Karnataka High Court
The Commissioner Of Central Excise vs M/S Datasol Innovative Labs on 8 February, 2017
Bench: Jayant Patel, A.N.Venugopala Gowda
1
R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 8TH DAY OF FEBRUARY 2017
PRESENT
THE HON'BLE MR.JUSTICE JAYANT PATEL
AND
THE HON'BLE MR.JUSTICE A N VENUGOPALA GOWDA
CENTRAL EXCISE APPEAL NO.26/2016
BETWEEN:
THE COMMISSIONER OF CENTRAL EXCISE
BENGALURU-V COMMISSIONERATE,
TTMC-BMTC BUILDING, 5TH FLOOR,
DOMLUR, OLD AIRPORT ROAD,
BENGALURU - 560 071.
PRESENTLY RESIDING AT THE ABOVE ADDRESS
...APPELLANT
(BY SRI.K V ARAVIND, ADVOCATE)
AND:
M/S DATASOL INNOVATIVE LABS
NO. 793, GROUND AND FIRST FLOOR,
DATASOL HOUSE, 17TH CROSS,
VYALIKAVAL HBCS LAYOUT, VEERANNA PALYA,
ARABIC COLLEGE POST, NAGAWARA,
BENGALURU - 560 045.
...RESPONDENT
(BY SRI.CHERIAN PUNNOOSE, ADVOCATE)
2
THIS APPEAL IS FILED UNDER SEC.35G OF THE
CENTRAL EXCISE ACT, ARISING OUT OF ORDER
DATED:08/01/2015 PASSED IN FINAL ORDER
NO.20078/2015 BY THE CESTAT, SOUTH ZONAL
BENCH, BENGALURU PRAYING TO FORMULATE THE
SUBSTANTIAL QUESTIONS OF LAW FRAMED ABOVE
AND DECIDE THE SUBSTANTIAL QUESTIONS OF LAW
IN FAVOUR OF THE APPELLANT IN THE INTEREST OF
JUSTICE AND EQUITY, SET ASIDE THE FINAL ORDER
NO.20078/2015 DT:08/01/2015 PASSED BY THE
CESTAT, SOUTH ZONAL BENCH, BENGALURU AND
ALLOW THE APPEAL IN THE INTEREST OF JUSTICE
AND EQUITY AND PASS SUCH OTHER ORDER AS THIS
HON'BLE COURT DEEMS FIT UNDER THE
CIRCUMSTANCES OF THE CASE IN THE INTEREST OF
JUSTICE AND EQUITY.
THIS APPEAL COMING ON FOR ADMISSION THIS
DAY, JAYANT PATEL J., DELIVERED THE FOLLOWING:
3
ORDER
The appellant-Revenue has preferred the appeal by raising two substantial questions of law which reads as under:
1. WHETHER, under the circumstances of the case, the CESTAT is right in holding that the demand is barred by limitation on the ground that there is a bonafide belief and the clarification issued by the Bangalore Commissionerate?
2. WHETHER, the CESTAT is right in holding that the Respondent is entitled for the benefit of exemption on the basis of the Certificate said to have been issued by the CSIO Or Aeronautic Development Agency which is not a prescribed authority under the Notification No.10/97-CE dt.01/03/1997?4
2. The present appeal is directed against the order dated 08.01.2015 passed by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as the Tribunal for the sake of brevity), whereby the Tribunal for the reasons recorded in the order has found that only period of one year would be available for limitation and period of five years would not be available for limitation and thereafter the matter is remanded to the Commissioner for consideration in accordance with law.
