Custom, Excise & Service Tax Tribunal
Mitutoyo South Asia Pvt Ltd vs Commissioner, Customs-New Delhi ... on 28 March, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH COURT NO.II
CUSTOMS APPEAL NO. 50961/2021
[Arising out of Order-in-Appeal No. CC(A)/CUS/D-
1/Import/NCH/103/2021-22 dated 02.07.2021 passed by the
Commissioner of Customs (Appeals), New Delhi]
M/s. MITUTOYO SOUTH ASIA PVT LTD.
APPELLANT
C-122, Okhla Industrial Area,
Phase 1, New Delhi 110020.
Vs.
COMMISSIONER, CUSTOMS
(AIRPORT AND GENERAL) New Customs House,
Near IGI Airport, NEW DELHI
RESPONDENT
APPEARANCE:
Dr. Prabhat Kumar, Advocate for the Appellant Shri Ravi Kapoor, Authorised Representative for the Department CORAM:
HON'BLE MRS RACHNA GUPTA, MEMBER (JUDICIAL) DATE OF HEARING: February 16, 2022 DATE OF DECISION: 28.03.2022 FINAL ORDER No. 50289 /2022 PER RACHNA GUPTA The present appeal has been filed to assail the Order- in -Appeal bearing No. 103/21-22 dated 02.07.2021. The relevant facts are as follows:
That the appellants are engaged in import and trading of precision measurement instruments, part and accessories thereof. The onsite post clearance audit was conducted in March, 2015 by Commissionerate New Delhi.
C/50961/2021 It was observed that during the period from 17.03.2012 to 17.04.2013, the appellant had wrongly availed the benefit of nil rate of additional duty of Customs (SAD) leviable under sub section 5 of section 3 of Customs Tariff Act, 1975. Under S.No. 2 of Notification no 21/2012-Cus dated 17.3.2012 on import of (Customs made software) meant for the machines imported by them. The Department formed an opinion that said exemption was applicable only to the pre-packaged goods intended for retail sale where as the software imported by the appellant was not for retail sale but was meant for the machines imported by them.
The availment of said exemption was alleged as wrong. Department further observed that the appellant discontinued the practice of availment of exemption after 17.4.2013. On being pointed out the appellant deposited Rs. 62,671/- as Customs duty along with interest of Rs. 11,132/- and penalty of Rs. 8,148/- for the period from 2013-14 on 17.4.2015. But the total differential Customs duty as Rs. 12,63,673/- for the period 2011-12 to 2013-14 was still alleged to have been evaded by the appellant.
Accordingly a Show Cause Notice No. 02/2016 dated 28.1.2016, the said differential amount of duty was proposed to be recovered along with interest alleging suppression on the part of the appellant, not only the extended period of limitation was invoked but penalty was also proposed to be imposed upon the appellant. The said proposal was initially confirmed by the Order-in-Original No. 102/17-18 dated 10.12.2018. The said order has been upheld and the appeal has been rejected by the order under challenge. Still being aggrieved the appellant is before this Tribunal.
2C/50961/2021
2. I have heard Dr. Prabhat Kumar, learned Counsel for the Appellant and Shri Ravi Kapoor, learned Authorised Representative for the Department.
3. It is submitted that demand raised vide the impugned Show Cause Notice was barred by time as it was issued after expiry of 5 years. There was no alleged suppression on the part of the appellant. The Department had already conduced the audit for the period 2012-2013 as was conducted in the year 2013, but no such objection was ever raised by them and no infirmity was pointed out and no demand was raised. The present Show Cause Notice includes the demand for the said period also which is legally not sustainable. The appellant was otherwise maintaining all relevant records which were being regularly audited by the Department. Question of any suppression of facts or collusion does not at all arise. Learned Counsel has submitted that the order under challenge is liable to be set aside on this ground itself. The position in the case of Nizam Sugar Factory vs Collector of Central Excise A.P. reported as [2006 (197) ELT 465 (SC)] has been impressed upon. It is further submitted that the penalty was not at all imposable for want of any mensrea with the appellant to evade the payment of duty. Reliance has been placed on the decision of Hon'ble Apex Court in the case of Tamil Nadu Housing Board vs Collector of Central Excise, Madras reported as [1994 74 ELT 9 (SC)]. The order under challenge is being assailed on the ground of limitation only and accordingly is prayed to be set aside. The appeal is prayed to be allowed.
4. Learned Departmental Representative per contra has mentioned that the said submission with respect to the period of limitation have duly been considered by the 3 C/50961/2021 Commissioner (Appeals) in para 5.3 of the order under challenge. After going through the case law relied upon by the appellant. It has been held that the appellant had failed to establish that complete facts were disclosed to the previous audit team which distinguish the present case from rest of the cases as relied upon by the appellant. It is submitted that there is no infirmity in the Order under challenge. The appeal is prayed to be dismissed.
5. After hearing the rival contentions it is held that the order under challenge has been assailed only on the ground of limitation. Hence the judgement is confined to the said aspect only.
