Case Law Details
Birla Corporation Limited Vs Commissioner, CGST & Central Excise (CESTAT Delhi)
CESTAT Delhi held that invocation of extended period of limitation unsustainable as several rounds of audit was conducted and show cause notice for previous period on the same issued was already issued. Hence, department was fully aware of the issue in the question.
Facts- M/s. Birla Corporation Ltd. filed this appeal to assail the denovo OIO passed by the Principal Commissioner. The matter was initially decided against the appellant who filed an appeal which was disposed of by this Tribunal remanding the matter to the Commissioner.
The impugned order was passed confirming the demand of Rs. 49,27,427/-. He also imposed penalty of Rs. 49,27,427/- u/s 11AC. The appellant mainly contested the demand as the Show Cause Notice was issued beyond the normal period of limitation. The appellant also contested the imposition of penalty under section 11AC.
Conclusion- In this case, not only one but several rounds of audit were conducted. Show Cause Notice was issued for the previous period on the same issue by the Revenue. Thus, the department was fully aware of the issue in question, the general marketing pattern of the appellant and it was for the officer scrutinising the returns to have checked the returns and issued SCN within time.
For all the above reasons, the impugned order cannot be sustained as the entire demand is time barred. The appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Birla Corporation Ltd.1 filed this appeal to assail the de-novo Order-in Original dated 30.3.2021 2 passed by the Principal Commissioner, Central Excise and CGST, Jabalpur. The matter was initially decided against the appellant who filed appeal No. E/50328/2016 which was disposed of by this Tribunal by Final Order dated 29.7.2019 remanding the matter to the Commissioner. Paragraphs 12 to 15 of this order are as follows.
12. In view of the above, we hold that the matter needs a detailed verification and examination of claims made by the appellant at the field level, we remand back the appeal to the original adjudicating authority for necessary verification.
13. Finally coming to the issue of Show cause notice being barred by limitation, we find that similar issue has already been adjudicated by the Commissioner vide his Order-in-Original No. 13/Commr/CEX/ADJ/STN/2010 dated 29.07.2010 wherein similar issue was the subject matter of remand. Apart from the above, we take note of the fact that the appellant unit have been audited every year since 01.01.2008. We find that following audits had taken place during the period of demand:
(i) CE Audit Conducted upto October, 2008 on 18.12.08
(ii) CE Audit Conducted upto March, 2009 on 7.8.2009
(iii) CE Audit Conducted upto June, 2010 on 26.8.2010
(iv) CERA Audit Conducted upto March, 2010 on 26.11.2010
(v) CE Audit Conducted upto December, 2011 on 7.1.2012
14. Thus prima facie, we find that there is a substance in the claim made by the advocate that the extended period of demand under section 11 A of the Central Excise Act, 1944 is not invokable in the facts and circumstances of this case. However, since the entire matter is being remanded back, we expect that the learned adjudicating authority will examine the issue of limitation also in detail keeping in mind the facts narrated in para 7 above.
15. In view of the entire above discussions, the appeal in hand is allowed by way of remand as explained in the preceding paragraphs.
2. The impugned order was passed dropping the demand of Rs.3,47,13,776/- and confirming the demand of Rs. 49,27,427/-. He also imposed penalty of Rs. 49,27,427/- under Section 11AC. Learned counsel for the appellant submits that the Commissioner correctly calculated the demand of duty on merits based on the facts presented before him and as per the judgment of the Supreme Court regarding taxability of the cement supplied to institutional buyers.
3. However, he contested the demand as the Show Cause Notice was issued beyond the normal period of limitation. He also contested the imposition of penalty under section 11AC. It is undisputed that to invoke extended period of limitation and also to impose penalty under section 11AC, one of the following elements must be present:
a) Fraud;
b) Collusion;
c) Wilful mis-statement;
d) Suppression of facts,
e) Violation of the provisions of the Act or Rules with an intent to evade payment of duty.
