2025 (6) TMI 1087 - AT - Central Excise

Seeking rectification of mistake - recovery of the Central Excise duty - invocation of extended period of limitation - HELD THAT - The period involved in the appeal is from 01.04.2013 to 14.05.2015 and the Show Cause Notice (SCN) was issued by the Department on 28.11.2017 proposing for recovery of the Central Excise duty demand from the appellant by invoking the extended period of limitation. Since the entire modus operandi of manufacturing and clearance of the goods were known to the Department well in advance through filing of periodical returns by the appellant and on the basis of the books of accounts maintained by them periodical audit being conducted by the Department the charges levelled against the appellant such as suppression fraud collusion wilful mis-statement etc. cannot be sustained and in such circumstances the duty demand can only be sustained for the normal period of limitation of two years. Since the present SCN was issued on 28.11.2017 i.e. beyond the normal period prescribed under Section 11A of the Central Excise Act 1944 we are of the view that confirmation of the adjudged demands in the impugned order by invoking the extended period of limitation cannot be sustained against the appellant. The Hon ble Allahabad High Court in the case of Commissioner of Customs Central Excise Service Tax Vs. Monsanto Manufacturer Pvt. Ltd. 2014 (4) TMI 505 - ALLAHABAD HIGH COURT has dealt with an identical situation and has held that if the show-cause proceedings are barred by limitation of time the merits of the case cannot be looked into for deciding the matter ignoring the limitation aspect provided in the statute. Conclusion - Extended period of limitation under Section 11A cannot be invoked without specific grounds such as suppression fraud collusion or wilful mis-statement. There are no merits in the impugned order insofar as it has confirmed the adjudged demands on the appellant by invoking the extended period of limitation - the impugned order is set aside - appeal allowed in favour of the appellant only on the ground of limitation.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter are:

• Whether the extended period of limitation for recovery of Central Excise duty can be invoked in the present case, given that the Department was aware of the facts regarding clearance of goods well in advance.
• Whether the adjudged demands confirmed by the impugned order under the extended period of limitation are sustainable.
• Whether the matter should be remanded back to the original authority for re-determination of the amount of duty payable, or whether the appeal should be decided on the limitation issue alone.
• The applicability and interpretation of the statutory limitation provisions under Section 11A of the Central Excise Act, 1944, and relevant judicial precedents concerning limitation and merits of demand recovery.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Invoking Extended Period of Limitation

Relevant Legal Framework and Precedents: The limitation period for recovery of Central Excise duty is governed by Section 11A of the Central Excise Act, 1944. Normally, the limitation period is two years from the relevant date; however, an extended period can be invoked in cases involving suppression of facts, fraud, collusion, or wilful mis-statement. The Hon'ble Allahabad High Court's ruling in a cited precedent clarified that if show-cause proceedings are barred by limitation, merits of the case cannot be examined, and extended limitation cannot be invoked without specific grounds.

Court's Interpretation and Reasoning: The Tribunal observed that the modus operandi of manufacturing and clearance of goods was known to the Department well in advance through periodical returns filed by the appellant and audit reports. There was no specific allegation or evidence of suppression, fraud, collusion, or wilful mis-statement warranting invocation of the extended period of limitation. The Tribunal emphasized that since the Department had access to the relevant information and records, the extended limitation period could not be validly applied.

Key Evidence and Findings: The Department had conducted periodical audits and had access to the appellant's books of accounts and returns. The Show Cause Notice (SCN) was issued on 28.11.2017 for the period 01.04.2013 to 14.05.2015, which was beyond the normal two-year limitation period. No fresh facts or concealment were brought to light that would justify extending the limitation period.

Application of Law to Facts: Applying Section 11A and the principle from the Allahabad High Court precedent, the Tribunal concluded that the extended limitation period could not be invoked as the SCN was issued beyond the normal limitation period without any valid grounds.

Treatment of Competing Arguments: The appellant contended that since the Department was aware of the facts, the extended limitation period could not be invoked and the matter should not have been remanded. The Department, implicitly, sought confirmation of demands under the extended period. The Tribunal sided with the appellant, rejecting the Department's position.

Conclusions: The extended period of limitation cannot be invoked in this case. The demand is time-barred.

Issue 2: Confirmation of Adjudged Demands and Remand for Re-determination

Relevant Legal Framework and Precedents: The law mandates that if a demand is barred by limitation, the merits cannot be examined. The Tribunal referred to the Allahabad High Court decision which held that once the demand is time-barred, the Tribunal cannot proceed to decide on the merits.

Court's Interpretation and Reasoning: The original order had remanded the matter back to the original authority for re-determination of the amount of duty payable despite concluding that the extended limitation period was not invokable. The Tribunal found this to be an apparent mistake on the face of the record.

Key Evidence and Findings: The Tribunal reviewed the final order dated 28.10.2024 and identified the inconsistency between rejecting extended limitation and remanding the matter for fresh adjudication.

Application of Law to Facts: Since the limitation period bars recovery, there is no scope for re-determination on merits. The matter should be decided solely on limitation.

Treatment of Competing Arguments: The appellant challenged the remand as unjustified. The Tribunal agreed and allowed rectification of the mistake by recalling the earlier order and restoring the appeal for decision on limitation.

Conclusions: The remand was improper, and the appeal should be disposed of on the limitation ground alone.

Issue 3: Disposal of Appeal on Limitation Ground

Relevant Legal Framework and Precedents: Section 11A prescribes limitation for recovery of duty. The Allahabad High Court precedent mandates dismissal of demand if barred by limitation without considering merits.

Court's Interpretation and Reasoning: The Tribunal proceeded to decide the appeal on limitation, holding that since the SCN was issued beyond the two-year period and no grounds for extended limitation existed, the demand cannot be sustained.

Key Evidence and Findings: The SCN dated 28.11.2017 was issued after the limitation period for the relevant period ending 14.05.2015. No evidence of suppression or fraud was found.

Application of Law to Facts: The Tribunal applied the limitation statute and judicial precedent to hold the demand time-barred.

Treatment of Competing Arguments: The Department's attempt to sustain the demand under extended limitation was rejected.

Conclusions: The impugned order confirming the demand under extended limitation is set aside and the appeal is allowed on limitation grounds.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Further, we also find that there is no specific ground for invoking extended period having been made out in the SCN or in the impugned order, when the entire modus of clearance of goods are known to the department and to the audit officers, when they examined the records of the appellants."

"Once it is held that the demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the issues raised by the Revenue."

The core principles established are:

• Extended period of limitation under Section 11A cannot be invoked without specific grounds such as suppression, fraud, collusion or wilful mis-statement.
• If the Department is aware of the facts through returns, accounts, and audits, and no fresh concealment is shown, limitation bars recovery beyond two years.
• Where a demand is barred by limitation, the merits of the case cannot be examined.
• Remand for re-determination is improper if limitation bars the demand; the appeal must be decided on limitation.

The final determination was that the impugned order confirming the duty demand under extended limitation was set aside, and the appeal was allowed solely on the ground of limitation, dismissing the Department's claim for recovery beyond the statutory period.