REITERATING RELEVANT DATE AND MOVABILITY OF FURNITURE

[jayaprakash gopinathan]

By:  G. Jayaprakash

Superintendent of Central Excise

Can the creature of a statute go beyond the boundaries as laid by the statute? Often this thought engulfs the readers of Case laws pronounced by Hon’ble CESTAT. Being created as per provisions of Customs Act, 1962 / Central Excise Act, 1944, the Tribunal is restrained to restrict itself within the permissible law. The relevant date to compute limitation for demand of duty is often an issue which is being decided by proclaiming law which is unknown to the statutes. When an activity carried out by someone attracts the provisions of the Central Excise Act, 1944, the Apex Court now re-confirmed that the date of knowledge of the department is the relevant date for computing limitation. The decision is in CCE Vishakhapatnam V Mehta & Co. [2011 -TMI - 201898 - SUPREME COURT OF INDIA].

The factual matrix of the case is as follows:

M/s Mehta & Company, Mumbai (the assessee) were engaged in the business of interior decoration. It appeared that the assessee manufactured goods covered under different chapter headings at the customer’s site and removed them without payment of proper duty of excise with an intention to evade payment of duty. Thus, a Show Cause Notice under the Central Excise Act, 1944 dt.15.05.2000 was issued to the assessee proposing to demand duty of excise alongwith interest on the goods manufactured and cleared under Rule 9(2) of the Rules read with proviso to Section 11A(1) of the Act; proposing to adjust the amount already paid by them under protest; and also proposing to impose penalty under Rule 9(2), Rule 52A and Rule 173Q and penalty u/s 11AC of the Act; and also proposing to confiscate the goods involved under Rule 173Q(1) of the Rules.  M/s Grand Bay Hotel, Vishakhapatnam was also issued with a Show Cause Notice proposing to impose penalty under Rule 209A of the Rules for purchase and possession of the excisable goods on which duty of excise has not been paid. The said case was adjudicated by the Commissioner of Central Excise confirming a portion of the demand along with penalty of equal amount and directed the redemption of the confiscated goods. The assessee filed an appeal against the said order before the CESTAT, who remanded the case back to Commissioner. Further, against the denovo adjudication order appeal was filed before CESTAT, who in turn set aside the Commissioner’s order, against which appeal was filed before Hon’ble Supreme Court. Supreme Court allowed the appeal and restored the order passed by the Commissioner and held that the decision in Craft Interiors (a case decided by Supreme Court) has clearly laid down that ordinarily furniture refers to moveable items such as desk, tables, chairs required for use or ornamentation in a house or office. Therefore, the furniture could not have been held to be immoveable property. The Commissioner having considered the aforesaid issue carefully and after proper scrutiny, the Tribunal was not justified in rejecting the said findings by mere conclusion and without trying to meet the findings recorded by the Commissioner.

In this case the apex court examined the issue of limitation as well excisability of different items like Chairs, beds, tables etc. affixed to the ground. A cursory reading of the order of the Apex Court bring before us the voluminous task undertaken by the adjudication section of the Commissioner’s desk of Vishakhapatnam who carefully segregated the taxable and non-taxable activities by carefully sieving the admixture provided before them. The original demand of Rs. 62,94,910/- was reduced to Rs. 14,94,456/-.

The contract specifically contained a provision of inclusion of excise duty in the total amount agreed upon between the parties, and the apex court upheld the ‘intention to evade payment of duty’ as contained in proviso to Section 11A (1) of the Central Excise Act, 1944. The date of knowledge of the department about the activity of manufacture of the excisable goods by the party is considered by the apex court to compute the relevant date. This definitely was within five years from the date of execution of the contract, in the absence of any specific date of 1st clearance of goods. Thus The apex Court concurred with the findings of the original authority and also set aside the decision of Hon’ble Tribunal that the demand is hit by limitation.

Vide para 27 and 28 , the Apex Court seems to have appreciated the onerous job of identifying the taxable goods by the original authority and in restricting the demand on goods without any ambiguity . By this order, the Apex Court reiterated the excisability of other wise moveable property but specifically fixed to earth in certain cases and also the date of knowledge of the department about the legal transaction is the relevant date to compute limitation. If the original and appellate authorities follow the ratio laid down by the Apex court in this case, considerable litigation can be avoided, an agenda of the day.

[The views are purely personal]