TMI Blog2013 (6) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant facts in other forms, cannot by itself lead to finding of deliberate attempt to evade tax. At best, what can be said is that the claim of assessee was misconceived which resulted in short-payment of duty. This would be actionable within the shorter period of limitation available under Section 11A(1) and not relevant for the longer period under proviso thereto. In fact, even the Tribunal held it to be a technical breach involving no mens rea when it came to penalty. We fail to see if that were so in respect of penalty, how the demand could be sustained within the longer period of limitation in absence of mens rea. The order of the Tribunal, in so far as it sustains the duty demand with reference to the longer period available under the proviso to Section 11A(1) is unsustainable - decided in favor of assessee. - Civil Writ Jurisdiction Case No. 929 of 2009 - - - Dated:- 14-3-2012 - Navaniti Prasad Singh and Ashwani Kumar Singh, JJ. Shri D.V. Pathy with Abhi Sarkar and Uttam Kumar Mishra, for the Petitioner. Mrs. Nivedita Nirvikar with Mrs. Archana Sinha, for the Respondent. JUDGMENT By this writ petition, the petitioner has challenged the demand-cum-show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of PVC pipes and filters, which were used in manufacturing the Tara handpump which attracted nil duty, their liability would be 8%, as envisaged under Rule 57CC(1) instead of 25%. It is not in dispute that upon this declaration and calculation, the petitioner paid duty on the captive consumption of PVC pipes and filters at 8% and cleared the Tara handpump at duty nil. This is undisputedly reflected in Annexure-3 series. 4. The dispute arose when the notice dated 27-1-1999 (Annexure-4) was issued. The impugned notice was issued by the respondent-Additional Commissioner of Central Excise, Patna. According to the Department, in terms of Rule 57CC(4)(a), the provisions of sub-rule (1) of Rule 57CC would not apply if articles of plastic falling under Chapter 39 were manufactured and used in producing final goods which attracted nil duty. In other words, PVC pipes and filters being used would disentitle the petitioner from claiming benefit under Rule 57CC(1). Accordingly, the petitioner was noticed to pay up the difference of 25% duty payable and 8% duty paid for the period in question that is 1-3-1987 to 18-10-1997 which comes to Rs. 4,02,801/- in terms of proviso to Section 11A(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he adjudicating authority to be not legal and proper. It may be noted that the Commissioner (Appeals) did not give a finding that there was any suppression or willful default on the part of the petitioner in compliance with the provisions of the Act or the Rules in order to evade liability. 8. It appears that the petitioner-assessee then preferred an appeal before the Appellate Tribunal being the Customs Excise and Gold (Control) Appellate Tribunal, Eastern Bench, Kolkata, as it then was, being Appeal No. ER 579 of 2001 which was heard and disposed of by order dated 11-2-2002 (Annexure-7). The Tribunal clearly held that the revenue had filed no appeal against the order of the Commissioner (Appeals). The consequential effect was that the petitioner-assessee was liable to get a refund of the amount deposited but noticing that in view of the order of the Commissioner (Appeals), as no order of the adjudicating authority survives, while entitling the assessee to get the refund, it directed that the show cause notice, as originally issued, be decided as per law. Thus effectively, without disturbing the fact that there was no suppression, the matter was remitted to the original adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een, so far as the substantive matter is concerned with regard to duty liability, the matter is now before this Court but with regard to penalty, the matter is before the Appellate Tribunal. 13. We are of the considered opinion that the matter before the Tribunal is consequential to the matter before this Court inasmuch as if this Court were to hold that the extended period under proviso to Section 11A(1) was not applicable then neither would there be any occasion for invocation of Section 11AB in respect of interest on delayed payment of duty nor penalty, as envisaged under Section 11AC. The reason for saying so would be apparent if the three provisions aforesaid are read together which three provisions, in so far as relevant, are quoted hereunder : SECTION 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und in the phrase used in the three provisions which have been emphasized which is the same. It is only by reason of fraud, collusion or any willful mis-statement of suppression of fact or contravention of any provision of this Act or the Rules made with the intent to evade payment of duty that these three provisions come into play. The first, in point of time, would be Section 11A, a duty determination upon the finding aforesaid. That would be followed by next liability in terms of Section 11AB and simultaneously there would be a penalty in terms of Section 11AC. 15. Here, we would like to point out that if the condition for invocation of proviso to Section 11A is not present or not found then action for recovery of duty can only be taken with reference to the substantive of Section 11A(1) and that too only within the time prescribed therein and not the extended time made available by the proviso thereof. In such a situation, the interest liability would be governed by Section 11AA. The difference between the interest on delayed payment of duty, as under Section 11AA and Section 11AB, is that the interest under Section 11AA starts after three months of the date of such determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short-payment of duty the penalty clause would automatically get attracted and the Authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. 18. Then they noticed the observations, as made in Dharamendra Textile Processors (supra) in paragraphs 31 and 32 of the reports in relation to Rajasthan Spinning and Weaving Mills (supra) and held thus : From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section 11-AC would apply to every case of non-payment or short-payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11-AC in the manner as suggested because in that case that was not even the stand of the Revenue. 