Custom, Excise & Service Tax Tribunal
Jindal Steel & Power Ltd vs Principal Commissioner, Central Tax, ... on 15 April, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
EXCISE APPEAL NO. 51511 OF 2018
(Arising out of Order-in-Original No. RPR/EXCUS/000/COM/082/2017 dated 20.12.2017
passed by the Principal Commissioner, Central Tax, Raipur)
M/s. Jindal Steel & Power .....Appellant
Ltd. Coal Mines
Village - Donga Mahua,
Post-Dhurabhata, Tehsil - Tamnar,
Dist - Raigarh (C.G.)
versus
Principal Commissioner, Raipur .....Respondent
Central GST, Central Excise & Customs
Central GST Bhawan,
Dhamtari Road, Tikrapara,
Raipur (Chattisgarh)
APPEARANCE:
Shri Vipin Jain, Ms. Tuhina Sinha and Ms. Neha Gulati, Advocates for the
Appellant
Shri Raj Pal Sharma, Special Counsel for the Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)
DATE OF HEARING: 30.01.2025
DATE OF DECISION: 15.04.2025
FINAL ORDER NO. 50479/2025
JUSTICE DILIP GUPTA:
M/s. Jindal Steel & Power Ltd. Coal Mines 1 has filed this appeal to
assail the order dated 20.12.2017 passed by the Principal Commissioner,
Raipur 2. This order confirms the demand of central excise duty amounting
to Rs. 45,95,95,499/- under section 11A/11A(4) of the Central Excise,
1944 3 with interest under section 11AA of the Central Excise Act. Penalty
1. the appellant
2. the Principal Commissioner
3. the Central Excise Act
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has also been imposed on the appellant under section 11AC(1)(c) of the
Central Excise Act.
2. The appellant is a captive coal mine of Jindal Steel and Power Ltd 4.
As the appellant is engaged in raising coal, it is registered with the central
excise authorities. JSPL has a separate central excise registration for the
iron and steel manufacturing facility at Raigarh.
3. Coal, being a natural product, has different physio-chemical
properties with reference to the extent of ash content, volatile matter and
carbon percentage present in it. To segregate coal with reference to
minimum level of ash content, volatile matter and carbon percentage, coal
is subjected to a process of washing, which is a process of physically
segregating coal of different grades.
4. The entire coal raised from the mines is generally called
"Raw"/"Run-of-Mine" coal 5. A part of such ROM coal, which can be
directly used by the JSPL steel manufacturing facility, is cleared as such
and the remaining coal is subjected to a process of washing for physical
segregation of the required composition. This coal is referred to as
"Washed coal". During the process of segregating coal though washing,
two by-products, namely, Middlings and Rejects are generated. These by-
products are also coal, but the composition is not suitable for use in
metallurgical operations. Middlings are coal with high density which are
generally used for power generation, while Rejects contain high ash and
mineral impurities and are generally used for Fluidized Bed Combustion
Boilers for power generation, briquette (domestic fuel) and land filling.
5. Central excise duty on coal was introduced on 01.03.2011.
However, in terms of an earlier notification dated 16.03.1995, all goods
4. JSPL
5. ROM coal
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manufactured in a mine were exempted from duty. With effect from
24.03.2011, the aforesaid notification dated 16.03.1995 was amended to
exclude "coal" from the said notification. Thus, w.e.f. 24.03.2011, "coal"
produced and cleared from a mine became leviable to excise duty.
6. During the relevant period from 2011-12 to 2014-15, the appellant
cleared a part of the ROM coal directly for steel manufacturing at JSPL,
while the balance quantity was subjected to the process of washing. The
appellant also cleared Washed coal and Middlings to JSPL. So far as
Waste/Rejects are concerned, there was no clearance during the relevant
period.
7. The appellant claims that it filed monthly ER-1 returns with the
department in terms of rule 12 of the Central Excise Rules 2002 6, in which
details of the coal cleared along with the assessable value and duty paid
thereon were reported in Table 3. The appellant also claims that it filed
monthly returns in Form B with the Coal Controller, Ministry of Coal,
Kolkata 7, wherein it furnished details of the ROM coal raised during the
month, fed into the washery as also dispatched to its JSPL plant for steel
manufacturing along with details of Washed Coal and Washed Coal fines
produced in the washery, as also the quantity dispatched to the washery.
The details of the quantity of Middlings and Rejects arising from the
process of washing as also the quantity of Middlings cleared to JSPL plant
along with the particulars of the opening and closing stock were also filed
on a monthly basis.
8. The Superintendent, Central Excise, Raigarh sent a letter dated
30.03.2012 to the appellant to furnish the monthly returns filed in Form B
6. the Central Excise Rules
7. the Coal Controller
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with the Coal Controller for the period July 2011 to March 2012. The
relevant portion of the letter is reproduced:
"You are requested to make available Form B i.e.,
Monthly Returns filed in respect of coal production
with the Coal Controller, Ministry of Coal, Kolkata
(W. Bengal) for the period Jul'11 to Mar'12.
While perusing your Form B for the earlier period, it
came to the notice that the quantity of production of
coal from COAL WASHERY is higher than that of coal
fed into COAL WASHERY. Why it so?
Please make available the same by 10.04.12"
9. The appellant sent a reply dated 10.04.2012 enclosing copy of the
monthly returns of coal submitted to the Coal Controller for the period
from July 2011 to March 2012. The relevant portion of the letter is
reproduced:
"In response to your letter bearing no. 898 dated
30.03.2012 we enclose herewith copy of monthly
return of coal submitted to the Coal Controller,
Kolkata for the period from July 2011 to March
2012."
