Lipi Boilers Ltd. v. The Commissioner of Central Excise, Aurangabad

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub- section shall have effect, as if, for the words one year, the words “five years” were substituted.” (Emphasis supplied)

76. A bare reading of Section 11A(1) along with its proviso would indicate that ordinarily, notice has to be issued within one year, however the proviso stipulates that the notice can be issued within five years from the relevant date if , the non-levy, short-levy, or erroneous refund has occurred on account of either of the following – fraud, collusion, wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act, 1944 or rules thereunder, with an intent to evade payment of duty. The proviso employs selective choice of words which contemplate a state of mind, whereby the noticee has knowingly and deliberately done something or omitted to do something which has resulted in non-levy, short-levy or erroneous refund of duty. In contrast, for the normal period of one year, there is no requirement of any state of mind, and the fact of non-levy, short-levy or erroneous refund of duty by itself would be sufficient to invoke the provisions of Section 11A(1) of the Act, 1944.

77. In the context of invoking the extended period of limitation under Section 11A of the Act, 1944, this Court in Pahwa Chemicals Private Limited v. Commissioner of Central Excise, Delhi reported in (2009) 4 SCC 658, observed that mere failure does not amount to wilful misdeclaration or wilful suppression and that there must be some positive act on the part of an assessee to bring the case within the mischief of wilful misdeclaration or wilful suppression, as the case may be. This Court in Pahwa Chemicals (supra) observed as follows: “6. It is settled law that mere failure to declare does not amount to wilful misdeclaration or wilful suppression. There must be some positive act on the part of the

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Lipi Boilers Ltd. v. The Commissioner of Central Excise, Aurangabad

party to establish either wilful misdeclaration or wilful suppression. When all facts are before the Department and a party in the belief that affixing of a label makes no difference does not make a declaration, then there would be no wilful misdeclaration or wilful suppression. If the Department felt that the party was not entitled to the benefit of the notification, it was for the Department to immediately take up the contention that the benefit of the notification was lost.” (Emphasis supplied)

78. The allegation levelled against the assessee in the present matter before us is of wilful suppression with an intention to evade central excise duty. Therefore, the following observation of this Court in Continental Foundation Joint Venture Holding v. CCE reported in (2007) 10 SCC 337 is required to be referred to: “12. The expression ‘suppression’ has been used in the proviso to Section 11-A of the Act accompanied by very strong words as ‘fraud’ or ‘collusion’ and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop (sic evade) the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.” (Emphasis supplied)

79. Judged by these principles laid down by this Court on the application of the proviso to Section 11A(1) of the Act, 1944, we find that the assessee is justified to contend that the extended period of limitation could not have been invoked in the present case since the assessee

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bona fide believed that the bought out items are not to be included in the assessable value of the boiler. A perusal of the show cause notice would show that the revenue itself admits that the assessee had filed the RT-12 returns with the revenue, which means that the revenue had the material particulars on record which it could have acted upon within the normal one year period. There is nothing on record to indicate that any material information had been suppressed by the assessee with any intention to evade payment of central excise duty.

80. Therefore, in the absence of any deliberate act on the part of the assessee with an intention to evade being established by the revenue, the essential precondition of wilful suppression with intent to evade duty is not satisfied. Consequently, the invocation of the extended period of limitation under the proviso to Section 11A(1) is held to be not tenable in law.

81. The show cause notice being held to be invalid, the proceedings leading up to this present appeal are also liable to be quashed, and accordingly the impugned order is set aside.

F. CONCLUSION

82. We hereby conclude that the value of the duty paid bought out items which were delivered directly at the buyer’s site is not liable to be included in the value of the boiler cleared by the assessee from its factory in CKD condition, for the purpose of assessment of excise duty.

83. We also hold that the show cause notice issued under the proviso to Section 11A(1) of the Act, 1944 is not legal and hence invalid.

84. Therefore, for all the foregoing reasons, the appeals succeed and are hereby allowed.

Result of the case: Appeals allowed.