LIMITATION ISSUE IS TO BE RAISED AT FIRST AVAILABLE OPPORTUNITY.

[Mr. M. GOVINDARAJAN]

                        The provisions of indirect tax laws authorize the officers to issue cause notice to recover the tax/duty which has not been levied or short levied or short paid within one year from the relevant date.   Section 11A (4) of Central Excise Act provides that where any duty of excise has not been levied or paid or has been short levied or short-paid or erroneously refunded, by the reason of—

      (a) fraud; or

      (b) collusion; or

      (c) any wilful mis-statement; or

      (d) suppression of facts; or

      (e) contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice.

                      Sec. 73(1) of the Finance Act, 1994 has also the same provision to invoke the extended period.

                      In an appeal filed before the Commissioner (Appeals) or before the tribunal or before the High Court the appellate authorities do not allow any new plea which has not been raised before the adjudicating authority.   In some cases the same are allowed by the Tribunals/High Courts considering the facts and circumstances of the case.   But the objection to be raised on limitation period is to be raised before the adjudicating authority itself.   There is no exception to raise the said issue either before the Commissioner (Appeals) or Tribunal.   The said proposition is explained with reference to decided case laws as discussed below:

                        In ‘A-One Laminators (Pvt.) Limited V. Commissioner of Central Excise, Delhi- 1’ – 2011 (270) ELT 536 (Tri. Del) the appellant filed a stay application in an appeal which arised from order passed by the Commissioner (Appeals), New Delhi dated 26.2.2010 by which the appeal of the appellants against the order of the adjudicating authority, has been dismissed.  The Additional Commissioner, New Delhi vide his order dated 30.01.2009 has confirmed the demand and ordered recovery of cenvat credit to the tune of Rs.14,11,270/- arising from show cause notice dated 2.7.2007 in relation to the period from January 2006 to April 2007 along with interest and equal amount of penalty.

                        The appellant contended that Rule 3(4) of CENVAT Credit Rules, 2004 and Rule 16 of the Central Excise Rules, 2002 allowed the appellant to avail credit on inputs which were utilized for the manufacture of final products.  The appellant got registration under the Central Excise Act and therefore it was not permissible for the authorities to deny the benefits under the CENVAT Credit Rules to a manufacturer of excisable goods. The appellant further contended that the show cause notice was issued beyond the period of limitation and, therefore, there was no justification for invoking extended period of limitation. 

                        The Tribunal among the other grounds considered the issue of limitation.   It held that as regards the claim of bar of limitation, undisputedly, the same was not raised before the adjudicating authority or before the Commissioner (Appeals).   The point of limitation is not a pure question of law, it is mixed question of law and facts.   A party seeking to raise such an issue has to raise the same at the earliest available opportunity so that the opposite party gets fair opportunity to counter the same by placing necessary materials on record.   Once the appellants have not raised the issue before the adjudicating authority, it is obvious that the department has no such opportunity to counter the same by placing necessary materials on record.   It is too late for the appellants to raise such an issue and that to in the miscellaneous proceedings.

                        In ‘Century Yarn V. Commissioner of Central Excise, Indore’ – (2011 -TMI - 205566 - CESTAT, NEW DELHI) the appellant filed the present appeal against the order of Commissioner of Central Excise (Appeals) who rejected the appeal against the order-in-original passed by the adjudicating authority.   The Assistant Commissioner, Indore, by his order dated 13.11.2009 had confirmed the demand of duty to the tune of Rs.4,99,705/- with interest and imposed penalty of Rs.50,000/- against the appellants.

                        The appellants are the manufacturers of cotton yarn.   Previous the appellants were 100% EOU.   The appellants applied to the Development Commissioner for exit from EOU scheme and obtained the debonding permission from yarn division.   The final debonding from 100% status to normal unit in respect of decision was granted by the Asst. Development Commissioner on 20.4.04 to be effect from 31.3.2004.  The Commissioner, Indore  directed to the appellants to deposit the duty payable on raw materials, consumables, capital goods, waste and finished goods as self assessed by them to the tune of Rs.1,08,83,399/-.  Since the appellants has violated the provisions of Section 3(1) the adjudicating authority confirmed by the demand and the Commissioner (Appeals) also upheld the demand.

                        The appellants among the other grounds contested that-

• The appellants debonded their unit in March 2004 and final debonding order was issued on 20.4.2004;
• The appellants paid the central excise duty on the finished goods at the time of debonding on 4.4.2004;
• The show cause notice was issued on 06.03.2009;
• There was no suppression of any fact and therefore, the extended period of limitation was not invokable.

The Department, among other grounds, submitted that the issue of bar of limitation was not raised before the adjudicating authority and the fact that duty was paid by wrongly availing the benefit of exemption notification and not in accordance with the proviso to Section 3(1) of the Act has not been disputed and being so, there is no case for interference of the impugned order.

                        The Tribunal held that as regards the ground to bar of limitation is concerned, the Department is justified in connecting that no pleas was every raised before the adjudicating authority.   The issue relating to the bar of limitation is not a pure question of law.   It is a mixed question of law and facts.   It is to be raised at the first available opportunity.   The contesting party is entitled to place on record its defence plea.  In the absence of such plea being raised before the adjudicating authority, obviously the department had no opportunity to meet the same by placing on record the required material in support of their defence.   Being so, the Tribunal held that it is too late in the day for the appellants to raise such issue at the appellate stage.