10. According to the appellant, as the ROM coal and Washed coal were
captively consumed for steel manufacturing at JSPL, the appellant
computed the assessable value of such ROM coal and Washed coal in
terms of rule 8 of the Central Excise Valuation Rules, 2000 8, which
requires the value to be computed at 110% of the cost of production,
determinable in terms of CAS-4 prescribed by the Institute of Cost
Accountants of India.
11. The appellant claims that for this reason it prepared two separate
statements of cost of production for each financial year. The first being for
8. the 2000 Valuation Rules
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the ROM coal and the second for the Washed coal. While preparing the
statement of cost of production for Washed coal, all costs incurred in the
production process like cost of material consumed, direct wages and
salaries, direct expenses, work overheads and administrative overheads,
were loaded but the value of the by-product Middlings which were cleared
was subtracted, as is provided for in of CAS-4. However, royalty, clean
energy cess and development and environment cess were added to such
value. Thereafter, the assessable value was taken by the appellant at
110% of the sum total of the aforesaid costs for the purpose of
discharging central excise duty.
12. There is no dispute regarding the accuracy and correctness of the
costs/heads of costs considered for computing the cost of production of
Washed coal as also ROM coal in terms of CAS-4.
13. According to the appellant, the assessable value of Middlings which
were cleared could not have been determined as per CAS-4, since it is a
by-product. The assessable value was, therefore, arrived at by considering
the market price of the lowest grade of coal sold by South Eastern Coal
Fields, to which amount towards royalty, clean energy cess and
development and environment cess were added for the purpose of
discharging central excise duty on their clearances.
14. The appellant also claims that while computing the cost of
production of the Washed coal, deduction qua the by-product is to be
considered as per the net realizable value of the by-product and so the net
realizable value considered for deduction by the appellant was much lower
than the value of by-product considered for the purpose of discharging
central excise duty. The appellant claims that this would be evident from a
comparison of the value on which central excise duty on Middlings was
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discharged for each year vis-à-vis the value of Middlings which was
deducted while computing the CAS-4 value of Washed coal. This
comparison is reflected in the following tabulation chart provided by the
appellant for the period 2011-12 to 2014-15.
Financial By-product credit Assessable value Assessable
Year in CAS-4 of by product value in excess
statement (in Rs.) of column (A)
(in Rs.) (in Rs.)
A B C=B-A
2011-12 58,07,38,020 1,19,24,71,364 61,17,33,344
2012-13 1,03,87,30,542 1,75,41,95,844 71,54,65,302
2013-14 1,16,71,23,142 1,83,72,03,554 67,00,80,412
2014-15 1,39,06,97,395 2,05,33,28,555 66,26,31,160
15. Thus, according to the appellant, as a lower value towards the by-
product was deducted while computing the value of the Washed coal,
higher central excise duty was paid by the appellant on Washed coal than
what should have been actually discharged.
16. A show cause notice dated 08.04.2016 was issued to the appellant.
It alleges that the entire coal cleared to the steel manufacturing facility of
JSPL, other than the quantity of ROM coal cleared to the steel
manufacturing facility of JSPL, represents clearance of Washed coal,
though according to the appellant part of the coal that was cleared to JSPL
included Middlings. The show cause notice, therefore, computes the
differential central excise duty liability by multiplying the presumed
quantity of Washed coal cleared by taking 110% of the CAS-4 value for
each year in question. The show cause notice also invokes the extended
period of limitation for the reason that but for the audit, the factum of
short-payment of duty would not have come to light and would have
remained unnoticed.
17. The appellant filed a reply to the show cause notice pointing out that
the show cause notice wrongly presumes that the entire quantity of coal,
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other than ROM coal clearance, represents Washed coal since it overlooks
the fact that there was substantial quantity of clearance of the by-product
Middlings also. The appellant also pointed out that the CAS-4 value of
Washed coal was arrived at without considering the quantity of Middlings.
If Middlings were not to be considered as a by-product, the total quantum
of clearances of finished goods would be considerably more, and,
therefore, the per unit cost of production of such clearances would be
substantially lower than what the appellant had considered for discharging
excise duty. The appellant, therefore, contended that there would be no
differential duty liability as computed in the show cause notice.
18. The Principal Commissioner did not accept the pleas raised by the
appellant in reply to the show cause notice and by order dated 20.12.2017
held that the appellant had declared the entire quantity cleared under the
description of coal in the ER-1 returns and had not separately mentioned
the quantum of the by-product that was cleared. The Principal
Commissioner further held that the appellant had not produced any
documentary evidence in support of its claim regarding the clearance of
the by-product Middlings to the JSPL plant.
19. It needs to be noted that the appellant had filed an application
dated 22.11.2023 for bringing on record additional evidence and grounds.
The appellant brought on record the returns that were filed with the Coal
Controller in "Form B" on a monthly basis. These returns had been
submitted by the appellant to the department by letter 10.04.2012 in
response to the letter dated 30.03.2012 sent by the Superintendent. The
returns filed with the Coal Controller, amongst others, furnished details of
the quantity of Middlings that was generated as also the quantity that was
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cleared to JSPL on a month to month basis. This application was allowed
by the Tribunal on 11.07.2024.
20. During the course of hearing held on 11.07.2024, learned special
counsel appearing for the department stated, after receiving instructions
from the department, that the particulars furnished by the appellant in the
application were correct.