19. Ultimately, this is what their Lordships said in paragraph 34 of Rajasthan Spinning and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recovery of short-levied duty can only be extended beyond six months (now one year) if the Department comes to a finding that the assessee, by his intent and purposeful deceitful act, tried to evade duty as a consequence whereof duty was short levied/paid. In such a case, not only would the duty be recoverable by initiation of proceedings in the elongated time provided but it would automatically follow with penalty of equal amount with no discretion and penal interest from the date when the duty was due. 22. Now coming to what is the meaning of the phrase by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty . Apart from what has been said by the Apex Court in the case of Rajsthan Spinning and Weaving Mills (supra) and in the case of SKF India Limited (supra) explaining the aforesaid, we may note two other decisions. The first being Continental Foundation Joint Venture Holding, Nathpa, HP v. Commissioner of Central Excise, Chandigarh-I since reported in (2007) 10 Supreme Court Cases 337 = 2007 (216) E.L.T. 177 (S.C.), the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me positive act other than mere inaction or failure on the part of the manufacturer. There must be conscious or deliberate withholding of information by the manufacturer to invoke larger period of limitation. 24. Thus seen, for the Department to avail the extended period of limitation for recovery of duty with penalty and penal interest, it is upon the Department to establish that the assessee had made a conscious and deliberate effort to evade tax and intentional mis-statement or a mistake or a mere technical breach of obligations would not be sufficient. 25. These legal principles we have to keep in mind to judge the legality of the demand from the petitioner. The first thing we would like to notice is that the demand is in relation to the period 1-3-1997 to 18-10-1997 and the notice is dated 27-1-1999 which is clearly beyond the period of six months, as was then prescribed under the substantive provisions of Section 11A(1). Thus, it was for the Department to establish the conditions of delinquency, as stipulated under proviso to the said Section 11A(1) in order to sustain the demand and consequently the penalty and interest. 26. Now, there are two aspects of the matter in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no suppression much less intentional suppression with intent to evade duty. He came to a finding that if at all it would be at best a technical failure on part of the petitioner-assessee which mistake appeared to be genuine. He noted that the bona fides of the assessee is established from the fact that they had agreed to pay the amount of differential duty. He, thus, held the notices to be barred by limitation and dropped the proceedings. 28. Thus, the finding of the adjudicatory authority, at the first instance itself, was that there was no guilty mind for the actions of the assessee. 29. Curiously against this order, the Commissioner (Appeals) exercised jurisdiction in terms of Section 35E(4) of the Act in respect of which departmental appeal was filed on 12-1-2001 and curiously, without disturbing the findings of the adjudicatory authority, held that the adjudicatory authority could not have allowed appropriation of the differential duty deposited without first holding the petitioner-assessee liable. It, accordingly, gave the finding and passed the following order : FINDINGS :- I have gone through the case records and the submission of the respondents. I agree w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account then PVC pipes and filters form an integral part of the Tara handpump which is classified under Chapter 84 and, therefore, the whole of it, notwithstanding it being a plastic part, would fall under Chapter 84. They would in fact not be chargeable even to 8% duty. This time, the adjudicatory authority first held that handpump does not include the portion of pipe dug into earth. It only refers to what is visible above and, therefore, rejected the contention that the petitioner was entitled to classify the whole of the handpump under Chapter 84 attracting nil duty. It held that Rule 57CC(4)(a) disentitle plastic parts. It then held that by not disclosing the correct particular in RT-12 return, it had managed to evade payment of duty. It held that the fact alone that the Department was aware that the assessee had paid duty at the rate of 8% on such PVC pipes and fittings was not sufficient to prove that there was no suppression of fact on the part of the assessee. It then held that there were some informations missing from some returns but it was not said that how it was relevant for the issue in question and further that they were deliberately not furnished. It, accordingly, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. As noted above, the Department took the matter striking down the penalty to the Apex Court which has remanded the matter to the Tribunal to decide afresh in view of its judgment in the case of Rajasthan Spinning and Weaving Mills (supra). The assessee impugned the part of the order of the Tribunal by which demand of duty was sustained before this Court in these proceedings. 38. In our view, the Tribunal has again fallen into the same error as the other authorities, as would be apparent from its order, as quoted above. It assumed that the moment there was a misstatement or failure to disclose information of any kind leading to escapement of duty the longer period for raising demand was available which we do not think is the correct position inasmuch it has to be shown and found that it was a deliberate misstatement or suppression with intent to evade tax. This, even the Tribunal was conscious seeing the facts because when it came to penalty, it itself held that the dispute was technical in nature meaning thereby it was a technical violation and, therefore, there being no mens rea, penalty, should not be imposed. 39. Here, we may once again note that the conditions for raising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he adjudicating authority, on remand, had to hold that handump is what is visible above the ground and not what is submerged in the ground. We understand it differently as commonly, there cannot be a handpump without its casing filter etc without which water cannot be brought over ground. In the facts aforesaid, we find there are no facts justifying holding that there was any deliberate suppression or misstatement with intent to evade tax. We may note that even the adjudicatory authority, on remand, was unable to point as to what was the specific information suppressed and how it was connected with the tax sought to be evaded. Mere misstatement in some form or the other, not relevant with full disclosure of relevant facts in other forms, cannot by itself lead to finding of deliberate attempt to evade tax. At best, what can be said is that the claim of assessee was misconceived which resulted in short-payment of duty. This would be actionable within the shorter period of limitation available under Section 11A(1) and not relevant for the longer period under proviso thereto. In fact, even the Tribunal held it to be a technical breach involving no mens rea when it came to penalty. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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