4. According to the learned counsel for the appellant, extended period of limitation could not have been invoked in this case for the following reasons.
a) This was a case involving interpretation of law which was finally settled by the Supreme Court in the case of Commissioner vs Madras Cements Ltd. 3 . Therefore, extended period of limitation could not be invoked.
b) The department was well aware of the facts of the case since SCN was issued for the previous period on the same issue. Reliance is placed on Nizam Sugar Factory vs CCE4.
c) Five audits were conducted at the factory every year since 1.1.2008.
d) Without proving any intention to evade, extended period of limitation could not have been invoked.
5. Learned counsel for the appellant prays that the appeal may be allowed and the impugned order may be set aside as the entire demand was issued beyond the normal period of limitation. Penalty under section 11AC can also not be imposed for the same reason.
6. Learned authorized representative supports the impugned order and reiterates its findings.
7. We have considered the submissions on both sides and perused the records. There is no dispute regarding the merits of the case and the calculation of duty. Therefore, insofar as the directions of this Tribunal in the Final Order dated 29.7.2019 are concerned, they have been fully complied with. The only question which remains is the invocation of extended period of limitation which was also required to be examined by the Commissioner. The Commissioner recorded his findings on this issue in paragraph 19 of the impugned order as follows:
“I observe that the Noticee in their defense reply have contended that there cannot be suppression clause invocable for demand of duty as they have not suppressed the facts with intent to evade payment of excise duty. In support of their defence, they placed reliance some judicial pronouncements. Here, I find that the suppression of facts with intent to evade duty is clearly evident as all these material facts came to the knowledge of the Department only after scrutiny of records. Furthermore, the Noticee has not provided any evidence to show that they had provided any information about the categories of buyers to whom they had cleared the cement in ER-1 and they have also deliberately misinterpret the definition of „institutional/industrial consumer‟ of SoWM (PC) Rules as well as provision of notification No. 4/2007-CE dated 01.03.2007 as amended. As regards the conduct of Audit of records of the Noticee, I find that EA-2000 Audit is always a selective audit and not 100% audit of records of the assessee. In such circumstances, it is settled position that the assesse has to prove on record that the issue raised in the Show Cause Notice was in the knowledge of Auditors and they had cleared it after due examination. However, no such evidence had been placed on record by the Noticee. Hence it appears that mere conduct of audit would not have effect on invocation of extended period. After having made short-payment of duty on cement over a prolonged period as evident from Show Cause Notice, in the era of self assessment, the Noticee cannot be permitted to take shelter of a spacious plea relating to matter being time barred.
Hence, with due respect to observations of Hon‟ble CESTAT, I find that extended period of limitation provided under the provisions of Section 11A of Central Excise Act, 1944 is correctly and squarely invocable and applicable to the demand of short payment of duty amounting to Rs. 49,42,427/-.” I also rely on the following decisions for invocation of extended period.”
8. The Commissioner has, thus, invoked extended period of limitation for the following reasons:
a) Since all material facts came to light only after scrutiny of records, the suppression of facts with an intent to evade payment of duty was evident.
b) The appellant has not provided any evidence to show that they had provided any information about the categories of buyers to whom they had cleared the cement in ER-1.
c) The audit is always done on a selective basis and hence the fact that the audit was conducted would not come to the aid of the appellant and the demand is not time-barred.
9. It would be necessary to briefly review the relevant legal provisions regarding assessment. Central Excise Rules, 2002 provide not only for self-assessment of duty and filing of returns by the assessee in ER-1, but also scrutiny of the returns by the officers. Duty of excise is charged on excisable goods manufactured or produced in India but the duty becomes payable on removal (Rule 4). The assessee has to self- assess (Rule 6) the duty and pay it by the fifth day of the following month (Rule 8) and file Returns (Rule 12). The officers have to scrutinize the returns and can, for the purpose, call for documents and records which the assessee is bound to produce. The relevant Rules are below:
Rule 4. Duty payable on removal.-
(1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided
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Rule 6. Assessment of duty.-
The assessee shall himself assess the duty payable on any excisable goods:
Provided that in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal by the assessee.