21. Shri Vipin Jain, learned counsel for the appellant assisted by Ms.
Tuhina Sinha and Ms. Neha Gulati made the following submissions:
(i) It is an undisputed position that the appellant had
effected clearance of ROM coal, Washed coal and
Middlings during the period in dispute, as verified by the
department from the data filed with the Coal Controller
and on comparison with the figures disclosed in the ER-1
return. From the said verification report, it is evident that
the appellant had effected clearances of by-product
Middlings, which the show cause notice erroneously
presumes to be Washed coal while raising the demand of
differential central excise duty against the appellant;
(ii) Even if clearance of Middlings is regarded as part of
clearance of Washed coal, then too there can be no
demand of differential central excise duty as the total cost
of production considered while computing the CAS-4 value
for Washed coal was not disputed. The only consequence
would be that the per unit cost of production of Washed
coal would reduce substantially, if the quantum of
Middlings is added to the quantity cleared as Washed
coal;
(iii) In March 2012 itself, the department had called for
information/copies of the returns filed with the Cost
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Controller and thereafter on 18.04.2012 and 25.04.2012
called for the copies of CAS-4 in respect of coal sold
during March 2011 to March 2012 as also requiring the
appellant to furnish information regarding the ingredients
as well as amount thereof per tonne to arrive at the
landing cost of coal. It is therefore, evident that the
department was always aware of the details of quantity
and value vis-à-vis ROM coal, Washed coal and Middlings
raised and cleared by the appellant. The CAS-4
statements/certificates clearly show that the value of the
by-product was deducted while arriving at the cost of
production of the Washed coal. As such, it was clearly
impermissible for the department to invoke the extended
period of limitation;
(iv) Even otherwise, the entire dispute is revenue neutral as
undisputedly CENVAT credit was available to the
appellant. Therefore, the demand, except for the month of
March 2015, is barred by limitation; and
(v) In any case, the only reason assigned for invoking the
extended period of limitation is that it is only on initiation
of investigation and enquiry that facts came to the
knowledge of the department. It is a settled principle of
law that the extended period of limitation cannot be
invoked merely because facts came to light during enquiry
or investigation.
22. Shri Rajpal Sharma, learned special counsel for the department,
however, supported the impugned order and made the following
submissions:
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(i) The order passed by the Principal Commissioner is based
on evidence available on record and does not suffer from
any illegality;
(ii) There is no evidence to establish that Middlings are by-
products;
(iii) The value of Middlings shown in the CAS-4 statement (the
by-product credit amount) is significantly different from
the assessable value shown in the chart, which is at page
233 of the appeal memo;
(iv) The appellant had not furnished separate details of ROM
coal, Washed coal and Middlings in the ER-1 returns;
(v) The applicant may have filed monthly returns with the
Coal Controller, but these are not assessment documents
as per Central Excise Rules and hence these returns
cannot be given an overriding effect over the monthly ER-
1 returns filed by the appellant with the jurisdictional
authority under rule 12 of the Central Excise Rules, which
is a primary self-assessment document of the assessee
containing relevant monthly details such as quantity of
production and clearances, value of goods cleared, tariff
heading, exemption notification and availment of CENVAT
credit; and
(vi) The extended period of limitation was correctly invoked in
the facts and circumstances of the case.
23. The submissions advanced by the learned counsel for the appellant
and the learned special counsel appearing for the department have been
considered.
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24. Central excise duty on coal was introduced from 01.03.2011, but in
terms of an earlier notification dated 16.03.1995 all goods manufactured
in a mine were exempted from duty. However, w.e.f. 24.03.2011 the said
Notification was amended to exclude "coal" and so w.e.f. 24.03.2011 coal
produced and cleared from a mine became leviable to central excise duty.
25. The appellant is a captive coal mine of JSPL. It is engaged in raising
coal and the entire coal raised by the appellant is captively consumed at
the JSPL steel manufacturing facility. The coal that is raised from the mine
is known as ROM coal. Part of this ROM coal is directly used in the
manufacturing of steel by JSPL. The balance of the ROM coal is washed by
the appellant. After washing, three products emerge, namely, Washed
coal, Middlings and Reject. During the relevant period i.e. 2011-12 to
2014-15, the appellant cleared ROM coal, Washed coal and Middlings to its
JSPL steel manufacturing unit. There was no clearance of Rejects during
the disputed period.
26. ROM coal, Washed coal and Middlings are consumed at the JSPL
plant. The assessable value of ROM coal and Washed coal captively
consumed at JSPL steel plant is computed in terms of rule 8 of the 2000
Valuation Rules, which requires the value to be computed at 110% of the
cost of production in terms of CAS-4. The appellant prepared two
statements showing cost of production for each financial year. The first
statement was for ROM coal and the second statement was for Washed
coal.
27. While preparing the statement for production for Washed coal, the
appellant loaded all costs incurred in the production process and
subtracted the value of the by-product Middlings that was cleared, as is
provided for in CAS-4. Thereafter, the appellant added royalty, clean
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energy cess and development and environment cess to such value. The
assessable value was then determined at 110% of the sum total of the
aforesaid costs for the purpose of discharge of central excise duty. For
calculating the assessable value of Middlings that was cleared, the
appellant considered the market price of the lowest grade of coal sold by
South Eastern Coal Fields and then added royalty, clean energy cess and
development and environment cess for the purpose of discharging the
central excise duty on the clearance of Middlings. It needs to be noted
that the assessable value of Middlings is not required to be determined as
per CAS-4, as it is a by-product.
28. The main issue that arises for consideration in this appeal is as to
whether the department is justified in including the total quantity of
Washed coal and Middlings supplied to the JSPL plant as Washed coal so
as to raise the differential demand of central excise duty. Linked to this
issue is the issue as to whether the department was justified in invoking
the extended period of limitation contemplated under the provisions of
section 11A(4) of the Central Excise Act. These two issues were framed,
amongst others, by the Principal Commissioner for decision in the
impugned order.
29. The findings recorded by the Principal Commissioner in respect of
the first issue are as follows:
(i) The by-product Middlings is treated as Washed coal
"3.5.2 On perusal of the CAS-4 submitted by the
Noticee for the period 2011-12 to 2014-15, it is
observed that they are maintaining CAS-4 under two
categories (i) CAS-4 for ROM coal (ii) CAS-4 for
washed Coal separately. The CAS-4 for ROM coal for
the said period indicate quantity of production and
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clearance of ROM coal, its cost of production and
110% of cost of production including royalty amount.
