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2008 Supreme(Pat) 1430
PATNA HIGH COURT
Chandramauli Kumar Prasad and Ravi Ranjan JJ.
Commissioner Of Central Excise
Versus
Tubex India (Pvt.) Limited
Tax Cases No. 1 of 2001 ;
Decided On : SEPTEMBER 15, 2008
The central legal point established in the judgment is that the extended period for recovery of duties under Section 11A of the Central Excise Act is applicable only in cases where there is intent to evade payment of duty.
Headnote:
misinterpretation - Central Excise - Central Excise Act, 1944, Section 11A - The court discussed the misinterpretation and misclassification of tariff head under the Central Excise Tariff and its impact on the entitlement to exemption from payment of duty. The court emphasized that the extended period for recovery of duties under Section 11A is applicable only in cases where there is intent to evade payment of duty, and in this case, as the manufacturer's act was not intended to evade payment of duty, the extended period of five years was not available to the Central Excise Officer.
Fact of the Case:
The manufacturer, M/s Tubex India (Pvt.) Limited, was issued a show cause notice raising demand of duty for the year 1991-92 and 1992-93 on the ground that the manufacturer was not entitled to small scale exemption benefit of a notification. The manufacturer contested the matter on merit and on the point of limitation.
Finding of the Court:
The court found that the manufacturer's act was not intended to evade payment of duty, and therefore, the extended period for recovery of duties under Section 11A was not applicable.
Issues: The issues involved the entitlement to small scale exemption benefit and the applicability of the extended period for recovery of duties under Section 11A of the Central Excise Act.
Ratio Decidendi: The court held that the extended period for recovery of duties under Section 11A is applicable only in cases where there is intent to evade payment of duty.
Final Decision: The court dismissed the application, finding no merit in the case and without any order as to cost.
Chandramauli Kumar Prasad and Ravi Ranjan JJ.
1. M/s Tubex India (Pvt.) Limited manufactures Galvanized Flexible Metallic Hose Tube. It is not in dispute that the manufacturer had given correct description of the product in the return. It prayed for clearing the product under notification dated 20th of May, 1988 and it was so cleared by the Superintendent. However, show cause notice dated 7.7.1994 was issued raising demand of duty for the year 1991-92 and upto 24th of July, 1992 of the year 1992-93 on the ground that the manufacturer was not entitled to small scale exemption benefit of notification dated 20.5.1988.
2. During the adjudication proceeding, the manufacturer contested the matter on merit as also on the point of limitation. The demand of duty was confirmed by the Commissioner of Central Excise vide its Order dated 2.9.1996. The manufacturer carried the matter in appeal before the Customs Excise & Gold (Control) Appellate Tribunal, hereinafter referred to as the Tribunal. The Tribunal allowed the appeal and while doing so, it observed as follows:
xxx It is well settled that mis-classifying under different headings based upon interpretation as understood by the assessee does not amount to misdeclaration of the description of the product. We find from the earlier order in appeal of the Commissioner (Appeals) relied upon by the learned Advocate that the declaration filed by them were also granted permission by the jurisdictional Superintendent. As such it cannot be said that appellant suppressed any factual position from the Department with the intent to evade payment of duty.
3. Aggrieved by the same, commissioner of Central Excise has preferred this application under Section 35-H (I) of the Central Excise Act, 1944 praying to this Court to direct the appellate Tribunal to refer the question of law arising from the order of the Tribunal. By order dated 4.4.2008, this Court directed the Tribunal to draw statement of case and refer following question of law to this Court:
Whether in the facts and circumstances, misinterpretation and misclassification of tariff head under Central Excise Tariff will provide valid defence to the assessee and manufacturer of Excise goods is entitled to exemption from payment of duty on the basis of declaration made before the authority not vested with a power to entertain declaration?
4. Accordingly, the Tribunal has drawn the statement of case and referred the aforesaid question for our determination.
5. Mr. Rakesh Kumar, Central Government Counsel, appearing on behalf of the petitioner, contends that under Rule 173 of the Central Excise Rules, it was obligatory on part of the manufacturer to get the return cleared by the Assistant Collector of Central Excise and admittedly, it had not done so and got it cleared by an incompetent authority, i.e. the superintendent and therefore, it had acted in contravention of the provisions of the Rules and as such, action in terms of Section 11(A) of the Central Excise Act was possible to be taken within five years.
6. Mr. Satyabir Bharti, learned Counsel appearing on behalf of the manufacturer, however, contends that suppression of any fact or contravention of the provisions of the Rules itself does not extend the period to five years so as to entitle the authority to proceed in the matter within the extended period. He contends that the condition precedent for exercise of power under Section 11(A) of the Act in the extended period is that the contravention of the Rules has been made with intent to evade payment of duty. He points out that admittedly the manufacturer had given correct description of the product and from that it can safely be inferred that there was no intention to evade payment of duty.
7. Having appreciated the rival submission, we do not find any substance in the submission of Mr. Singh. Section 11A of the Central Excise Act as existing then, which is relevant for the purpose reads as follows:
11A. -Recovery of duties not levi
