Determination of relevant date for raising Demand u/s 11A of Central Excise and u/s 73 of Service Tax - Relevant Date is the date of knowledge of the department or is the date as prescribed in the statute

[CA Surender Gupta]

Hon'ble Supreme Court while confirmed the demand in the case of,  Commissioner of Central Excise, Mumbai Versus M/s. Kalvert Foods India Pvt. Ltd. & Ors. [2011 (8) TMI 24 - SUPREME COURT OF INDIA ] , has observed that:

"since there was clandestine removal of excisable goods, the period of limitation in the present case would have to be computed from the date of their knowledge, arrived at upon raids on the premises"

Tribunal in the case of VIBHA IMPEX AND JANNAT FABRICS Versus COMMISSIONER OF CENTRAL EXCISE, NASHIK [2014 (2) TMI 916 - CESTAT MUMBAI], has followed the decision of Apex Court as above, without understanding the letter and spirit of the case and circumstances in which the decision was given.

In this case demand pertained to the period 1.4.2002 to 31.1.2003 and show cause was issued as on 23.2.2010, while confirming the demand and, tribunal observed that,

We find that the Hon'ble Supreme Court in the case of Kalvert Foods India Pvt. Ltd. [2011 (8) TMI 24 - SUPREME COURT OF INDIA], while interpreting the provisions of Section 11A of Central Excise Act, 1944, held that since there was a clandestine removal of excisable goods, the period of limitation in the case would have to be computed from the date of their knowledge. Similar view has been taken by the Hon'ble Supreme Court in the case of Mehta & Co. [2011 (2) TMI 2 - SUPREME COURT OF INDIA]. In the present case, we find that the statutory records maintained by the appellants show the use of the raw material procured without payment of duty for intended use. However, the detailed investigation was conducted from various transporters as well as buyers, which shows that in fact the raw material which was procured without payment of duty was cleared clandestinely to DTA. The documents prepared by the appellants were found to be fake and ultimately in the year 2006, the evidence collected was put to the proprietors and they admitted the clandestine clearance of the goods without payment of duty and thereafter the show cause notices were issued within five years hence the ratio of the above decisions relied upon by the Revenue are fully applicable on the facts of the present case. As the appellants are not disputing the demands on merits before the adjudicating authority nor in the present appeals, therefore we find no merit in the contention of the appellants that the demands are time barred. The appeals are dismissed.

In this case, High Court has interpreted the decision of Apex Court [2011 (8) TMI 24 - SUPREME COURT OF INDIA] and observed that:

If there is a power to recover and within a specific period, then, the exercise of that power is contemplated within the said period, else there is a fetter or restriction to recover the duty. That does not mean that the Department or Revenue is remedyless. Such a prohibition does not mean that remedies under the general laws are barred or are in any way affected or taken away. It is only when recovery is contemplated in terms of the statute that the adherence to the statutory provision is mandated. Once this conclusion is reached, then, we find that even the Judgment in the case of Commissioner of Central Excise, Vishakhapatnam vs. Mehta and Co. reported in 2011 (2) TMI 2 - SUPREME COURT OF INDIA will not be carrying the case any further. There, the Hon'ble Supreme Court of India found that the department discovered the fraud or it came to its knowledge in the year 1997. There was a reply sent to a letter from the Department by the Assessee in February, 1997. Limitation is computed from the date of such reply. The show cause notice was issued on 15th May, 2000, which was within the period of limitation of five years. Therefore, this is not a decision which would in any manner hold that the accrual of the cause of action is to be taken into account and for computing and calculating the relevant date.

the Tribunal's order is ex-facie erroneous and unsustainable in law. It is vitiated by complete non application of mind as well. That the fraud is of great magnitude and that involvement or the act is admitted does not mean that recovery of duty because of such fraud or as a result of it can be made at any time under Section 11A . This was clearly lost sight of by the Tribunal.

Though the Hon'ble high court has interpreted the provisions of Section 11A of Central Excise Act, 1944 and the decision of Apex Court in the case of Kalvert Foods India Pvt. Ltd. & Ors, department may further appeal before the Apex Court.

But till than, the derconion interpretation made by the tribunal has gone and period of limitation will be computed from the relevant date as provided in Section 11A of Central Excise Act, 1944 and section 73 of service tax (Chapter V of the Finance Act, 1994) for the purpose of issuance of Show Cause Notice demanding the duty / service tax within the period of One year or Five Years as the case may be and not from the date of knowledge of the department.

 

See:- Shri Dharampal Lalchand Chug, Shri Kamal Lalchand Chug Versus Commissioner of Central Excise - 2015 (7) TMI 957 - BOMBAY HIGH COURT