Whereas the CAS-4 for Washed Coal for the
said period does not mention the clearance
quantity of Washed Coal ***** but indicates
the consumption of raw coal in washery and its
cost of production along with 110% of cost of
production including royalty amount.
3.6 The Noticee in its defense mainly contested
the demand raised under the impugned Show Cause
Notice on the ground that "the value of by-product
cannot be determined under CAS-4, rather on the
basis of its transaction value and the quantity of its
by-products [said to be middlings and pond slurry]
are also included under the ibid demand of duty
which is improper and not demandable". In this
regard, on perusal of copy of ER-1 available on
record, it is observed from the body of ER-1, that
the Noticee have shown manufactured and cleared
quantity of coal under one head describing as
"COAL" and in 'Remarks' column of the ER-1 return,
there is a mention of quantity of products/by-
product; for example in the ER-1 of August 2012, it
is mentioned as "TOTAL PRODUCTION
(967263000KG) INCLUDES FOLLOWING: 1.
PRODUCTION COALMINES - 502175000KG. OUT OF
THIS 479347000 KG. FEED TO WASHERY. 2.
PRODUCTION WASHERY - 465088000KG." Thus, it
is seen that the ER-1s, do not have any SUCH
segregation of main products/by-products, as
claimed by the Noticee.
*****
3.7 The Noticee further in their defense claimed the production of 'by-product' and its quantification as under:
Period Quantity of Quantity of Quantity of Total ROM coal Washed coal by-products quantity cleared cleared cleared shown in ER-
1 Returns Mar-11 5,614.06 41,628.42 90,940.99 138,183.47 14 E/51511/2018 2011-12 305,773.88 2,062,077.63 3,521,727.51 5,889,579.02 2012-13 271,281.76 2,050,708.90 4,435,853.10 6,757,843.76 2013-14 239,059.00 2,092,513.81 3,846,715.19 6,178,288.00 2014-15 268,711.88 2,220,485.36 3,868,347.64 6,357,544.88 3.7.1 On perusal of above shown data reveals that the quantity claimed as by-product by the Noticee is much higher in comparison to the quantity of its main product which cannot be feasible and viable in normal course of business. Further, except to the copy of ER-1 [which are not supporting the Noticee's claim as discussed supra], the Noticee have not come forward with any documentary evidence in support of their claim in this regard. The plea taken by the Noticee in its defense to consider the transaction value for levy of duty for its said to be by-products is again without any supportive documentary evidence inasmuch as that they have sold the so-called by-products on the basis of transaction value as determined under Section 4(1) of the Central Excise Act, 1994.
***** 3.9.2 In view of this discussions and findings given in the foregoing Paras, it is observed that the Noticee has not determined the correct assessable value and has failed to disclose the correct assessable value in their ER-1 Returns filed for the period from Mar-2011 to Mar-2015 without ascertaining the correct Cost of Production and also failed to discharge the correct Central Excise Duty on 110% of the CAS-4 value on Coal cleared to its related unit M/s. Jindal Steel and Power Ltd., Raigarh in terms of Rule 8 of the Valuation Rules, 2000 read with Section 4(1)(b) of the Central Excise Act, 1944. Accordingly, the demand raised under the impugned Show Cause Notice is liable to be confirmed on this count. Held Accordingly."
(emphasis supplied) 15 E/51511/2018
30. The findings recorded by the Principal Commissioner in respect of the second issue are as follows:
(ii) Invocation of extended period "3.10. 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 the removal of impugned goods for the captive consumption/to the related persons. It has also suppressed the cost of production and failed to discharge the correct duty payable on 110% of CAS-4 value on coal cleared to its unit in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000; the Central Excise Rules, 2002 read with Section 4(1)(b) of Central Excise Act 1944. Further, it has not reflected the correct "transaction value" in their ER-1 Returns filed for the said period. These omissions of the Noticee came to the knowledge of the department only during enquiry and initiation of investigation in the case. Thus, the Noticee has suppressed the material facts from the knowledge of department and have deliberately not paid central excise duty on appropriate transaction value on coal extracted from mines. Accordingly, it has contravened the provisions of Rule 4, Rule 6 and Rule 8 of Central Excise Rules, 2002. Therefore, extended period of limitation as provided under Section 11A(4) of Central Excise Act 1944 is rightly invoked in the instant case for the recovery of Central Excise duty."
(emphasis supplied) Discussion on first issue
31. As noticed above, the appellant contends that ROM coal raised from the mine is divided into two parts. One part is sent directly to JSPL and 16 E/51511/2018 the balance part is sent for washing, after which three products come into existence, namely Washed coal, Middlings and Reject. According to the appellant Washed coal and Middlings are both cleared to JSPL plant. The following chart would depict the aforesaid position:
JSPL Washed coal ROM coal washery Middlings Reject
32. The show cause notice proceeds on the footing that apart from the ROM coal directly supplied to JSPL, only Washed coal is supplied to JSPL. Thus, in effect the show cause notice seeks to exclude Middlings and the quantity of Middlings has been treated to be Washed coal so as to increase the quantity of Washed coal cleared to JSPL.
33. According to the appellant, Middling cannot be treated as Washed coal and the cost of production of Washed coal is arrived at after deducting the value of Middlings that were cleared. The appellant also contends that the assessable value of Middlings is calculated by a different procedure.
34. The Principal Commissioner has placed emphasis on the ER-1 returns filed by the appellant and has held that since the ER-1 returns did not segregate Washed coal and Middlings, the entire amount of Middlings 17 E/51511/2018 would have to be treated as Washed coal. The differential central excise duty has, therefore, been determined on this basis.
