Central Excise - Issue of show cause notice under Section 11A - Invoking of extended period thereof - Instructions Regarding - Central Excise - 5/92

Central Excise - Issue of show cause notice under Section 11A - Invoking of extended period thereof - Instructions Regarding Circular No. 5/92 Dated 13-10-1992 [From F. No. 167/39/92-CX.4] Government of India Central Board of Excise Customs New Delhi Subject : Central Excise - Issue of show cause notice under Section 11A - Invoking of extended period thereof - Instructions Regarding. Of late, it has come to the notice of the Board that show cause notices under Section 11A of the Central Excises and Salt Act, 1944 are being issued invoking the extended period of five years, although there may not be a case of fraud or collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of Central Excise and Salt Act, 1944 or of the rules made thereunder. Such show cause notices are also being issued frequently under Section 11A of the said Act invoking the extended period of five years even in those cases where doubts have risen as to the appropriate classification of a particular product and on examining the issue, the Central Board of Excise and Customs issues guidelines/clarifications in such cases. 2. Member, Central Excise Shri A.M. Sinha has expressed his concern and displeasure at the casual manner in which such show cause notices are issued despite the fact that instructions have already been issued in this regard. However, with a view to put the things beyond doubt, the guidelines/instructions contained in Board's demi-official letter F. No. 95/7/91-CX.3, dated 10-9-1991 (copy enclosed for ready reference) are reiterated for strict compliance. Any failure notices in this regard would be viewed seriously. The field formations may also be informed suitably. F. No. 167/39/92-CX.4, dated 13-10-1992 Board have noticed that show cause notices under Section 11A of the Central Excises and Salt Act, 1944 are being issued invoking the five years period although there may not be a case of fraud, collusion, any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Central Excises and Salt Act, 1944, or of the Rules made thereunder with intent to evade payment of duty on the part of the assessee. The powers to issue show cause notices under Section 11A of the Central Excises and Salt Act, 1944, covering the period of five years from relevant date have been vested in the collector of Central Excise to ensure that show cause notices for the extended period are not issued as a matter of routine, as was being done when these powers could be exercised by officers subordinate to the Collector also. However, it is observed that even Collectors are using these powers quite often in a routine fashion, without applying their mind. 2. It has also come to the notice of the Board even in cases where either no duty was being levied or there was a short levy on any excisable goods in the belief that they were not excisable or were chargeable to lower rate of duty, as the case may be, show cause notices have been issued covering five years period on receipt of the communication from the Board that the said goods are excisable or chargeable to higher rate of duty. Such type of cases could not normally be covered by the proviso of para (i) of Section 11A, as it would be difficult to prove fraud, collusion etc. when the Department as well as the Trade were not clear about the correct legal position. In such cases, it would ordinarily call for restricting the deamands for six months from the relevant date only. There could be exceptions, say, where the assessments or RT 12s indicated that the matter had been opened up on some earlier date. Facts in each case have to be studied by the Collectors to make sure that there are good and sufficient reasons to invoke the extended period. Indiscriminate use of such restricted powers even at high levels leads to fruitless adjudications with the gamut of appeals and reviews, inflates the figures of outstanding, confirmed and unconfirmed demands and above all, avoidable harassment of the assessees. 3. I have taken a serious note of such casualness in issuance of show cause notices and desire that the Collectors should be more circumspect in applying the provisions of Section 11A for the extended period and should not resort to these provisions as a matter of routine. Henceforth, such instances would be viewed seriously.