1. Excise duty demand and penalty dispute — failure to maintain records under self-removal procedure — challenge to limitation period and stock classification under Central Excises and Salt Act. (Para 3 , 4 , 5 )
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1999 Supreme(SC) 365
SUPREME COURT OF INDIA
A.P.Misra : R.P.Sethi
Madras Petro Chem Limited
Versus
Collector Of Central Excise, Madras
Case No. : 10625 of 1983
Date of Decision : 3/23/99
Under the self-removal procedure in excise law, failure to make mandatory entries in production registers and returns constitutes conscious withholding of information, justifying the extension of the limitation period for demanding duty from six months to five years under the proviso to Section 11-A.
Headnote:(A) Central Excises and Salt Act - Section 11-A - Central Excise Rules, 1944 - Rules 9(2), 173 and 10 - Limitation period for demand of excise duty - Extended period of limitation - Suppression of facts - Under self-removal procedure, the primary obligation of an assessee is to make proper declarations and entries in the production Register RG I, gate passes and RT 12 returns - Failure to disclose particulars of clearance and production, when the assessee is aware of such obligations, constitutes conscious withholding of information and not mere inadvertence - Such suppression attracts the proviso to Section 11-A, extending the limitation period from six months to five years. (Paras 9, 12)
(B) Burden of Proof - Claim of pre-budget stock - When an allegation is made that stock is not pre-budget stock, the burden lies on the assessee to prove the same - Failure to lead evidence to prove the nature of the stock entitles the authorities to determine the duty. (Para 13)
Facts of the case:
A notice was issued to a company for non-payment of excise duty on transformer oil and white oil used in the manufacture of petroleum jelly. The company contended that the notice was time-barred as it was issued beyond the six-month period and that the transformer oil was pre-budget stock and thus not liable for duty. It was observed that the company had not prepared gate passes or debited duty in the relevant accounts, nor had it disclosed the clearances in the mandatory returns.
Findings of Court:
The court found that the company, operating under the self-removal procedure, failed to fulfill its obligation to make correct declarations in the RG I register and RT 12 returns. This failure was not due to inadvertence but was a conscious withholding of information. Regarding the pre-budget stock, the court held that the company failed to discharge the burden of proof to establish that the stock was indeed pre-budget.
Issues: Whether the show cause notice was barred by limitation and whether the stock in question was pre-budget stock exempt from excise duty.
Ratio Decidendi: In a self-removal procedure, the failure of an assessee to make mandatory entries in production registers and returns, despite being aware of the obligation, amounts to suppression of facts or conscious withholding of information, thereby attracting the extended limitation period under the proviso to Section 11-A of the Act.
Result: Appeal dismissed.
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Table of Contents
2. Whether the show cause notice was time-barred due to lack of wilful suppression and whether the goods constituted pre-budget stock exempt from excise duty. (Para 2 , 8 )
3. Under self-removal procedure, failure to make mandatory entries in production registers and returns, when not inadvertent, constitutes conscious withholding of information to evade duty. (Para 9 , 12 )
4. The extended period of limitation under the proviso to Section 11-A is attracted where an assessee deliberately suppresses material particulars under a self-removal procedure. (Para 12 )
5. Appeal dismissed. (Para 14 )
6. When is the extended period of limitation under the proviso to Section 11-A of the Central Excises and Salt Act applicable?
The extended period applies when there is fraud, collusion, wilful misstatement, or suppression of facts with intent to evade payment. This requires a conscious or deliberate withholding of information by the assessee, as mere inaction or failure is insufficient to extend the limitation beyond six months. (Para 11 , 12 )
7. What is the impact of the self-removal procedure on the assessee's obligation to disclose production and clearance?
Under the self-removal procedure, the primary obligation is on the assessee to make proper declarations and entries in the production register, gate passes, and returns. Failure to fulfill these obligations, if not due to inadvertence, is considered conscious withholding of information for gain. (Para 9 , 12 )
8. Who bears the burden of proof when a party claims that stock is pre-budget stock to avoid excise duty?
The burden of proof lies with the assessee to establish that the stock in question was pre-budget stock. (Para 13 )
(1) THE present appeal is directed against an order dated 2/9/1983 passed by Customs Excise and Gold (Control) Appellate tribunal (hereinafter referred to as "the tribunal") which confirmed the orders of the Assistant Collector and the appellate authority.
(2) THE counsel for the appellant has raised two main contentions- (1 that the notice issued by the respondent was beyond the period of six months hence barred by time and on the facts of the present case, the proviso to S. II-A of the Act would not be applicable and hence this period cannot be extended to five years and (2 that the stock in question was pre-budget stock, the assessment on the same was illegal and not sustainable.
(3) THE brief facts are that the notice was issued to the appellant-company on 2 5/06/1979 by the Superintendent of central Excise Madras-IV Division to show cause why the penalty should not be imposed upon them under Rules 9(2 and 173 of the central Excise Rules, 1944 and why a duty of Rs. 1,01,915.84 paise should not be demanded under Rule 10 of the central Excise Rules, 1944.
(4) THE notice indicated that the appellant- company having sold the transformer oil under invoice Nos. 626 to 629, 630 and 634 for the period from 1/3/1978 to7/3/1978 for which the gate passes had not been prepared and duty has not been debited in PIA, though it has been raised in the invoices. It further mentioned that the company consumed 131- 323 K..L. of white oil in the manufacture of petroleum jelly I.P. grade falling under tariff item 68 during the said period, i.e., 1 /3/1978 to 31/12/1978 when there is no exemption of excise duty for such captive use.
(5) A reply was filed by the company to the said notice on 14/7/1979, inter alia, stating that the transformer oil referred to in the notice was the pre-budget stock and the same could not attract excise duty and that the excise duty element has been inadvertently included in the invoices as they were raised after lapse of time. They also challenged the classification of the white oil used in the manufacture of petroleum jelly to be falling under tariff item No. 8. The other points raised by the appellant-company are not necessary for the purpose of disposal of the present appeal, except the question of limitation of the show cause notice as aforesaid. The Assistant Collector, central Excise, Division IV, Madras, determined the excise duty on transformer oil amounting to Rs. 1,01,915.84 paise and the excise duty on white oil consumed in manufacture of petroleum jelly was assessed as Rs. 57,708.81 paise.
(6) AN appeal was preferred under S. 35 of the Act which was dismissed by the Appellate Collector of central Excise. Thereafter the appellant-company filed a revision before the central government under S. 36, which was subsequently transferred to the Tribunal. The tribunal also dismissed the appeal of the appellant against which the present appeal has been filed.
(7) WE have heard at length the learned counsel for the parties.
(8) LEARNED counsel for the appellant laid emphasis that unless there was wilful suppression of material fact which is not in the present case, by an assessee period of six months as provided, under proviso to S. 11-A would not be applicable. The contention is that it is true that the clearance of these products has not been disclosed in the relevant monthly RT 12 register, but they were nevertheless covered by the appellants challans and further, turn over (T.O.) of the Sales, invoices had been seen by the Excise Authorities, it could not be said that there was any wilful suppression of facts as to attract the extended period of limitation.
(9) THE contention for the revenue is that under the self-removal procedure, the primary obligation of an assessee is to make proper declarations and entries in the production Register RG I, the gate passes and RT 12 returns unlike in the Physical Control System where the Excise Inspector present in th