35. In arriving at this conclusion, the Principal Commissioner has completely ignored the returns filed by the appellant in Form B before the Coal Controller. These returns had been submitted by the appellant to the department through the letter dated 10.04.2012 in response to the communication dated 30.03.2012 sent by the Superintendent. Such returns have also been brought on record by the appellant and on verification have not been disputed by the department. These returns furnish complete details of the quantity of Middlings cleared to JSPL on a month to month basis. The Principal Commissioner was required to examine this issue, more particularly when such a contention was raised by the appellant in response to the show cause notice. In fact, the Principal Commissioner has recorded a finding that apart from ER-1 returns the appellant did not submit any document to substantiate the claim that the by-product Middlings were also cleared to JSPL. Failure to examine the returns filed by the appellant in Form B before the Coal Controller has vitiated the findings recorded by the Principal Commissioner. The quantity of Middlings cleared to JSPL could not have been treated as Washed coal.
36. It also needs to be noted that the Principal Commissioner has not disputed that Middlings also emerge together with Washed coal and Rejects after ROM coal is washed. All that has been stated by the Principal Commissioner is that the appellant did not disclose the figure of Middlings cleared to JSPL in the ER-1 returns filed before the department.
37. The contention of the learned counsel for the appellant is also that if clearance of Middlings is regarded as part of clearance of Washed coal, 18 E/51511/2018 then too, there will be no differential demand of central excise duty for the reason that if Middlings is considered as Washed coal, then the per unit cost of production of Washed coal would reduce substantially upon addition of the quantity of Middlings to the Washed coal.
38. This submission of the learned counsel for the appellant is not required to be examined. As noticed above, for preparing the statement of cost of production of Washed coal, all costs incurred in the production process are loaded but the value of the by-product Middlings cleared to JSPL is subtracted, as is the procedure provided in CAS-4. The assessable value of Middlings is calculated by a different method and indeed duty was paid by the appellant on the quantity of Middlings cleared to JSPL. The Principal Commissioner committed an error as Middlings could not have been considered as Washed coal and added to the quantity of Washed coal cleared to JSPL.
39. Learned special counsel from the department, however, urged that there was no evidence to establish that Middlings is a by-product.
40. In the first instance, this was not even an allegation raised in the show cause notice nor such a finding has been recorded in the impugned order. Secondly, the Provisional Coal Statistics Report 2022-23, published by the Office of the Coal Controller provides a comprehensive and detailed information on various aspects, including reserves and production of coal, under Chapter II of Concepts and Definitions. It records as under:
"2.12 Middlings and Rejects: In the process of coal washing, apart from clean coal we also get two by-products, namely, middlings and rejects......"19
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41. It is, therefore, not possible to accept the contention of the learned special counsel appearing for the department that Middlings is not a by- product emerging after washing of coal.
42. The learned special counsel for the department also raised an issue that the value of Middlings shown in the CAS-4 statement is different from the assessable value shown in the chart at page 233 of the appeal memo.
43. According to the appellant, in the CAS-4 statements prepared by the Cost Accountant, the net realizable value of the by-products produced during the washing process was deducted while computing the cost of production of Washed coal. In any view of the matter, the appellant had in the returns filed before the Coal Controller clearly indicated the amount of Middlings that were supplied to JSPL plant on a month to month basis.
44. Learned special counsel for the department also urged that the appellant did not separately furnish details of ROM coal, Washed coal and Middlings in the ER-1 returns.
45. According to the learned counsel of the appellant, rule 12 of the Central Excise Rules does not require disclosure of each variety of coal cleared in the ER-1 returns for the disputed period.
46. There is substance in the submission advance by the learned counsel for the appellant that till 24.03.2011 there was exemption available in respect of all coal raised in mines. It is thereafter that upon withdrawal of the exemption levy was introduced. This fact has been overlooked in the show cause notice as well as in the impugned order while confirming the demand raised for the quantity cleared in the month of March 2011. Even otherwise, the Principal Commissioner could not have ignored the returns filed by the appellant before the Coal Controller. These returns clearly bifurcate the ROM coal, Washed coal and Middlings. A 20 E/51511/2018 conjoint reading of both the ER-1 returns and the returns filed before the Coal Controller leave no manner of doubt that the appellant had disclosed all the relevant facts.
Discussion on second issue
47. The demand in the present appeal is from 2011-12 to 2014-15. The show cause notice was issued on 08.04.2016 invoking the extended period of limitation under the provisions of section 11A(4) of the Central Excise Act.
48. It would, therefore, be useful to reproduce sections 11A(1) and 11A(4) of the Central Excise Act and they are as follows:
"11A(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) the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.
***** 21 E/51511/2018 11A(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."
49. It would be seen from a perusal of sub-section (1) of section 11A of the Central Excise Act that where any duty of excise has not been levied or paid, 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 the Central Excise Act or the Rules made thereunder with intent to evade payment of duty, the Central Excise Officer, shall within one year from the relevant date, serve notice on the person chargeable to the duty which has not been paid. However, sub-section (4) of section 11A of the Central Excise Act provides that where any duty of excise has not been levied by reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Central Excise Act with intent to evade payment of duty, the Central Excise Officer, shall within five year from the relevant date, serve notice on the person to show cause why he should not pay the amount specify in the notice.
