Whether show cause notice issued after a period of six months from the date of completion of investigations is barred by limitation?

PJ/Case law/2013-14/1885

Case:-M/s UNION QUALITY PLASTIC LTD Vs CCE, VAPI

Citation:-2009-TIOL-326-CESTAT-AHM

Brief Facts:-The appellant is engaged in the manufacture of HDPE Woven laminated/un-laminated fabrics and bags and Tarpaulin classifiable under Chapter 39. Their factory was visited by the Central Excise officers on 1.8.97, who conducted various checks and verifications. As there was shortage of various finished products in the appellant's factory, as compared to statutory records, an offence case was booked against them by drawing panchnama. The statement of manager and clerk was recorded, which are inculpatory in nature. The director's statement was also recorded on 2.9.97 admitting the clearances. Thereafter a show cause notice was issued to the appellant on 29.1.99 alleging clandestine removal and proposing to confirm demand of duty and to impose penalties. The said show cause notice was adjudicated by the Commissioner confirming demand of duty of Rs.26,02,088/- and imposing penalty of identical amount. In addition penalties were imposed upon the other appellants.

Appellant Contentions:-The appellant primarily assailed the impugned order on the point of limitation. It is his contention that the factory was visited on 1.9.97 and all the investigations were completed by the department by 2.9.97, when the last statement of the director was recorded. As such issuance of show cause notice after a gap of two years is clearly barred by limitation. In support, reliance stands placed upon the Tribunal's decision in the case of Jetex Caburettors Pvt. Ltd. Vs. Commissioner of Central Excise, Vadodara reported in 2007 (210) E.L.T 73 (Tri.-Ahmd) = (2006-TIOL-1999-CESTAT-AHM), where the entire law on the issue was taken note of and it was held that the notice issued after a period of six months from the date of visit of the officers was barred by limitation. Reliance also stands placed upon subsequent decision of the Tribunal in the case of M/s. Prism Mills Ltd., being order No. A/2803-2505/WZB/AHD/07 dated 26.10.2007.

Respondent Contentions:- The respondent submits that the findings against the appellant being that of clandestine removal, longer period of limitation of five years is available. The fact that show cause notice was issued after a period of about two years from the date of visit of the officers will not take away the Revenue's right to invoke the extended period against the appellant. He has also drawn my attention to various decisions of Tribunal laying the law to the contrary. Special reference stands made to the Tribunal's judgment in the case of Mukand Ltd. Vs. Commissioner of Central Excise, Belapur reported in 2007 (218) E.L.T. 120 (Tri.-Mumbai) wherein the assessee's plea that the show cause notice was issued after more than a year of the date of knowledge was not accepted on the ground that there was a clear suppression on their part with intent to evade duty. Reliance was also placed on the Hon'ble Supreme Court decision in the case Commissioner of Central Excise, Ahmedabad Vs. M/s. M. Square Chemicals 2008 (231) E.L.T 194 S.C = (2008-TIOL-243-SC-CX) to support his contention that in cases of clandestine removals, proviso to Section 11A can be invoked. Reliance was also placed upon another decision of the Hon'ble Supreme Court in the case of Mathania Fabrics 2008 (221) E.L.T 481 S.C. = (2008-TIOL-03-SC-CX). Reliance was also placed on para 4.4. of Tribunal's decision in the case of C.C.E Ahmedabad Vs. M/s. Milli Detergent and others, being Order No. A/ 1955 - 1958 /WZB/AHD/07 dated 2.8.07 rejecting the assessee's contention that time limit of six months from the date of commencement of investigations will apply and holding that in cases of fraud, suppression etc. the five year period should be from the date of clearance.

Reasoning of Judgement:-It was noted that the above disputed issue as to whether the show cause notice raised after a period of six months from the date of visit of the officers in the assessee's factory or after a period of six months from the date of completion of investigations is subject matter of various appeals, in as much as usually the show cause notices are issued after a period of six months, in such type of cases. The date of completion of investigations by the department cannot be arrived at, as it may happen that during the intervening period, Revenue might have made efforts to conduct further investigations, which might not have resulted in fruitful results. As such the efforts so made may not be part of the records on account of non-finding of any materials against the assessee. However, the fact remains that the investigations might get complete after a long period, in contradiction to the facts appearing on record and as contained in the show cause notice. It might refer to only the last statement recorded. Further once an assessee has been found to be indulging in clandestine activities, whether the longer period of five years becomes available to the Revenue irrespective of the facts of completion of investigation is a question of prime importance. As there are two views on the said issue as to whether in such circumstances notice is required to be held as barred by limitation or not, the matter is referred to the larger bench to be constituted by the Hon'ble President.

Decision:-Matter referred to Larger Bench.

Comment:-The substance of this case is that as there are different opinions regarding the issue that the show cause notice issued after a considerable span of time from the date of completion of the investigation proceedings is barred by limitation or not, the matter is being referred to the larger bench of the Tribunal.

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PJ/Case law/2013-14/1885

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