Limitation on Issuance of SCN - when factswithinknowledge of Department

PJ/Case Laws/2011-12/1216

Case: Commissioner of Customs & Central Excise v/s ITW India Ltd.

Citation: 2011(268) E.L.T. 311 (A.P.)

Issue:- When facts already intimated to the Department – No Wilful suppression – show cause notice time-barred and not sustainable.

Brief Facts: - Respondent firm is manufacturers of non-destructive testing equipments and consumables. According to Revenue, there was a godown at Plot No. 31, APIIC, Phase-II, IDA, Pashamylaram in Medak District. The godown premises is not registered nor declared with the Central Excise Department. The respondent firm is repacking certain chemicals in the said godown premises. The chemicals namely ZYGLO-ZP-4B and 9C RED concentrate were received in bulk packing of 205 litre of drums and those were repacked into small packs of 1 Kg. and cleared as ‘trading goods’ without payment of duty.

On enquiry by the Revenue, it transpired that the goods ZYGLO-ZP-4B were classified under chapter sub-heading 320620, and by virtue of Note 3 to Chapter 32, the activity of repacking is in smaller packs and labelling would amount to manufacture.

According to Revenue, the respondent firm had deliberately suppressed the information relating to the composition of the product as also the literature relating to it with an intention to evade payment of duty.

Show cause notice was issued to respondent demanding duty and proposing to impose penalty during the period from 3/95 to 5/99 as well as for confiscation of plant and machinery, land and building used in connection with the manufacture and removal of the.

Respondent raised ground of limitation that the show cause notice is clearly barred by the time as there is no suppression of facts with any mala fide intention to evade payment of duty as they had intimated the Department vide their dated 28.7.1992 about the nature of activities carried out by it in the said godown i.e. repacking of imported Magnaflux 9C RED into smaller pack and its classification under sub-heading 281290; that the Commissioner by his O-I-O No.36/97, dated 28.11.1997 had also dropped demand on the manufacture of Magnaflux consumables and fluid products including the aspect of suppression of facts and that the Jurisdiction Assistant Collector is the competent authority to decide the classification matters, but not the Adjudicating Authority.

However, the Joint Commissioner, passed an order dated 28.3.2003 in Original C. EX. No. 26 of 2003 demanding the respondent firm to pay the duty evaded on the goods manufactured and cleared during the period from 3/95 to 5/99 with penalty and interest.

Against the order, respondent filed appeal. The Commissioner (Appeals) modified rejection of respondent’s contention that the show cause notice was time- barred, revenue preferred appeal before the Tribunal. The Tribunal held that the show cause notice dated 29.3.2000 was time barred and set aside the impugned order to the extent that the show cause notice was not time barred.

Hence, Revenue is in appeal before the High Court.

Appellant’s Contention: - Revenue contended that the Tribunal erred in holding that the intimation sent on 28.7.1992 by the respondent firm was sufficient to put the department to notice about the respondent firm converting the material into small packs; that the DGCEI Officers had visited the respondent firm at the said Plot and found the discrepancy in classification of the products and non-intimation of the activity of repacking, and issued show cause notice dated 29.3.2000; that the Tribunal failed to notice that the intimation given by the respondent firm was in respect of premises at Plot No. 36, Phase II, IDA, but not in respect of premises at Plot No. 31 and that the Tribunal should have seen that the show cause notice was issued in respect of Plot No.31, where repacking activity of chemicals was taking place.

Reasoning of Judgement: - The High Court noted that respondent had sent intimation on 28.7.1992 to the Jurisdictional Assistant Collector with a view to bring to the notice of Revenue about the nature of activities in connection with two products i.e. ZYGLO-ZP-4B and 9C RED. In the said intimation it was stated that the trading activity was carried out in Plot No. 31, Phase-II, IDA, Pashamylaram. The respondent firm was repacking the bulk goods into similar packs did not amount to manufacture in relation to any of the Chapter of Excise Tariff and that it was a trading activity and did not amount to manufacture.

It was noticed that the Revenue authorities did not take any steps against the respondent firm pursuant to the intimation dated 28.7.1992. It is pertinent to note that pursuant to the intimation, the Deputy Commissioner had made an order on 3.2.1998(41/98) in respect of one the items covered thereunder and held that there was no suppression of facts as the respondent firm has already brought the matter to the notice of Jurisdiction Assistant Collector. The Jurisdiction Assistant Collector at the relevant time was the competent officer and such the Revenue cannot disown the communication dated 28.7.1992.

In the end, it was held that show cause notice dated was time-barred and rightly set aside by the Tribunal.

Decision: - Appeal dismissed.

Comments: - If the department is aware of the facts then wilful suppression cannot be alleged on the assessee. In the instant case when the full facts of activity undertaken by manufacturer is duly informed to the department then the wilful suppression cannot be alleged.

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PJ/Case Laws/2011-12/1216

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