22
E/51511/2018
50. To examine whether the extended period of limitation could have been invoked, it would be appropriate to first reproduce allegations made in the show cause notice on this issue and the same is as follows:
"19. As discussed in foregoing paras, it appears that the Noticee is a captive mines and it has undervalued its cleared coal with intent to evade payment of central excise duty. The Noticee appears to have not determined the correct assessable value and has failed to discharge the correct duty payable in the period-2010-11 (03/2011) to 2014-15. Thus the Noticee appears to have suppressed the cost of production and failed to discharge the correct duty payable on 110% of CAS-4 value on coal cleared to its unit in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 in accordance to Rule 8 of the Central Excise Rules, 2002 read with Section 4(1)(b) of Central Excise Act 1944. The Noticee was required to pay the duty on the 110% of cost of production charges as a part of cost of production in terms of Rule 8 of the Valuation (Determination of Price of Excisable Goods) Rules 2000. Further, the Noticee also appears to have not reflected the correct "assessable value" in its ER-1 Returns filed for the said period. Non furnishing of actual amount of assessable value in its ER-1 Returns amounts to suppression of facts with intent to evade duty. Further non-payment of duty on 110% of CAS-4 value has not been disclosed by the Noticee on its own to the department, but noticed by the department only when an enquiry was initiated in this case. Again the Noticee appears to have suppressed the actual assessable value by not determining the correct 110% of CAS-4 value according to Rule 8 of Central Excise Valuation (determination of price of Excisable goods) Rules 2000 during 2010-11 (Mar'2011) to 2014-15. Therefore, that Noticee appears to have contravened the provisions of Rule 4, Rule 6 & Rule 8 of the Central Excise Rules, 2002 and 23 E/51511/2018 Rule 8 of Central Excise Valuation (determination of price of Excisable goods) Rules 2000 read with Section 4(1)(b) of the Central Excise Act, 1944, by not paying correct duty and interest thereon with intent to evade duty, hence extended period of 5 years is invokable for recovery of duty short paid Rs. 44,44,80,045/- (Basic Excise Duty Rs. 43,15,34,024/- Edu. Cess Rs. 86,30,680/-, H.E. Cess Rs. 43,15,340/-) under Section 11A(4) of the Central Excise Act 1944 alongwith interest as applicable under Section 11AB/11AA of the Central Excise Act, 1944."
(emphasis supplied)
51. The appellant filed a detail reply on this aspect and the relevant portions are as follows:
"2.4 The records of the Noticee are regularly audited by the Internal Audit, Central Excise Headquarters, Raipur, including the period involved in the present case. The following table provides information as to dates when audits were conducted:
Dates of Audit Period covered
30-8-2012 to 6-9-2012 March 2011 to March 2012
24-3-2014 to 25-3-2014 April 2012 to December 2013
16-3-2015 to 19-3-2015 January 2014 to February 2015
1-3-2016 March 2015 to January 2016
F.4 ***** There is no allegation that the
Noticee had not filed the statutory returns or the returns were incomplete or the relevant cost of production statement were not submitted. The only charge against the Noticee is that correct assessable value was not furnished in the returns and said statements.
F.5 The Noticee has sufficiently explained
hereinbefore as to correctness of the
figures mentioned in the returns and the erroneous basis taken in the SCN for raising the present demand. If at all, there is any 24 E/51511/2018 alleged discrepancy, the same is entirely attributable to the incorrect understanding of the figures shown in ER-
1 Returns and the difference in
interpretation and the same neither
amounts to suppression nor is an act
intended to deceive the Department. The Noticee wishes to submit that no evidence has been adduced by the department when such serious charges are being levelled.
F.6 The Noticee submits that the allegation in the present case is rather strange as according to the Department, the figures provided by the Noticee are not the 'correct' or 'actual' one.
Other than pointing out the difference between ER-1 figures and cost of production figures which were being filed regularly, the SCN does not disclose any evidence or attempts to show any positive act of suppression on the part of the Noticee. ***** They have been paying excise duty regularly, filing returns regularly and providing cost of production statements and other documents regularly. The Department is well aware of the products, practices and compliances of the Noticee as their unit is regularly visited by departmental officers.
F.7 It is submitted by the Noticee that there was no mala fide intention on part of the Noticee not to disclose assessable value, which according to the Department would be the correct value. When the Noticee is regularly filing both ER-1 Returns and cost of production statements, both provisional and final, there can hardly be any room to allege design with mala fide intention to deliberately suppress correct assessable value and not pay corresponding central excise duty. The Noticee humbly reiterates that they have believed and continue to believe that the assessable value as shown in ER-1 Returns and the figures provided in cost of 25 E/51511/2018 production statements are correct and hence, there has been no short payment of duty.
*****
F.12 ***** the facts in the present case
overwhelmingly indicate that excise duty was paid as per the bona fide understanding of the Noticee and by-
products were not included in cost of production of main products precisely because CAS-4 does not mandate the same. Assuming without admitting that there has been short payment of duty by the Noticee, it is submitted that the same was not due to any deliberate suppression or with intent to avoid statutory liability. Therefore, question of suppression of any fact or information, deliberately or otherwise does not arise at all in the present case and in such circumstances, invoking the ingredients of fraud, suppression, wilful misstatement etc. with intention to evade payment of duty, in an attempt to sustain a demand issued covering extended period of limitation, is bound to be rejected in view of the precedents."
(emphasis supplied)
52. The Principal Commissioner did not accept the submissions made by of the appellant on this issue, and recorded the following findings:
"3.10. 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 the removal of impugned goods for the captive consumption/to the related persons. It has also suppressed the cost of production and failed to discharge the correct duty payable on 110% of CAS-4 value on coal cleared to its unit in terms of Rule 8 of the Central Excise Valuation (Determination of Price 26 E/51511/2018 of Excisable Goods) Rules, 2000; the Central Excise Rules, 2002 read with Section 4(1)(b) of Central Excise Act 1944. Further, it has not reflected the correct "transaction value" in their ER-1 Returns filed for the said period. These omissions of the Noticee came to the knowledge of the department only during enquiry and initiation of investigation in the case. Thus, the Noticee has suppressed the material facts from the knowledge of department and have deliberately not paid central excise duty on appropriate transaction value on coal extracted from mines. Accordingly, it has contravened the provisions of Rule 4, Rule 6 and Rule 8 of Central Excise Rules, 2002. Therefore, extended period of limitation as provided under Section 11A(4) of Central Excise Act 1944 is rightly invoked in the instant case for the recovery of Central Excise duty."