Rule 8. Manner of payment. –
(1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case:
Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March:
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Rule 12 Filing of return.-
(1) Every assessee shall submit to the Superintendent of Central Excise a monthly return in the form specified by notification by the Board, of production and removal of goods and other relevant particulars, within ten days after the close of the month to which the return relates
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(3) The proper officer may on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee on the goods removed, in the manner to e prescribed by the Board.
(4) Every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer.
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10. The officer scrutinising the returns can call for any documents and records from the assessee which is bound to provide them. Thus, as far as the appellant is concerned, it is only legally bound to self-assess and pay duty and file returns in ER-1 form. If this form does not require certain details, the appellant is not required to furnish them. Further, since the returns are filed online, there is little scope for an assessee to provide extra information. Therefore, the finding in the impugned order that the appellant had not provided evidence that it had provided details of the types of customers cannot be sustained. Unless the ER1 return requires such information and the appellant does not provide it or provides incorrect information, the appellant cannot be faulted and this cannot be a ground to allege suppression of facts.
11. Rule 12 requires the officer to scrutinise the returns and for this purpose, he can call for any information or documents and the assessee is bound to provide them. If the officer does not scrutinise the return or having scrutinised, does not call for any relevant information, the responsibility for it lies on the officer and not on the assessee. It needs to be emphasised that Audit is only an additional check and the primary check against any incorrect self-assessment rests squarely on the officer who is mandated to scrutinise the returns.
12. In other words, the officer is mandated under the Rules to do what the audit may do much later. If the officer, who is an expert in taxation scrutinises the returns as he is mandated to do and calls for any records as he is authorised to call for, any mistakes which may be pointed out by the audit would come to light and an SCN could have been issued under section 11A within the normal period of limitation. Therefore, even if no audit is conducted during the relevant period and some duty escapes assessment, extended period of limitation cannot be invoked for that reason. The check against incorrect self assessment is the scrutiny of the return by the officer and audit is only the second check. Therefore, while the fact that audit checks only some selected documents and not every document as held in the impugned order is correct, this cannot be a ground to invoke extended period of limitation. Unlike audit, the officer receiving the ER-1 returns is required to scrutinise the returns and is empowered to call for any information.
13. It is also significant in this case that the appellant was issued SCN on the same issue for an earlier period. Thus, the officer scrutinising the returns must have been fully aware of what were the potential disputes and could have examined the ER-I returns and issued the SCNs within time.
14. Equally important is the fact that the issue involved interpretation of the notification and therefore, the appellant could have legitimately held a different view from the Revenue and therefore, no intent to evade payment of duty can be attributed to the appellant.
15. Further, we also find that several rounds of audit were conducted during the period.
16. To sum up, while the assessee was required to self– assess duty and file ER-1 return, a check against such self- assessment was the scrutiny which the officers were mandated to do by Rules. Audit is the next level of check against the scrutiny. If the audit points out some wrong assessment which was not pointed out by the officer scrutinising the ER-1 return, the fault lies at the doorstep of the officer. It does not, by itself, establish that the assessee had suppressed any facts. In this case, not only one but several rounds of audit were conducted. Show Cause Notice was issued for the previous period on the same issue by the Revenue. Thus, the department was fully aware of the issue in question, the general marketing pattern of the appellant and it was for the officer scrutinising the returns to have checked the returns and issued SCN within time.
17. For all the above reasons, the impugned order cannot be sustained as the entire demand is time barred. The appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
(Pronounced in open Court on 23.03.2023)
Note
1. Appellant
2. Impugned order
3. 2020(371) ELT A 42 (SC)
4. 2006(4) TMI-SC
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