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TMI Blog2023 (11) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... , it adopted the cost of production as per the Cost Accounting Standards-4 [CAS - 4] as it was supplying coal to the Raigarh unit for captive consumption and paid duty @ 110% of such cost at the time of raising invoices in terms of rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 [the Valuation Rules]. 3. The Ministry of Coal, Government of India, by a letter dated 20.06.1996 alloted coal to the appellant at the Gare Palma Coal Block area in Raigarh coalfields for captive mining. Such allocation of coal, as also the allotment made to other persons, was challenged before the Supreme Court in a Writ Petition filed by Manohar Lal Sharma and by a judgment dated 25.08.2014 the Supreme Court held that the allocation of coal blocks in question was arbitrary and illegal. The Supreme Court, therefore, cancelled 42 out of the 46 coal blocks effective from 31.03.2015 and an additional levy of Rs. 295 per metric ton of coal that was extracted was directed to be paid to correct the wrong done by the Union of India. The name of the appellant was also included at Serial No. 19 of Annexure I to the judgment of the Supreme Court. The relevant portion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptable figure quantifying the loss sustained. The estimated loss of Rs. 295/- per metric ton of coal is, therefore, accepted for the purposes of these cases. The compensatory payment on this basis should be made within a period of three months and in any case on or before 31st December, 2014. The coal extracted hereafter till 31st March, 2015 will also attract the additional levy of Rs. 295/- per metric ton." (emphasis supplied) 4. An audit memo dated 13.04.2016 was issued by the department to the appellant mentioning that as a consequence of the order passed by the Supreme Court, the value of coal cleared by the appellant would increase by Rs. 295/- per metric ton. The appellant was, therefore, directed to pay central excise duty on such additional amount paid for the period from April 2011 to March 2015. 5. The appellant, by a letter dated 08.06.2016, explained the accounting treatment adopted by the appellant for payment of additional levy of Rs. 295/- per metric ton. By letter dated 08.06.2016, the appellant also informed that the payment of additional levy of Rs. 295/- per metric ton would not form part of the cost of production and consequently would not invite excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to allocation of mines and not production of coal, and even otherwise the cost of production as per CAS-4 read with rule 8 of the Valuation Rules would not include abnormal/exceptional cost and since the additional levy was an abnormal cost, it would not be included in the cost of production. The appellant also stated that in any view of the matter, the extended period of limitation could not have been invoked in the facts and circumstances of the case. 8. The Commissioner, however, by order dated 28.11.2017 that has been impugned in the present appeal confirmed the demand holding that the extended period was correctly invoked. The relevant portion of the order passed by the Commissioner in connection with the invocation of the extended period of limitation is reproduced below: "3.15 The Noticee in its defense also contested the invocation of extended period of limitation. In the instant case, it is observed that the Noticee has not disclosed about the additional levy of coal @ Rs. 295/- per metric ton. The Noticee neither included the additional levy ibid, in their invoices for payment of duty nor disclosed in the statutory return i.e. ER-1. This fact of additional levy wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in terms of the order passed by the Supreme Court, the payment of Rs. 295/- per metric ton as additional levy would have a direct bearing on the valuation of coal for the purpose of payment of excise duty, it was imperative for the appellant to have started paying the central excise duty after the judgment was delivered by Supreme Court on 25.08.2014, but with an ulterior motive of avoiding payment of central excise duty, the appellant did not pay the central excise duty. Learned special counsel, therefore, submitted that the extended period of limitation was correctly invoked. Learned special counsel also pointed out that in case the appellant had any doubts, it could have sought a clarification from the department, but it did not do so. Learned special counsel also pointed out that immediately after the audit team conducted the audit, the show cause notice was issued to the appellant. 11. The submissions advanced by the learned counsel for the appellant and the learned special counsel for the department have been considered. 12. It is not in dispute that the show cause notice was issued on 20.05.2016 for the period from May 2011 to March 2015. At the relevant point of time, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of cost of production for valuation of goods meant for captive consumption, as required under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. CBEC, vide Circular No. 692/8/2003-CX dated 13.02.2003 had clarified that in case of captive consumption, cost calculation should be as per CAS-4 only. ***** Definitions 4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and/or due to some abnormal situation of the production or operation. ***** 5.28 Fines, penalties, damages, demurrage and similar levies paid to statutory authorities or other third parties shall not form part of the cost of production or acquisition or supply of goods or provisions of services". 17. Reliance on the aforesaid provisions has been placed by the learned counsel for the appellant to contend that the belief of the appellant that the compensation of Rs. 295/-per metric ton imposed by the Supreme Court would not be included in the cost of production was bonafide and based on material. 18. The show cause notice that was issued to the appellant emphasises that the appellant had suppressed material facts from the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or has been short levied or short-paid or erroneously refunded, by the reason of - (a) fraud; or (b) collusion; or (c) any wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice". 22. It would be seen from a perusal of sub-section (4) of section 11A of the Central Excise Act that where any excise duty has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice to the person chargeable with the duty requiring him to show cause why he should not pay the amount specify in the notice. Sub-section (4) of section 11A, however, provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department cannot be accepted in view of the recent decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. versus Union of India and others [W.P. (C) 7542 of 2018 decided on 06.04.2023], wherein the Delhi High Court observed as follows: "32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious." (emphasis supplied) 28. Even assuming that there was suppression, it has to be examined whether suppression of facts by the appellant was wilful and with an intent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 30. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [2005 (188) E.L.T. 149 (SC)] and the observations are as follows: "26. ***** This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :- "In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 decided on 06.04.2023], the Delhi High Court also observed as follows: "28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable. ***** 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts. ***** 16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinental Engines Ltd. vs. Commissioner, Central Excise & Service Tax, Alwar (Raj.)[ 2023 (8) TMI 697-CESTAT New Delhi]. 40. In Gripsurya Re-Cycling, the Tribunal observed as follows: "20. As far as the question of Revenue neutrality is concerned, the Commissioner (Appeals) was correct in stating that even if a related person would get CENVAT credit, duty has to be paid if it is to be paid as per law. Revenue neutrality is a concept which has evolved through a series of decisions only for the limited purpose of determining if the assessee could have had an intention to evade payment of duty. This intention is an essential ingredient to invoke extended period of limitation. If it is Revenue neutral situation where, the excess duty, if paid, would have been available to the appellant itself or its another unit or a related unit as CENVAT credit, there cannot be an intention to evade because the assessee would gain nothing by evading. If the duty is chargeable or differential duty is chargeable such charge flows from the charging section- Section 3 of the Act. If such duty or differential duty is not paid, the remedy is available to the Revenue under Section 11A. This section plac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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