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2011 Supreme(SC) 710
2011 (5) Supreme 412
SUPREME COURT OF INDIA
Dr. Mukundakam Sharma and Anil R. Dave, JJ.
C.C.E., Mangalore — Appellant
versus
M/s. Pals Microsystems Ltd., Mangalore — Respondents
Civil Appeal No. 6058 of 2011
(Arising out of S.L.P.(C) No.13594 of 2009)
Decided on : 29-7-2011
IMPORTANT POINT
Where show cause notice was issued belatedly on respondent assessee and that too without prior permission of Commissioner ,proceedings under Section 11AC of Central Excise Act, 1944 read with Rule 173Q and Rule 210 of the Central Excise Rules, 1944 were held unsustainable.
Headnote:Central Excise Act, 1944- Section 11AC read with Rule 173Q and Rule 210 of the Central Excise Rules, 1944- Respondent, a limited company, a holder of Central Excise Registration and a manufacturer of data processing machines was also availing benefits under Modvat Scheme- On 25.10.1996, Superintendent of Central Excise visited the factory premises of the respondent-assessee for verification of the stock of inputs on which Modvat credit was availed and noticed that there was a vast difference between physical stocks available and that shown in RG23A Part 1 Register- Issuance of show cause notice on 26.06.2000 to respondent-assessee - On challenge thereagainst Tribunal held that show cause notice was issued belatedly and that too without prior permission of Commissioner as per provisions of Section 11A of the Act-Appeal-Dismissed by High Court-Appeal-No dispute that alleged suppression of payment of duty by respondent-company was brought to notice of authority on 25.11. 1996, when Superintendent of Central Excise had inspected premises of respondent-assessee, whereas show cause notice was issued on 26.6. 2000- The department failed to establish that there was any suppression of facts or a fraud on part of respondent-assessee-Honest mistake committed in maintenance of stock register etc. was frankly admitted by Managing Director of respondent-assessee- No finding to the effect that there was a fraud or willful mis-statement or suppression of facts- Since notice was issued after expiry of period of limitation-No interference called for with judgment delivered by High Court -Appeal dismissed. (Paras 17 to 19)
Facts of the Case :
Respondent, a limited company, a holder of Central Excise Registration and a manufacturer of data processing machines was also availing benefits under Modvat Scheme. On 25.10.1996, Superintendent of Central Excise visited the factory premises of the respondent-assessee for verification of the stock of inputs on which Modvat credit was availed and noticed that there was a vast difference between physical stocks available and that shown in RG23A Part 1 Register. A show cause notice was issued on 26.06.2000 to respondent-assessee . On challengethereagainst Tribunal held that show cause notice was issued belatedly and that too without prior permission of Commissioner as per provisions of Section 11A of the Act.Appeal thereagainst was Dismissed by High Court.
2. Present appeal has been filed against said order of High Court.
Findings of the Court :
The Court held that there was no dispute that alleged suppression of payment of duty by respondent-company was brought to notice of authority on 25.11. 1996, when Superintendent of Central Excise had inspected premises of respondent-assessee, whereas show cause notice was issued on 26.6. 2000. The department failed to establish that there was any suppression of facts or a fraud on part of respondent-assessee. Honest mistake committed in maintenance of stock register etc. was frankly admitted by Managing Director of respondent-assessee. There was no finding to the effect that there was a fraud or willful mis-statement or suppression of facts. Since notice was issued after expiry of period of limitation,No interference was called for with judgment delivered by High Court. Appeal was dismissed.
JUDGMENT
Anil R. Dave, J. —
1. Delay condoned.
2. Leave granted.
3. Being aggrieved by the judgement and order dated 1st July, 2008 delivered in the CEA No. 59/2007 by the High Court of Karnataka at Bangalore, this appeal has been filed by the Revenue.
4. The respondent, a limited company, is a holder of Central Excise Registration and is a manufacturer of data processing machines and is also availing benefits under Modvat Scheme. On 25.10.1996, Superintendent of Central Excise visited the factory premises of the respondent-assessee for verification of the stock of inputs on which Modvat credit was availed. It was noticed that there was a vast difference between physical stocks available and that shown in RG23A Part 1 Register. The Managing Director of the respondent-assessee, in his statement dated 25.10.1996 given before the Superintendent of Central Excise, West Range, Mangalore, admitted that the actual physical stock of inputs and entries in the RG23A Part 1 Register did not tally because the respondent-assessee had removed the Modvatable inputs for sales and warranty replacements. The Managing Director of the respondent-assessee also admitted the discrepancy i.e. shortage in the stock of inputs and stated that their office assistant, who was maintaining their books of accounts, was only a matriculate and being a non technical person, committed mistakes. He again stated that the mistake was also due to the clubbing of different Modvat inputs coming under the same heading. The correct figure was shown in his letter dated 21.1.1997 with all the details, admitting liability of Rs.51, 111/- due to the said lapses. He also conceded that, due to the aforestated mistakes, the figure of RG23A Part I did not reflect the actual quantity in stocks and enclosed a detailed worksheet showing monthly figures of opening balance, receipts, issues and closing balance for the past years.
5. On 26.06.2000, a show cause notice was issued to the respondent-assessee calling upon it to show cause as to why Central Excise Duty of Rs. 1,91,537, equivalent to the Modvat credit availed on the shortage of physical stock of Modvatable inputs should not be recovered from it and penalty under Section 11AC of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’) read with Rule 173Q and Rule 210 of the Central Excise Rules, 1944 be not imposed and interest thereon should not be recovered from it under Section 11AB of the Act.
6. After considering the reply and upon hearing a representative of the respondent-assessee, the Joint Commissioner of Central Excise vide his order in original Sl. No. 14/2000 dated 09.08.2000, dropped further proceedings in the matter after giving a warning to the respondent-assessee.
7. Aggrieved by the order of the Joint Commissioner of Central Excise, the Department filed an appeal before the Commissioner (Appeals), Bangalore. The Commissioner (Appeals), by the virtue of the order in appeal No. 591/2002 dated 04.10.2002, allowed the appeal.
8. Being aggrieved by the order of Commissioner(Appeals), the respondent-assessee filed an appeal before CESTAT, Bangalore. The CESTAT, Bangalore, by the order No. 1017/2005 dated 28.6.2005, held that the second statement of the Managing Director which was given before issuance of Show Cause Notice, accepting the discrepancies and admitting the liability to an extent of Rs. 51,111/- was not taken into consideration by the Joint Commissioner and the Commissioner(Appeals). They had proceeded only on the basis of the first statement recorded. The CESTAT did not agree with the reasons assigned by the Commissioner(Appeals) for allowing the appeal and remanded the matter to the original authority, for verification of the assessee’s contention and for passing a detailed, considered order after taking into consideration the entire evidence on record.
9. In pursuance of the aforestated order, after hearing the parties, the Joint Commissioner vide his order dated 25.10.2005 confirmed