3. The short facts of the case appears to be that as per the appellant, the respondent is engaged in the business of manufacture of parts of aircrafts and helicopters. As per the respondent, such parts were being manufactured for supply to Hindustan Aeronautics Limited (hereinafter referred to as 'the HAL' for the sake of brevity). As per the respondent, by 5 virtue of the notification, from 1986 onwards the products which are manufactured by HAL for supply to the Ministry of Defence for official purposes are exempted. It is further the case of the respondent that after the notification dated 01.03.1986, the Central Board of Customs & Central Excise had also issued a Circular, the relevant of which reads as under:
"2. The purpose of Notification 184 of 86, manufactured by the five units listed in the said Notification, which are mainly engaged in production and supply of goods to the Ministry of Defence for official purposes, is very clear. When goods are manufactured by other ancillary units and sub-contractors for this purpose, and are sent back to the five units for further processing, fitting, manufacture etc. and for eventual clearance from the five main units, there is absolutely no reason for denying them the benefit of this exemption notification. You may, therefore, immediately finalise all pending cases on this 6 basis and later send me a report as to the background factors leading to this problem so as to examine methods to ensure that such unnecessary problems are not created in future."
(Emphasis Supplied)
4. It appears that based on the same, the respondent claimed exemption. However, subsequently, the demand notice was made for covering the period as if five years period of limitation was available and the demand was confirmed by the competent authority. The matter was carried before the higher forum and ultimately before the Tribunal. The Tribunal found that the period of limitation available would be of only one year and not five years because of the bonafide act on the part of the respondent herein to clear the goods as if exempted and therefore the Tribunal also held that the period of five years would not be available which can be invoked only in specific circumstances. The Tribunal 7 after having found that the period of one year may be available, the matter is remanded to the competent authority. Under the circumstances, the present appeal before this Court.
5. We have heard Mr.K.V.Aravind, learned Counsel appearing for the appellant and Mr.Cherian Punnoose, learned Counsel appearing for the respondent.
6. We may record that the Tribunal in the impugned order at paragraphs 9 and 10 has observed thus:
"9. As regards Notification No. 10/97-CE dated 01.03.1997 is concerned, the Revenue's objection is that the certificate produced by the assessee in terms of the said notifications are not duly signed by the proper officer. However we find that certificates handed over to the appellant duly signed by CSIO or aeronautic development agency and based on which the 8 appellant availed the benefit of notification. Even if the fact that they were not signed by the proper officer is admitted, no suppression or misdeclaration can be attributed to the assessee so as to invoke the longer period of limitation. Apart from that we find, as is seen from the certificate, the person signing the same is holding the rank in pay scale higher than the Deputy Secretary to Government of India in which case even though the certificates were not signed by Deputy Secretary, the same should be accepted. Further the Superintendent in his letter dated 28.10.2013 has also verified the said certificates and has reported that the same appears to be adequate.
10. In view of the foregoing, demand cannot be held sustainable on the point of limitation itself. As regards the benefit of Notification No.6/2006-CE learned advocate submits that they are not aware as to whether M/s.HAL would use the goods for repair, 9 maintenance or for further manufacture of the goods. On being informed by M/s. HAL and as certified by them that the goods would be used for maintenance and repair, they have claimed the benefit of the said notification and if M/s. HAL and as certified by them that the goods would be used for maintenance and repair, they have claimed the benefit of the said notification and if M/s. HAL has not used the same for the said purpose, the appellant cannot be held responsible for them. As the entire demand is barred by limitation, we hold that no liability on the said count would also arise against them."
7. Section 11-A (1) to (4) of The Central Excise Act, 1944, for ready reference reads as under:
"11-A. 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 10 reason of fraud or collusion or any willful 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 charegeable 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 11-AA.11
(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 one year 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 12 short-paid or erroneously refunded, by the reason of-
(a) fraud; or
(b) collusion; or
(c) any willful 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 11-AA and a penalty equivalent to the duty specified in the notice.
