SCN issued after 6 months but within 5 years

PJ/Case Laws/2011-12/1207

SCN issued after 6 months but within 5 years – whether sustainable

Case: - Collector of Central Excise Vs H.M.M. Limited

Citation: -1995(76) E.L.T. 497 (S.C.)

Issue: -SCN issued after 6 months but within 5 years – whether sustainable when no allegation of willful suppression with intention to evade payment of duty made in the SCN?

Brief fact: -Respondent-assessee did not mention the waste product coal cinders in their classification list and did not pay duty on the said waste product payable under Tariff Item No. 68. First show cause notice dated 17-10-1983 covering duty period from 1-4-1981 to 31-1-1983. Other 2 show cause notices were issued proposing to impose penalty under Rule 9(2) read with Rule 173Q of the Central Excise Rules, 1944.

Respondent contended before the Additional Collector of Central Excise that the show cause notice was time barred under the main part of Section 11A since it was issued after the expiry of the period of six months stipulated therein but the Additional Collector did not accept their contention. The Additional Collector sustained the notice on the ground that it was within five years impliedly holding that the purported action was under the proviso to Section 11A of the Act.

The Additional Collector while conceding that the notice had been issued after the period of six months prescribed in Section 11A(1) of the Act had proceeded to observe that there was willful action of withholding of vital information apparently for evasion of excise duty due on this waste/by-product.

The Revenue has filed appeal before the Apex Court.

Respondent’s Contention: Respondent contended that in the absence of any allegation of fraud, wilfull suppression etc in the show cause notice the assessee was not put to notice regarding the specific allegation under the proviso to Section 11A(1) of the Act.

Reasoning of Judgment:- The Apex Court observed that there is no dispute that the show cause notice cannot be sustained under sub-section (1) of Section 11A unless the proviso is attracted. Admittedly, it is beyond the period of limitation of six months prescribed under Section 11A(1) but it is within the extended period of 5 years under the proviso to that sub-section. In order to attract the proviso it must be shown that the excise duty escaped payment by reason of fraud, collusion or willful mis-statement or suppression of fact or contravention of any provision of the Act or of the Rules made there under with intent to evade payment of duty. In that case the period of six months would stand extended to 5 years as provided by the said proviso.

It was noted that there is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been noticed or that the assessee was guilty of willful mis-statement or suppression of fact. It was noted that in the instant case that having not been specifically stated the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the payment of duty. The Additional Collector did not specifically deal with the contention of the assessee that non declaration did not automatically mean that there was wilfull intention to evade payment of duty but the Additional Collector merely drew the inference that since the classification list did not make any mention in regard to this waste product it could be inferred that the assessee had apparently tried to evade the payment of excise duty.

The Apex Court accepted the contention of the respondent-assessee that merely because a product was not declared in the classification list did not mean that there was willful intention to evade payment of duty. It was accepted that the assessee may be under bona fide impression that no duty was payable on the waste product.

No merit in appeal.

Judgment:Appeal dismissed.

Comment:- This is very old decision but is being used by every consultant when the demand is issued under proviso to Section 11A.

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PJ/Case Laws/2011-12/1207

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