a view cannot be approved of.
Accepting any such contention would lead to strange and anomalous results. For example, in a given case of evasion of duty by a manufacturer through fraud, collusion or willful misstatement for a period from 1st January 2006 to 30th June 2010, if comes to the knowledge of the Department, let us say, on 1st July 2010, would it then be open to the Department to serve a notice for recovery of such unpaid duty any time before 1st of July 2011 ? If the concept of availability of one year, from the date of knowledge of the Department is imported in such a situation, the period that may be available for the Department to serve the notice for recovery of unpaid duty would get extended to 30th June 2011, i.e. even beyond five years from the initial evasion of duty. Surely, the Legislature never intended to bring about such an incongruent situation.
We would, at this stage, like to deal with the decisions cited by the counsel for the appellants.
In the case of Commissioner of Central Excise, Goa, vs. Gammon India Ltd. 2002 (146) ELT 313 (SC), the Apex Court had dismissed the Department's appeal against the judgment of the Tribunal in the case of Gammon India Ltd. v. Commissioner of Central Excise, Goa, 202 (146) ELT 173 (Tri. Mumbai). If we peruse the decision of the Tribunal, it emerges that the Tribunal accepted the arguments of the manufacturer that fabrication was before the eyes of the general public. On this ground, the Tribunal was inclined to uphold the manufacturer's plea of limitation. The case on hand involves vitally different facts. The above decision, therefore, would not apply.
Reliance was placed on the decision in the case of Nizam Sugar Factory v. Collector of Central Excise, A.P., 2006 (197) ELT 465 (SC) wherein the Department had issued a show cause notice on 28.2.84 demanding duty for the period between February 1978 to September 1982. The manufacturer had opposed such notice contending that the product manufactured by it was not exigible to duty. The case was heard on 16.4.84, but thereafter no further action was taken in the matter. Thereafter, the manufacturer was served with second show cause notice on 16.7.87 covering the period of assessment year 1982-83 to 1986-87. The manufacturer opposed the proceedings contending, inter alia, that the Department had issued a show cause notice on the basis of certain set of facts. It cannot allege in another show cause notice issued subsequently for a later period suggesting suppression on the part of the assessee as the Department is fully aware of the facts even at the time of issuance of the first show cause. Such contention was upheld by the Apex Court in following terms :
"9.
Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant."
It can thus be seen that the decision of the Apex Court was rendered in an entirely different factual background.
The decision in the case of Commissioner of C.Ex. Mangalore v. Pals Microsystems Ltd., 2009 (234) ELT 428 (Kar.), was rendered in the facts of the case and we could not notice any ratio which can be applied in the present case.
In the case of Commissioner of C.Ex. & Customs v. Kwality Tube Industries, 2009 (240) ELT 20 (Guj.), Division Bench of this Court was pleased to confirm the Tribunal's order on the ground that the same suffers from no legal infirmity such as crucial evidence in the shape of weighment slips was non-existent and even the presence of panch witnesses was shrouded in doubt. It was in the background of these facts, the Division Bench observed as under :
"6. In the background of the aforestated facts and circumstances, where the crucial evidence in the shape of weighment slips is non existent and even the presence of panch witnesses is shrouded in doubt, and even assuming that panch witnesses were present, the refusal of permission to the respondent unit to examine them, it cannot be said that the order of the Tribunal suffers from any legal infirmity. In the absence of weighment slips, the amount of shortage itself is doubtful and the finding to this effect arrived at by the Tribunal is neither unreasonable nor unjustified, as contended by the learned counsel for the appellant. The delay in issuance of show cause notice is a factual aspect and, as has been noticed by the Tribunal, in the absence of any explanation, the show cause notice itself suffers from the vice of delay and laches. The impugned order of the Tribunal, therefore, does not warrant interference."
These observations at best can be seen as passing remarks and not the ratio decidendi of the judgment.
In the case of Commissioner of C.Ex. Bangalore v. Bripanil Synthetics (P) Ltd. , 2006 (203) ELT 11 (Kar.), Karnataka High Court did not permit the extended period of limitation. It was of the opinion that mere presumption would not give any jurisdiction for extended period of limitation. It was observed that there was absolutely no allegation forthcoming also with regard to fraud, etc. in terms of section 11A of the Act and that therefore, the case of extended period is not available in absence of factual foundation in terms of the show cause notice. Thus the decision of the Karnataka High Court was rendered in entirely different fact situation.
In the result, we do not find any case for interference. Tax Appeal is, therefore, dismissed.
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