Whether second SCN issued for period prior to date of visit by officers can be issued by invoking extended period?

PJ/CASE LAW/2014-15/2309

Case:-COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, AHMEDABAD Vs M/s AMBICA INDUSTRIES

Citation:- 2014-TIOL-1294-CESTAT-AHM

Brief facts:-This appeal has been filed by the Revenue against the OIA No. 111/2006(Ahd-I) dated 29.6.2006 passed by Commissioner (Appeals), Ahmedabad by holding that extended period for demanding duty for the period 1999-2000 can be invoked while issuing a second show cause notice when extended period has been invoked for the earlier period 1998-99 on the same issue.

Appellant’s contention:- Shri Manoj Kutty, A.R. (AR) appearing on behalf of the Revenue argued that the period involved in both the show cause notices is prior to the date of visit by the officers on 29.06.2000 and it is incorrect to say that extended period has been invoked for a period after the date of knowledge of the departmental officers. He argued that though the period 1999-2000 and 2000-2001 is indicated in Para 3 of the show cause notice dated 08.8.2003 but as per annexure 'A' & 'B' to this show cause notice only period up to March 1999 was covered in the first show cause notice. The period involved in the show cause notice dated 27.04.2004 is also prior to the date of visit of the officers (29.06.2000) and as per Annexure 'C' to the statement of Shri Pramodbhai Amin, Proprieter of the appellant recorded on 19.12.2003. Learned AR relied upon the following case laws:-

(a) Uniworth Textiles Limited vs. CCE, Nagpur - [2009 (244) ELT 401 (Tri. Delhi.)] = 2009-TIOL-648-CESTAT-DEL
(b) Hi-tech Needles (P) Limited vs. CC, Allahabad - [2012 (279) ELT 461 (Tri. Del.)] = 2012-TIOL-426-CESTAT-DEL
(c) CCE Ahmedabad III vs. Aksar Chem (I) Limited - [2013 (292) ELT 550 (Tri. Ahmd.)

Respondent’s contention:-None appeared on behalf of the respondent during the hearings fixed on 03.07.2013, 29.01.2014 and 07.02.2014. However, written submissions filed by the advocate of the appellants available on record are considered. It is the case of the respondent that clearance figures for the period 1999-2000 and 2000-2001 were known at the time of issue of first show cause notice as per Para 3 of the show cause notice dated 08.08.2003 and no new fact has been collected by the Revenue. Therefore, second show cause notice invoking extended period cannot be issued for the period after 1998-99.

Reasoning of judgment:-Heard learned AR and perused the records of the case. From the facts available on record it is observed that both the show cause notice are issued invoking extended period and pertain to the period prior to visit of the Central Excise officers on 29.6.2000. It is not the case in the present proceedings that subsequent show cause notice is issued for the extended period after the visit of the Central Excise officers for the same facts as was the case before the Apex Court in the case of Nizam Sugar Factory vs. CCE [2006 (197) ELT 465 (SC)] = 2006-TIOL-56-SC-CX, which will thus not be available to the present proceedings. This view is also fortified by the observations of CESTAT Delhi made in the case of Hi-Tech Needles (P) Limited vs. CCE Allahabad (supra) as follows:-

We have considered the arguments on both sides. We find that the decision of Nizam Sugar Mills (supra) is not applicable to the facts of the case. In that case the second demand was for a period after the issue of first SCN. During investigation for issue of this SCN the full facts were made known to the department. In this case the second demand is for a period prior to the period covered by the first SCN. The second SCN is based on records obtained from the Appellants later. When there is suppression and clandestine manufacture the outer limit for issuing SCN is five years from the relevant date. The SCN is issued within this outer period. The decision in Nizam Sugar is being wrongly interpreted that the Revenue is bound to issue only one SCN invoking suppression irrespective of the nature of the period involved. The decision in Nizam Sugar is very much Consistent with legal provisions and common sense. The interpretation of the decision that is canvassed is not consistent with legal provisions and common sense. So the plea on time bar is rejected."

In view of the above observations second demand show cause notice, also for the period prior to the date of the visit of the officers, can not be considered as time barred when the same is issued within a period of five years from the 'relevant date' as per the provisions of Section 11A of the Central Excise Act, 1944. Appeal filed by the Revenue is accordingly allowed and order of the Adjudicating authority is restored.

Decision:-Appeal allowed.

Comment:- The essence of this case is that the decision of Nizam Sugar Factory cannot be followed for issue of every second show cause notice and the facts and circumstances of particular case are to be examined. The basic theme of Nizam Sugar Factory case is that second show cause notice cannot be issued by invoking extended period of limitation if the facts were in knowledge of the revenue department. However, the facts of the reported case were different as in the present case, the second show cause that was issued also pertained to period prior to the date of visit of officers. Hence, it could not be concluded that second show cause notice cannot be issued by invoking larger period of limitation otherwise it will mean that second show cause notice is always to be issued within a period of one year.

Prepared by: Lovina Surana

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PJ/CASE LAW/2014-15/2309

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