Case Law Details
Kirupakaran Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Sets Aside Excise Demand Because Extended Limitation Was Invoked Without Justification; CESTAT Allows Appeal Because Department Failed to Prove Suppression of Facts; CESTAT Rejects Revenue’s Case Because Appellate Order Was a Non-Speaking Order; Excise Proceedings Fail Because Show Cause Notice Was Issued After Department Already Knew the Facts.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, allowed the appeal filed by a pickle manufacturer and set aside the Order-in-Appeal that had upheld the demand, interest, and penalties imposed by the Department. The dispute arose after officers of the Headquarters Preventive Unit of Chennai-II Commissionerate visited the appellant’s premises on 12.02.2013 and collected records and documents. Subsequently, statements of the proprietor were recorded. The Department alleged that the appellant’s turnover had crossed the prescribed threshold for a Small Scale Industry (SSI) unit, making it ineligible for the SSI exemption limit. It was further alleged that the appellant had cleared excisable goods without payment of duty and without obtaining Central Excise registration, thereby suppressing facts with an intention to evade duty. Based on these allegations, a show cause notice dated 26.04.2016 invoked the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 and proposed demand of duty, interest, and penalty.
The adjudicating authority confirmed the demand, interest, and penalty and appropriated the amount already deposited by the appellant before issuance of the show cause notice. The Commissioner (Appeals) subsequently upheld the order, leading to the present appeal before the Tribunal.
The Tribunal observed that the impugned appellate order was cryptic and non-speaking. It noted that although there was no proposal in the show cause notice to impose a penalty under Rule 26 of the Central Excise Rules, the Commissioner (Appeals) had nevertheless confirmed such penalty without providing any reasons. The Tribunal further found that the appellate authority had failed to explain why invocation of the extended period of limitation was justified despite the fact that the appellant had obtained Central Excise registration and paid the differential duty soon after the departmental visit in 2013, long before the issuance of the show cause notice in 2016.
The Tribunal noted that the Department was aware of the facts at least from the dates on which the appellant deposited amounts on 07.03.2013 and 13.05.2013. Since the show cause notice was issued only on 26.04.2016, it was clearly beyond the normal limitation period. The Tribunal found that the Department had failed to justify invocation of the extended limitation period merely on the allegation that the appellant had cleared goods without payment of duty and without registration. It observed that the appellant had enjoyed SSI benefits during the relevant period and that the adjudication order itself recorded that the appellant was paying Central Excise duty under a specific tariff heading. In such circumstances, the allegation of suppression of facts with intent to evade duty could not be sustained.
The Tribunal also observed that the duty and interest had been paid much before issuance of the show cause notice and noted the settled legal position that when duty along with interest is paid before issuance of the notice, interest and penalty cannot be levied. It held that the Revenue had erred in confirming the demand and penalties and that the invocation of the extended period of limitation was unsustainable.
Further, the Tribunal found that the penalty under Rule 26 had been upheld mechanically despite the absence of any proposal in the show cause notice to impose such penalty. Holding that the impugned order could not survive on this ground as well, the Tribunal set aside the Order-in-Appeal and allowed the appeal with consequential benefits as per law.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This Appeal is filed against the impugned Order-in-Appeal No. 464/2017 (CXA-II) dated 29.12.2017 whereby the First Appellate Authority has rejected the Appeal of the Appellant and thus upheld the levy of penalties. A perusal at the SCN No.27/2016 dated 26.04.2016 inter a/ia reveals that the Appellant who was a manufacturer of pickles had cleared the same without payment of Central Excise Duty and without obtaining Registration under the Central Excise, which prompted the officers of Headquarters Preventive Unit of Chennai-II Commissionerate to visit the premises on 12.02.2013. It appears that during the visit the officers collected/seized documents and records of the Appellant and as a follow-up action, statement of Proprietor of the Appellant firm was recorded on 27.02.2013 and a further statement was also recorded on 24.06.2013.
2. Per para 6 of the SCN, it is the case of the Revenue that the turnover of the Appellant had crossed the threshold for a SSI unit since its sales turnover had crossed Rs.4,00,00,000/- and, hence, the Appellant was not eligible for SSI exemption limit of Rs.1,50,00,000/-. Further, it is also alleged in the SCN that the Appellant had contravened various provisions of Central Excise Rules, 2002; with an intention to evade payment of duty as they had cleared the excisable goods without payment of duty and without taking Central Exercise Registration as required and thus suppressed the facts from the Department. Based on the above, extended period of limitation under Section 11A (4) of Central Excise Act, 1944 was invoked. Further, the SCN also proposed to appropriate the amount paid towards the proposed duty liability and interest there on, with a further proposal to charge interest under Section 11 AA ibid and levy penalty under Section 11 AC (c) ibid.
