Extended period of limitation cannot be invoked when non-payment of duty was due to divergent views on the issue.

PJ/Case Law/2013-14/2010

Case:-COMMISSIONER OF CENTRAL EXCISE, CUS. & S.T., COIMBATORE Vs KAY KAY PRESS METAL CORPORATION

Citation:-2013 (297) E.L.T. 40 (Guj.)

Brief Facts:-The assessee was engaged in manufacturing of fabricated iron and steel structures. The unit used to undertake processes such as cutting, bending, punching with the help of machines available in the factory. The Excise Officers visited the factory premises on 31.3.2000 on the basis of specific information that respondent had been manufacturing the excisable goods without obtaining registration and had thereby indulged into the evasion of duty. On the basis of material gathered during visit, the commissioner of Excise issued show cause notice in March, 2003 calling upon the respondent as to why the excise duty to the tune of Rs. 41,04,217/- should not be levied on the finished goods which were allegedly cleared during the period 1998-1999 and 1999-2000. The assessee had already paid Rs. 1 lakh which amount was accounted for. The assessee was also called upon in the show cause notice for explaining as to why the penalty and interest should not levied. The said show cause notice culminated into order dated 20-5-2004 by the adjudicating authority who confirmed the demand of excise duty for Rs. 41,04,217/-. It also imposed the Penalty of equivalent amount under section 11AC of the central Excise Act, 1944 as well as the penalty of Rs. 5,00,000/- and Rs. 10000/- and further ordered for payment of interest.

The assessee preferred an appeal before the appellate Tribunal (Appeals). The tribunal considered that show cause notice was issued in March, 2003, which was for the period 1998-2000 and thus it was time barred, the department had invoked the extended period as per the proviso to sec. 11 A of the Act on the ground that there was suppression and misstatement by the assessee. The Tribunal did not approve the action on the part of the department in invoking the extended period. Consequently, the appeal was allowed on limitation. Hence, the revenue department is in appeal.

Appellant contentions:-The appeal has been filed by the revenue department wherein following question of law has been framed to be answered by the High Court:-

“Whether the Tribunal below committed substantial error of law in allowing the Appeal filed by the assessee on the question of limitation on the ground of divergence of views at the relevant point of time although according to the law of precedent, even there was divergence of views, it is the duty of the assessee to follow the one which is binding as a precedent.”

Respondent contentions:-The respondent prayed for confirming the order passed by the Tribunal on the contention that the same is correct, legal and proper. The respondent contested the demand primarily on the ground of limitation as during the material time, divergent views were prevalent on the issue.

Reasoning of Judgment:- The High Court observed thatwith the following observations, the Tribunal dismissed the appeal of the department.

“….. The law on the issue is clear, i.e. to the effect that when there are views, many of which are in favour of the assessee holding the field, no suppression or mis-statement can be attributed to assessee, to entertain the same belief. As admittedly, in the present case, judgment prior to larger bench in the case of Mahindra & Mahindra Ltd, were lying that the processes allegedly adopted by the appellant did not amount to manufacture, we are of the view that the demand raise beyond the period of limitation, by invoking extended period, is barred. As such, irrespective the said activity or not, the demand is required to be quashed on the above issue itself. Ld. SDR appearing for the Revenue has placed on record the written submissions, which we find are mainly dealing with issues other than limitation.”

The Tribunal was justified in recording the aforesaid findings. In the facts of the case, it was not possible to ascribed any willful suppression or mis-statement on the part of the assessee for not paying excise duty because during the period in question, various decisions of the Tribunal were to the effect that the activity of cutting, bending, bunching of plats or channels in which the assessee was engaged, did not amount to manufacturing activity. In Continental Foundation Jt. Venture v. CCE, Chandigarh, 2007 (216)E.L.T. 177 (S.C.), Apex Court observed that when there was bona fide doubt as to non-excisability of the goods due to divergent views of the Hon’ble Supreme Court, the extended period of 5 years cannot be invoked. Mere failure or negligence in not taking license or not paying duty, is not sufficient for invoking extended period.

In the facts of the present case, it cannot be said that the conduct of the assessee was not bona fide. When the activity undertaken by it was not treated as manufacture, it would not have been expected to pay the excise duty. In order to show suppression or misstatement on the part of the assessee, a positive act has to be established. In view of the above, no error was committed by the tribunal in dismissing the appeal. It was not possible to countenance the contention of the learned counsel for the appellant that there was a suppression of facts and payment of duty was intentionally evaded by the assessee. For the foregoing reasons, the question formulated is accordingly answered in negative and in favour of the assessee. The appeal is dismissed being devoid of any merit as discussed above.

Decision:-Appeal Dismissed.

Comment:-The analogy drawn from this case is that when there are divergent decisions on a particular issue, suppression or wilful misstatement cannot be affirmed and so the extended period of limitation cannot be invoked. Moreover, it is also observed very often that the appeal is allowed solely on the grounds of limitation as in the present case.

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