6. Relevant provision for recovery of duty and time period is section 11A of the Central Excise Act, which reads as follows:
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 [two years] 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) the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.4
C/50961/2021 (2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder.
(3) Where the Central Excise Officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that sub-section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of [two years] shall be computed from the date of receipt of information under sub-section (2).
(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,
7. Hon'ble High Court of Karanataka in the case of CCE, Bangalore vs MTR Foods Limited reported as [2012 (282) ELT 196 (Kar)] has held as under:
"Sub-Section (1) of Section 11 provides for a period of one year as the period within which recovery of dues not levied or not paid or short levied or erroneously levied could be recovered. If the case falls under the proviso such as the duty has not been levied by reason of fraud, coercion or willful suppression of facts or contravention of any of the provisions of this Act or the Rules made thereunder with an intent to evade payment of duty by such person or his agent then 5 years is the period prescribed for initiating proceedings."
8. Hon'ble Supreme Court in the case of Continental Foundation Jt. Venture vs. CCE, Chandigarh I reported as [2007 (216) ELT 177 (SC)] have held as under:
5C/50961/2021
" 9. ...... Section 11A of the Act postulates suppression and, therefore, involves in essence mens rea.
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 11A 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.
11. ..............
12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word 'wilful', preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words 'contravention of any of the provisions of this Act or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful."
9. Coming to the facts of the present case, a mere fact that notification under which appellants were claiming exemption was not applicable to them, at the time of first audit, there was no reason with the appellant to discontinue the availment of exemption of 'NIL' duty. Appellant stopped availing the same immediately it was pointed out by department at the time of 2nd audit. Thus there seems no mis-statement or suppression. The appellant, in addition, immediately paid the differential duty that too with interest and even penalty, question of any intent of evading duty by the appellant does not at all 6 C/50961/2021 arise. I draw support from Hon'ble Apex Court decision in the case of Pahwa Chemicals Private Limited vs Commissioner of Central Excise, Delhi reported as [2005 (189) ELT 257 (SC)] wherein it was held that mere failure to declare does not amount to willful mis- declaration or willful suppression. There must be some positive act on the part of the party to establish either willful mis-declaration or willful suppression. When all facts are before the Department.
10. To my considered opinion judgement of Hon'ble High Court of Karanataka in the case of MTR Foods Limited (supra) would be applicable in this case, for the proposition that extended period cannot be invoked when no objections were raised in the first audit by the Revenue officers and in second audit, objections were raised. The relevant extract of the same is reproduced as under:-
"4. As is clear from the material on record, the returns were filed promptly. In the returns it is clearly mentioned that they availed credit under the aforesaid rules. The audit party accepted the same. It is only in the second audit that they noticed the mistake and initiated proceedings. Therefore, in the light of the aforesaid facts none of the other conditions prescribed in the Proviso exists in this case to extend the period of limitation of 5 years. It is in this background the Tribunal was justified in setting aside the order passed by the appellate authority and in restoring the order passed by the original authority. Therefore, there is no merit in this appeal. Accordingly, it is dismissed."
11. Further I draw support from the decision of Hon'ble Apex Court in the case of Tamil Nadu Housing Board vs Collector of Central Excise, Madras (supra) wherein it was held as under:
" A bare reading of the proviso indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression 7 C/50961/2021 as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years, it has to be construed strictly. The initial burden is on the Department to prove that the situations visualised by the proviso existed. But once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, the burden shifts and then applicability of the proviso has to be construed liberally. When the law requires an intention to evade payment of duty then it is not mere failure to pay duty. It must be something more. That is, the assessee must be aware that the duty was leviable and it must deliberately avoid paying it. The word `evade' in the context means defeating the provision of law of paying duty. It is made more stringent by use of the word `intent'. In other words the assessee must deliberately avoid payment of duty which is payable in accordance with law....."
12. Department has not produced any such evidence . In another judgement in the case of Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut reported as [2005 (188) ELT 149(S.C.)], while referring to the observations made in Pushpam Pharmaceuticals Company reported as [1995 (78) ELT 401 (SC)], Hon'ble Supreme Court clarified the requirements of the proviso to Section 11-A, as follows :-
"26... This Court in the case of Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay (supra), 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 C/50961/2021
13. Hon'ble Apex Court in the case of Union of India vs Ashok Kumar and Ors. reported as [(2005) 8 SCC 760] observed that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility."
14. Reverting to the facts of the present case, there already was an audit in the year 2013 hence entire information was with the department since then. Also no shortcoming was noticed during that audit, question of evasion of duty for the same period does not at all arise. Invoking the extended period under the proviso of Section 11A is accordingly not sustainable. Demand for extended period is barred by time. For the normal period also there is no evidence to prove the allegation of short payment of duty. The order under challenge is therefore, not sustainable. Same is hereby set aside. Consequently appeal stands dismissed.
(Pronounced in the open Court on 28.03.2022 ) ( RACHNA GUPTA ) MEMBER (JUDICIAL) ss 9