Important point
Mere failure to declare does not amount to wilful suppression for the purpose of Section 11A of the Central Excise Act. There must be some positive act from the side of the assessee to find wilful suppression.

Headnote:Central Excise Act, 1944—Section 11-A after its amendment in 2000—Central Excise Rules, 1944—Rule 10—Recovery of duties by invoking Section 11A of the Act—Suppression of facts by assessee—Meaning—Appellant, manufacturer of rubber profiles, a product which after extrusion is subject to notching or drilling of a few holes or slitting—Appellant classified such extruded rubber profiles under sub heading 4008.29 of Central Excise Tariff which attracted Nil rate of duty—Revenue classified such rubber under heading 4016.19—Show cause notice was issued in October 1995 demanding duty of over Rs. 2.18 crores for the period from September 1990 to Feb., 1994 under proviso to Section 11A of the Act—Commissioner by his order dated 2.8.1996 discharged the show cause notice on ground that proviso to Section 11A was not applicable—Appeal filed by the Department was allowed by CEGAT holding that extended period of limitation under proviso to Section 11A of the Act would be available—Order of remand for proper classification—Whether extended period of limitation under proviso to Section 11A of the Act would be available—(No).
       Held : In the impugned order, CEGAT on perusal of the correspondence between the appellant and the department was unable to find any disclosure in writing by the appellant with respect to post-forming processes like notching, drilling etc. From the materials on record which were produced before the authorities and also from the orders of the CEGAT and the Commissioner, it can be seen that the department had the opportunity to inspect the products of the appellants and in fact, the factory of the appellants was inspected by them. It may be true that the appellants might not have disclosed the post-forming process in detail but from the correspondence and other materials on record, it cannot be conceived that the authorities were not aware of the facts as, we gather from the materials on record, admittedly, samples were collected by the Department and even after the samples were collected and inspected, classification as supplied by the appellant in respect of the products in question was approved by them. (Para 23)
       In this view of the matter, we are unable to persuade ourselves to agree with the finding of the CEGAT as admittedly, the products of the appellant were inspected from time to time and the department was aware of the manufacturing process of the products although the appellant might not have disclosed the post forming process in detail. (Para 25)
       For the reasons aforesaid, we are of the view that the CEGAT was not justified in holding that the extended period of limitation would be available to the Department for initiating the recovery proceedings under section 11A of the Act on a finding that there was suppression of facts by the appellant. Accordingly, it was not open to the excise authorities to invoke proviso to section 11A of the Act and therefore, the demand of the Revenue must be restricted to six months prior to the issue of notice dated 19.10.1995 instead of five years. In view of this conclusion, it is not necessary for us to consider the question of applicability of the classification lists namely of 4008.29 and 4016.19 and the question of MODVAT facilities. Accordingly, in our opinion, CEGAT came to a wrong conclusion for wrong reasons. (Para 30)

Judgment

Tarun Chatterjee, J.—Appellant M/s. Anand Nishikawa Co. Ltd. is a manufacturer of rubber profiles which product after extrusion is subject to notching or drilling of a few holes or slitting. The appellant had classified such extruded rubber profiles under sub-heading 4008.29 of the Central Excise Tariff which attracted Nil rate of the duty. The Revenue, however, classified such rubber under heading 4016.19.

2. According to Revenue, the operations like notching, drilling and slitting are “further working” and in view of Note 9 to Chapter 40, these goods fall outside Heading 40.08. Accordingly, a show cause notice was issued in October, 1995 demanding duty of over Rs. 2.18 crores for the period from September 1990 to February, 1994 under the proviso to Section 11A of the Central Excise Act, 1944 (hereinafter referred to as `the Act’). The Commissioner by his order dated 2nd August 1996 discharged the show cause notice, inter-alia, on the ground that proviso to Section 11A of the Act was inapplicable in the facts of the case. In his order, the Commissioner observed that the authority had knowledge of the manufacturing process of the appellant and was seized of the matter from the very beginning and on few occasions, the department officers visited the factory for collection of samples and study etc. Adverse inference was also drawn by the Commissioner in his order dated 2nd August, 1996 against the department as show cause notice did not deal with the correspondence exchanged between the appellant and the department on the issue of classification from the year 1988. An appeal was carried by the Department against the aforesaid order of the Commissioner before the Customs, Excise and Gold (Control) Appellate Tribunal, (hereinafter referred to as “CEGAT”) New Delhi which was allowed by the CEGAT on the issue of limitation that is to say extended period of limitation under proviso to Section 11A of the Act would be available in the facts of this case. However, the matter was sent back to the Commissioner for a decision on the question of classification and availability of MODVAT credit etc. Against this order of remand, passed by the CEGAT, this appeal has been filed under section 35(L) of the Act in this Court which, on admission, was listed for final disposal.

3. We have heard Mr. V. Sridharan, learned counsel appearing for the Assessee/Appellant and Mr. Mohan Parasaran, the learned Additional Solicitor General for the Revenue. We have carefully examined the show cause notice, the order of the Commissioner discharging the show cause notice and the order of the CEGAT holding that the authority was entitled to invoke proviso to Section 11A of the Act in the facts of the case but remanding the case, as noted herein before, to the Commissioner for a fresh decision on the question which of the classifications, namely 4008.29 or 4016.19 of the Central Excise Tariff in respect of the product in question, would be attracted in the facts of this case and also whether MODVAT facilities would be available or not.

4. The only question that needs to be decided in this appeal is whether the extended period of limitation under proviso to Section 11-A of the Act would be available or not. Before we take up, for our consideration, this question, involved in this appeal, it would be fit and proper to refer to erstwhile Rule 10 of the Central Excise Rules and section 11A of the Act prior to and after its amendment in 2000. On the question of recovery of duties not levied or not paid or short-levied or not paid in full or erroneously refunded, erstwhile Rule 10 of the Central Excise Rules as it read at the relevant point of time and so far as it is relevant for our purposes is set out as under:

“Rule 10. Recovery of duties not levied or not paid, sort-levied or not paid in full or erroneously refunded.—(1) Where any duty has not been levied or paid or has been short-levied or erroneously refunded or any duty assessed has not been paid in full, th

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2005 Supreme(SC) 1230

Important pointMere failure to declare does not amount to wilful suppression for the purpose of Section 11A of the Central Excise Act. There must be some positive act from the side of the assessee to find wilful suppression.

Cases Referred (6)

Important point
Mere failure to declare does not amount to wilful suppression for the purpose of Section 11A of the Central Excise Act. There must be some positive act from the side of the assessee to find wilful suppression.