(emphasis supplied)
53. During the relevant period, the show cause notice was required to be issued within one year of the relevant date. The show cause notice was issued on 08.04.2016 and it pertains to the demand made from March 2011 to March 2015. Thus, except for the period of one month i.e. March 2015, rest of the demand is for the extended period of limitation.
54. Learned counsel for the appellant submitted that on 30.03.2012, the Superintendent of Central Excise had required the appellant to furnish the monthly returns filed in Form B with the Coal Controller and in response to this letter the appellant had submitted the returns. The department had also called for copies of CAS-4 statements. Thus, the department was aware of the details of the quantity and value of ROM coal, Washed coal and Middlings raised and cleared by the appellant to JSPL. Yet, the show cause notice was issued on 08.04.2016 invoking the extended period of limitation. Learned counsel, therefore, submitted that the reason assigned 27 E/51511/2018 for invoking the extended period of limitation that it was only upon initiation of investigation and enquiry that facts came to the notice of the department is not correct. Learned counsel also submitted that the records of the appellant were regularly audited in 2012, 2014, 2015 and 2016 and, therefore, it is not open to the department to contend that the appellant had concealed any material facts, much less concealed them with an intention to evade payment of excise. Learned counsel also pointed out that the appellant had regularly filed ER-1 returns which were complete in all respects and the only charge against the appellant in the show cause notice is that the correct assessable value was not furnished in the returns. Learned counsel for the appellant pointed out that the correct assessable value according to the understanding of the appellant had been furnished, as Middlings cannot be treated as Washed coal and, therefore, it cannot be said that the appellant had suppressed any fact from the department. Learned counsel also submitted that in any view of the matter, even if it is presumed that the appellant had suppressed facts, suppression was not with an intention to evade payment of excise duty.
55. Learned special counsel appearing for the department, however, supported the invocation of the extended period of limitation and contended that it was clearly invokable.
56. The show cause notice issued to the appellant merely mentions that the appellant had not determined the correct assessable value in the ER-1 returns and this would amount to suppression of facts with intent to evade payment of duty. The show cause notice also mentions that this fact came to the notice of the department only when an enquiry was initiated.
57. The appellant had not only pointed out that audits of its records had been conducted in 2012 and 2014 but also pointed out that complete 28 E/51511/2018 details had been furnished to the department and merely because a different opinion may have been formed by the department cannot be made a ground to invoke the extended period of limitation. The appellant also pointed out that the department had to point out a positive act on the part of the appellant regarding suppression of facts. It is seen that the reply filed by the appellant has not been examined by the Principal Commissioner in the impugned order. The order states that appellant did not reflect the correct "transaction value" in the ER-1 returns and as the omission came to the knowledge of the department during the enquiry and investigation, the appellant had suppressed material facts from the department as a result of which the extended period of limitation could be invoked.
58. As noticed above, the issue is whether the appellant had cleared Washed coal and Middlings to JSPL. It has been found by the Principal Commissioner that the appellant only cleared Washed coal since the ER-1 returns did not disclose the clearance of Middlings. Accordingly, the quantity of Middlings has been added to the quantity of Washed coal. All these facts were in the knowledge of the department in 2012 itself when not only the audit was conducted but information had also been supplied by the appellant when it was sought by the department. The statements furnished by the appellant to the Coal Controller clearly mention the quantity of Middlings that were cleared by the appellant to JSPL plant. It is, therefore, clear that nothing had been suppressed by the appellant, much less with an intention to evade payment of central excise duty. The value of the by-product Middlings was not required to be included in the CAS-4 because it does not require it to be included. In fact, the value of by-product is calculated by a different procedure. 29
E/51511/2018
59. The provisions of section 11A (4) of the Central Excise Act came up for interpretation before the Supreme Court in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay 9. The Supreme Court observed that section 11A(4) of the Central Excise Act empowers the Department to reopen the proceedings if 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. It is in this context that the Supreme Court observed that the act must be deliberate to escape payment of duty. The relevant observations are:
"2. ***** The Department invoked extended period of limitation of five years as according to it the duty was shortlevied due to suppression of the fact that if the turnover was clubbed then it exceeded Rupees Five lakhs.
*****
4. A perusal of the proviso indicates that it has been used in company of such strong works as fraud, collusion or willful 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)
9. 1995 (78) E.L.T. 401 (S.C.) 30 E/51511/2018
60. This decision of the Supreme Court in Pushpam Pharmaceuticals was followed by the Supreme Court in Anand Nishikawa Co. Ltd. vs. Commissioner of Central Excise, Meerut 10 and the relevant paragraph is as follows:
"27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceuticals Co. v. CCE 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 and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made hereinabove 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 the proviso to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was 7 (2005) 7 SCC 749 11 E/52953/2018 not open to CEGAT to come to a conclusion that the appellant was guilty of "suppression of facts."
(emphasis supplied)
61. In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore 11 the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, wilful statement, suppression of fact or contravention of
10. (2005) 7 SCC 749
11. (2003) 3 SCC 410 31 E/51511/2018 any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation.
62. The aforesaid decisions of the Supreme Court were relied upon by the Supreme Court in Uniworth Textiles Ltd. vs. Commissioner of Central Excise, Raipur 12 and the relevant portion of the judgment is reproduced below:
"12. We have heard both sides, Mr. R.P. Batt, learned senior counsel, appearing on behalf of the appellant, and Mr. Mukul Gupta, learned senior counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-
payment as any of the three categories
contemplated by the proviso would leave no
situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso."