(Emphasis Supplied) The aforesaid shows that if the case is falling other than that of fraud or collusion or any wilful mis-statement or suppression of material fact or contravention of any provisions of the Act or the Rules, with an intent to 13 evade the payment of duty then the period of limitation would be one year from the relevant date. But if it is a case falling in the category of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of provisions of the Act or Rules with an intent to evade payment of duty, the period of five years would be available from the relevant date. Both for the purpose of recovery of the duties not levied or not paid or short-levied or short-paid or erroneously refunded. As such, in our view, whether this is a case of fraud or collusion or any wilful mis-statement of consideration of material facts or contravention of provisions of the Act or the Rules with an intent to evade payment of duty are essentially the question of fact wherein ultimate fact finding conclusion is to be recorded depending upon the facts and circumstances of each case. If the matter is to rest on the ultimate fact finding conclusion for which 14 the Tribunal is the final fact finding authority, there would not be any question of law which may arise for consideration, since the present appeal has to be limited to question of law only and not on the question of fact, unless there is any perversity in the finding of fact recorded by the Tribunal.
8. If one is to further examine the matter so as to find out as to whether there is any perversity in the finding of fact recorded by the Tribunal or not, the finding recorded by the Tribunal at paragraphs 9 and 10 referred to herein above, cannot be said to be perverse finding.
9. However, Mr. K.V. Aravind, learned counsel appearing for the appellant attempted to contend that by virtue of Notification No.63/95-CE dated 16.03.1995, the earlier Notification No.184/86-CE dated 01.03.1986 15 as well as the clarification shall get superseded. He submitted that in the notification dated 16.03.1995, the language is clear that if the goods are manufactured by HAL itself and are for supply to the Ministry of Defence for official purposes, then only the exemption is available. In his submission, since the language is clear and if the duties are not paid by claiming exemption, the intention to evade duty can be gathered and therefore, the period of limitation of five years would be available and not one year as concluded by the Tribunal.
10. In our view, the contention is thoroughly misconceived for the simple reason that in the earlier Notification No.184/86 dated 01.03.1986, the language was as under:
16
"Manufactured by the units specified in the annexure to this notification for supply to the Ministry of Defence for official purpose".
11. The duty of the excise leviable is specified in the said schedule in the Notification No.63/1995 dated 16.03.1995. The said notification uses the same language which reads as under:
"If manufactured by the following units and are for supply to the Ministry of Defence for official purposes".
12. The only difference in the Notification dated 16.03.1995 is that the number of units are added upto 7 whereas, in the Notification dated 01.03.1986, the number of units were only 4. It is apparent that there is no change in the language used in both the notifications for the purpose of grant of exemption. Not only that but for the very language used, in the earlier notification dated 01.03.1986, the interpretation thereafter is 17 already made by the Central Board of Customs & Central Excise vide Circular dated 27.06.1992 referred to herein above, that when the goods are manufactured by other ancillary units and other contractors for this purpose are sent to the units for which the exemption is available, there is no reason for denying them the benefit of exemption. Under these circumstances, the contention raised that the intention to evade duty cannot be accepted.
13. In our view, if there was change in the language of the Notification dated 16.03.1995, possibly the matter may stand on a different footing and different consideration. But when the very language is kept intact and there is only addition in the number of units, it cannot be said that the clarification of the Central Board of Customs & Central Excise dated 27.06.1992 referred to herein above shall be wiped off or nullified by 18 the Notification dated 16.03.1995. As such, no intention either directly or indirectly to wipe out the effect of the Circular dated 27.06.1992 of the Central Board of Customs & Central Excise can be gathered.
14. In view of the above, if the language in the earlier Exemption Notification dated 01.03.1986 and the Exemption Notification dated 16.03.1995 were the same and the instructions issued by the Central Board of Customs & Central Excise would also co-relate. In any case, it cannot be said that there was any suppression or that there was any intention to evade the duty.
15. In view of the above, the finding recorded by the Tribunal on the aspects bonafide of the appellant therein /respondent herein and consequential non- availability of the limitation period of five years cannot be said to be perverse nor can be said to be erroneous. 19
16. Under the circumstances, the question No.1 needs to be answered in the negative against the Revenue and in favour of the assesee, so far as the availability of the period of five years as the limitation period.
17. It has been stated by the learned counsel for the appellant/Revenue that in view of the answer to question No.1, question No.2 would be inconsequential. Hence, we find that we need not answer question No.2.
18. In view of the above, the appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE JT/CA