3. It appears that the Assessee filed its reply to the above SCN which was considered in adjudication and vide Order-in-Original No.11.2017 dated 15.02.2017 the Original Authority however, confirmed the demand, interest and penalty as proposed, apart from appropriating the duty amount deposited much prior to the SCN. Seriously aggrieved by the above demands, it appears that the Appellant preferred an Appeal before the First Appellate Authority and the First Appellate Authority also having confirmed/upheld the demands confirmed in the Order-in-Original, thereby rejecting their Appeal vide impugned Order-in-Appeal No. 464/2017 (CXA-II) dated 29.12.2017 the present Appeal has been filed before this forum.
4. When the Appeal was taken up for hearing, Shri N. Vishwanathan, learned Advocate appearing for the Appellant contended at the threshold that the cause of action if at all, had arisen when the officers of Headquarters, Preventive Unit visited the Appellant’s premises on 12.02.2013 during which time the officers pressurized the Appellant to pay the duty by obtaining appropriate Registration under Central Excise Act, 1944, the SCN which having been issued only in 2016, i.e. after more than three years from the above cause of action, the invocation of extended period of limitation is, therefore, unjustified. He would also argue on merits and request for setting aside the impugned Order-in-Appeal.
5. Per contra, G. Krupa, Id. Departmental Representative defended the impugned order and requested for dismissal of the Appeal.
6. We find from the impugned order that the same is very cryptic and a non-speaking order, though there is no proposal in the SCN to levy penalty under Rule 26 of the Central Excise Rules, yet the Commissioner (Appeals), who is a quasi-judicial Authority, has blindly confirmed the said penalty without bothering to give justifiable reasons. This apart, there is also nothing brought out on record in the impugned order by the said quasi-judicial Authority to the effect as to for what reasons the Revenue was justified invoking the extended period of limitation, though it is a matter of record that soon after the visit by the officers, the Appellant got itself registered and soon thereafter also remitted the differential duty as indicated by the said officers, and these events are clearly much before, at least three years before SCN that came to be issued. Apart from these, the only proposal in the SCN is the demand and the appropriation towards the said demand the amount that was already paid by the Appellant along with interest. Hence, to our mind, the only proposal that stands out is the levy of penalty and it is the settled position of as held by various higher judicial fora that when the duty along with interest is paid much before SCN, no interest/penalty could be lived. In view of the above discussions, we are of the clear view that the revenue has seriously erred in passing the Order-in-Original, which came to be upheld.
7. We also find merit in the contentions of the Id. Advocate that the extended period of limitation is invoked without any justification. A perusal of SCN clearly reveals that the officers of Headquarters Preventive Unit visited the Appellant’s premises on 12.02.2013 itself. Para 1.11 of the Order-in-Original records the dates of deposit of amounts as 07.03.2013 & 13.05.2013, which were appropriated in the Order-in-Original. It is clear from the above that the Department was very much aware, if not from their date of visit but at least from the date of deposit i.e. 07.03.2013 but, however, the SCN came to be issued only on 26.04.2016 which is clearly beyond the period of limitation. Moreover, the only reason attributed in the Order-in-Original for invoking the extended period of limitation under Section 11A (4) ibid is that the Appellant had cleared the excisable goods without payment of duty, without taking Central Excise Registration and had suppressed the facts with an intention to evade payment of duty. We fail to understand the logic behind this allegation since the period of dispute is 01.04.2011 to 31.03.2013, the Appellant undisputedly enjoyed the benefit extended by virtue being a SSI unit. Further, at para-4.8, the Adjudicating Authority has recorded as under :
“I find that though the assessee has claimed the classification under heading 2001 9000 as erroneous, he has classified the pickles in his periodical returns only under that heading and is accordingly paying central excise duty which appears a tacit admission of the tariff heading being correct. ,
It is clear from the above that the Appellant was indeed paying Central Excise Duty and hence, the suppression with intent to evade duty cannot be alleged. Hence, we are satisfied that the Revenue has not been able to clearly defend the invocation of extended period of limitation, as in this case, the SCN has been issued after a period of 3 years. In view of the above, we are of the view that the Appellant should succeed on limitation itself. Therefore, we set aside the impugned order and allow the Appeal as indicated above.
8. We also find that despite no proposal in the SCN to levy penalty under Rule 26, the same has been upheld, mechanically. The impugned order, therefore cannot sustain, for which reason we set aside the same forthwith and allow the Appeal with consequential benefits, if any, as per Law.
(Order pronounced in open court on 29.05.2026)
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