(emphasis supplied)
63. The Supreme Court in Continental Foundation Joint Venture vs.
12. 2013 (288) E.L.T. 161 (S.C.) 32 E/51511/2018 Commissioner of Central Excise, Chandigarh 13 also observed, in connection with section 11A(4) of the Excise Act, that suppression means failure to disclose full information with intention to evade payment of duty and the observations are as follows:
"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 wilful misstatement. The latter implies making of an incorrect statement with knowledge that the statement was not correct."
(emphasis supplied)
64. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) 14 also examined the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act, 1994 15 and held as follows:
"27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of
13. 2007 (216) E.L.T. 177 (S.C.)
14. 2018 (12) GSTL 368 (Del.)
15. the Finance Act 33 E/51511/2018 facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty.
***** Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.
***** The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief."
(emphasis supplied)
65. It would also be appropriate to refer the decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others 16. The Delhi High Court observed that merely because MTNL had not declared the receipt of compensation as payment for taxable service, does not establish that it had wilfully suppressed any material fact. The Delhi High Court further observed that the contention of MTNL that receipt was not taxable under the Act is a substantial one and no intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. The relevant portion of the observations are:
"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
16. W.P. (C) 7542 of 2018 decided on 06.04.2023 34 E/51511/2018 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 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 35 E/51511/2018 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)
66. It is, therefore, clear from the aforesaid discussion that the extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax.
67. In the present case, the Principal Commissioner merely observed that since the appellant had not reflected the correct "transaction value" in the ER-1 returns, the appellant suppressed material facts from the department and deliberately did not pay central excise duty on the appropriate transaction value of the coal extracted from mines. It needs to be pointed out that the appellant had, according to it's wisdom and bona- fide belief, reflected the correct transaction value. According to the appellant, the value of Middlings was not be included in the value of Washed coal and, therefore, it cannot be alleged that merely because the value of Middlings was not included, the appellant had suppressed facts with intention to evade payment of central excise duty.
68. In this connection, it would be pertinent to refer to the judgment of the Supreme Court in Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd. 17. The Supreme Court held that if an assessee bona-fide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke
17. 2023 (385) E.L.T. 481 (S.C.) 36 E/51511/2018 the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona-fide manner. The relevant portion of the judgment of the Supreme Court is reproduced below:
"23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could co-
exist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner.
24. The extent of disclosure that an assessee makes is also linked to his belief as to the requirements of law. *****. On the question of disclosure of facts, as we have already noticed above the assessee had disclosed to the department its pricing policy by giving separate letters. It is also not disputed that the returns which were required to be filed were indeed filed. In these returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. Separate disclosures were required to be made only 37 E/51511/2018 for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee's action of including the value of deemed exports within the value of domestic clearances."
(emphasis supplied)
69. In the present case, the records of the appellant were also regularly audited and the relevant dates are as follows:
Dates of Audit Period covered 30.08.2012 to 06.09.2012 March 2011 to March 2012 24.03.2014 to 25.03.2014 April 2012 to December 2013 16.03.2015 to 19.03.2015 January 2014 to February 2015 01.03-2016 March 2015 to January 2016
58. The audit team is expected to scrutinize all the records and can also call for information from the appellant. It cannot, therefore, for this reason also be alleged that material facts were suppressed by the appellant.
59. In this connection reliance can be placed on the decision of the Tribunal in M/s. Kalya Constructions Private Limited vs. The Commissioner, Central Excise Commissionerate, Udaipur 18, wherein it was observed:
"11. Both the SCNs further state that had the audit not conducted scrutiny of the records, the short paying the service tax would not have come to notice. It is a matter of fact that all the details were available in the records of the appellant. The appellant was required to furnish returns under section 70 with the Superintendent of Central Excise which it did. It is for the Superintendent to scrutinize the returns and ascertain if the service tax had
18. Service Tax Appeal No. 54385 of 2015 decided on 15.11.2023 38 E/51511/2018 been paid correctly or not. If the assessee either does not make the returns under section 70 or having made a return, fails to assess the tax in accordance with the provisions of Chapter or Rules made thereunder, the Superintendent of Central Excise can make the best judgment assessment under section 72. For this purpose, he may require the assessee to produce such accounts, documents or other evidence, as he may deem necessary. Such being the legal position, if some tax has escaped assessment which came to light later during audit, all it shows is that the Superintendent of Central Excise with whom the returns were filed had either not scrutinized the returns or having scrutinized then found no error in self-assessment but the audit found so much later. Had the Superintendent scrutinized the returns calling for whatever accounts or records were required, a demand could have been raised within the normal period of limitation. The fact that the alleged short payment came to light only during audit does not prove the intent to evade payment of service tax by the appellant, but it only proves that the Range Superintendent had not done his job properly. For these reasons, we find that the demand for the extended period of limitation cannot be sustained."
(emphasis supplied)
70. It is, therefore, clear that the appellant had not suppressed relevant facts from the department and in any case it cannot be alleged that suppression was with an intent to evade payment of duty. The extended period of limitation as contemplated under section 11A(4) of the Central Excise Act could not have been invoked in the facts and circumstances of the case.
71. The show cause notice was issued on 08.04.2016. It pertains to the demand from March 2011 to March 2015. Except for the period of one 39 E/51511/2018 month i.e. March 2015, the rest of the demand is for the extended period of limitation. Thus, the demand for the period from March 2011 to February 2015 also deserves to be set aside as the extended period limitation could not have been invoked. It has also been found as a fact that central excise duty could not have been confirmed.
72. Thus, for all the reasons stated above, the order dated 20.12.2017 passed by the Principal Commissioner deserves to be set and is set aside. The appeal is, accordingly, allowed.
(Order Pronounced on 15.04.2025) (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER (TECHNICAL) Shreya