Sustainability of charge of suppression of facts in subsequent Show cause notice

PJ/Case Laws/2011-12/1472

Case: GUJARAT AMBUJA EXPORTS LTD. v/s UNION OF INDIA

Citation: 2011 (269) E.L.T. 159 (Guj.)

Issue:- Subsequent show cause notice alleging suppression of facts not sustainable when earlier notice was issued on same facts and facts within the knowledge of the Department.

Brief Facts:- Petitioner is a Public Limited Company engaged in the business of manufacture of Deoiled cakes of Soyabean/Groundnut/Mustard/other edible oil seeds and has two units at Kadi in Mehsana district. These units were permitted to work as 100% Export Oriented Undertakings by the Government of India. Pursuant to gaining of letter of permission, petitioner had been producing deoiled cakes of edible oil seeds and such deoiled cakes which were classified under SH No. 2302.00 of the Schedule to the Central Excise Tariff Act, 1985 and exporting to foreign countries.

During the Manufacture of deoiled cakes, a by-product, namely Soyabean Solvent Extraction Raw Oil/Crude Oil falling under SH No. 1503.00 of the Tariff emerges. The petitioners units were, however, allowed to operate as 100% EOUs for such product which was a fact also mentioned in the letter of permission issued in favour of the petitioners. According to the petitioners, the types of Crude Oils falling under SH No. 1503.00 of the Tariff were chargeable to nil rate of central excise duty.

Petitioners have been exporting the products like deoiled cakes in accordance with the letter of permission, whereas the by-product “Soyabean Solvent Extraction Raw Oil/Crude Oil” was removed and disposed off in the domestic market. The by-product falling under SH 1503.00 was chargeable to nil rate of duty under the said classification of the Central Excise Tariff and accordingly, the petitioner company was removing the said by-product at nil rate of duty in accordance with law. They were issuing central excise invoices as prescribed under the erstwhile Rule 52A of the Central Excise Rules, 1944 for each of the removals. They were also filing periodical excise returns showing the details like quantity of such by-product removed from the factories by filing monthly returns.

No objection was raised by the Department. However, Department issued show cause notices to each unit of Petitioner for the period from September 1999 to December 2000/January 2001 demanding excise duty under Section 11A of the Central Excise Act, 1944 with interest under Section 11AA of the Act and also for imposing penalty under Rule 173Q of the central Excise Rules, 1944. It was contention of the Department that the said by-products removed by the petitioner company in the Domestic Tariff Area (DTA) would attract excise duty under the proviso to Section 3 of the Central Excise Act, 1944, and accordingly, the petitioner No. 1 company was required to pay excise duties on the said by-product as per the rates of customs duty applicable to similar goods imported into India, although similar goods manufactured in India were chargeable to nil rate of duty under SH No. 1503.00 of the Tariff.

The Adjudicating Authority passed the original orders confirming the demand by holding that the petitioner was obliged to pay excise duty on by-products in accordance with the rates of customs duties on similar goods imported into India. Petitioner have filed appeal with stay application before the Commissioner (Appeals) which were pending.

Thereafter, Department issued show cause notices in 2002 on the same facts and also alleging suppression of facts. Petitioners have filed writ petition under Article 226 before the High Court against the demand raised therein.

Petitioner’s Contention:- Petitioner contended that the action of issuing the impugned show cause notices was wholly without jurisdiction. It was initiated that when six separate proceedings were already initiated against them for the period from September 1999 to December 2000/January 2001 for the same subject matter, it would not lie in the mouth of the revenue to now allege that there was any suppression of the facts or misstatement on the part of the petitioners because the Department was obviously aware about this controversy of excisability or otherwise of the by-product arising in the petitioner’s factories. It was submitted that, therefore the action of the department in issuing two show cause notices invoking larger period of limitation in the facts of the present case, was wholly without jurisdiction. Inviting attention to six show cause notices which had issued earlier, it was submitted that the petitioners had duly filed declarations under Section 173B of the Act and as such, this was not a case of clandestine removal so as to invoke the extended period of limitation. Referring to the provisions of Section 11A of the Act, it was pointed out that the normal period of limitation for initiating the proceedings under the said provisions was one year from the relevant date and that for the purpose of invoking the proviso thereto, there has to be a finding as regards the fraud, mis-statement, suppression, etc., with an intent to evade payment of duty.

They further made reliance upon the decisions of the Supreme Court in the cases of Nizam Sugar Factory v. Collector of Central Excise, A.P. [2006 (197) E.L.T. 465 (S.C.)], Hyderabad Polymers (P) Ltd v. Commissioner of Central Excise, Hyderabad [2004 (166) E.L.T 151(S.C.)], ECE Industries Limited v. Commissioner of Central Excise, New Delhi [2004 (164) E.L.T. 263 (S.C.)] and P & B Pharmaceuticals P. Ltd. v. Collector of Central Excise [2003 (153) E.L.T. 14 (S.C.)] and it was submitted that the issue involved in the present case is directly covered by the above decisions and as such, the impugned notices were required to be quashed.

Respondent’s Contention:- Department argued that in the impugned show cause notices, suppression had been alleged and that the extended period of limitation can be invoked up till the period of five years from the relevant date in the circumstances the contention that the extended period of limitation could not be invoked, was without any merit. Inviting attention to the impugned show cause notices, it was submitted that insofar as the earlier show cause notices were concerned, the same had been issued by the Deputy Commissioner. However the present show cause notices have been issued by the Commissioner of Central Excise and that on a plain reading of show cause notices, it was apparent that the same have been issued pursuant to intelligence gathered that the said unit was evading central excise duty by misusing the facilities provided under notification No. 8/97-C.E., dated 1.3.97 and clearing the very by-product, that is, Soyabean Solvent Extraction Raw Oil/Crude Oil falling under SH No. 1503.00 of the Central Excise Tariff Act, 1985 without payment of Central Excise duties. It was further submitted that though the allegations in both show cause notices were the same, there was additional material in the form of statements admitting that the declarations under Section 173B of the Act had not been filed.

Reasoning of Judgment:- The High Court perused the judgments given in the cases of P & B Pharmaceuticals P. Ltd. v. Collector of Central Excise, Hyderabad Polymers (P) Ltd v. Commissioner of Central Excise, Hyderabad, Nizam Sugar Factory v. Collector of Central Excise, A.P. wherein it was held that once the earlier show cause notice, on similar issue has been dropped, it can no longer be said that there is any suppression. The extended period of limitation would thus not be available. It was held that when the first show cause notice was issued, all the relevant facts were in the knowledge of the authority. Later on, while issuing the second and third show cause notices, the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. The Court agreed that the view taken in the aforesaid judgments and following the same held that there was no suppression of facts on the part of the assessee therein.

On facts of this case, the High Court held that the six show cause notices as well as the allegations made therein were more or less similar. The, only difference, as pointed out by the respondents was that in the impugned show cause notices, there was a reference to intelligence gathered by the Central Excise authorities and statements recorded. However, though there was a reference visit by the central excise officers to the factory of the petitioners, the date of such visit has not been mentioned. In the circumstances while issuing the present show cause notices, the same set of facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the department.

Impugned show cause notices quashed and set aside.

Decision:- Petition allowed.

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PJ/Case Laws/2011-12/1472

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