Case Law Details
Kamal Steel Fabricators Vs Commissioner of Central Excise (CESTAT Chandigarh)
The CESTAT Chandigarh allowed the appeal filed against the order dated 13.08.2015 passed by the Principal Commissioner, Central Excise & Service Tax, Faridabad-I, which had confirmed a central excise duty demand of ₹55,01,282 along with a penalty of ₹5 lakh under Rule 173Q of the Central Excise Rules, 1944.
The dispute originated from a show cause notice dated 04.06.1998 alleging that the appellant had collected central excise duty from Indian Railways, its customer, but had not deposited the amount into the Government exchequer in violation of Section 11D of the Central Excise Act, 1944. In an earlier round of litigation, the Tribunal, by Final Order No. A/30/2012-EX (DB) dated 11.01.2012, remanded the matter to the adjudicating authority for re-quantification after holding that the excise duty actually paid by the appellant at the time of clearance of goods from the factory should not be included in the total demand. Following the remand, the Commissioner again confirmed the demand of ₹55,01,282.
The appellant contended that the impugned order was barred by limitation and that the demand related to the period from 29.01.1990 to 19.09.1991, whereas Section 11D was introduced only with effect from 20.09.1991 and could not be applied retrospectively. Reliance was placed on Mahatma Sugar and Power Limited and Hindalco Industries Ltd., where Section 11D was held to operate prospectively. The appellant also argued that the show cause notice issued in 1998 was beyond a reasonable period and relied on Omid Engineering Pvt. Ltd. for the proposition that, even in the absence of a prescribed limitation under Section 11D, proceedings must be initiated within a reasonable time. It was further submitted that RT-12 returns and financial statements had been furnished, contrary to the finding in the impugned order that no proof of duty payment had been produced.
The Revenue supported the findings recorded in the impugned order.
After considering the submissions and examining the records, the Tribunal held that the principal issue was the retrospective application of Section 11D. It observed that the disputed period was prior to 20.09.1991, when Section 11D came into force, and that a statutory provision cannot be applied retrospectively unless expressly stated. The Tribunal found nothing on record indicating that Section 11D had retrospective operation. It noted that the Bombay High Court in Mahatma Sugar and Power Ltd., relying on the Supreme Court’s judgment in Jalna Sahakari Shakkar Karkhana Ltd., and the Delhi High Court in Hindalco Industries Ltd., had held that Section 11D applies prospectively.
On this basis, the Tribunal held that the Revenue had not made out a case for recovery of duty allegedly collected and retained prior to the introduction of Section 11D. Although it observed that the appellant also had a strong case on limitation, it declined to record findings on that issue since the appeal succeeded on merits. Accordingly, the Tribunal held that the impugned order was unsustainable and allowed the appeal.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
M/s Kamal Steel Fabricators challenged the impugned order dated 13.08.2015 passed by Principal Commissioner, Central Excise & Service Tax, Faridabad-I.
2. Brief facts of the case are that a show cause notice dated 04.06.1998 was issued to the appellants demanding central excise duty of Rs.55,01,282/- on the allegation that they have collected the same from Indian Railways that is their customers and have not deposited the same to the government exchequer in violation of the provisions of Section 11D of the Central Excise Act, 1944. Learned Commissioner of Central Excise confirmed the demand along with a penalty of Rs. 5 Lakhs under Rule 173Q of Central Excise Rules, 1944. On an appeal filed by the appellants, Tribunal vide Final Order No. A/30/2012-EX (DB) dated 11.01.2012 remanded the matter back to the adjudicating authority for quantification holding that excise duty actually paid by the appellants at the time of clearance of the goods from the factory is not to be included in the total demand. In the remand proceedings, learned Commissioner vide impugned order confirmed the demand of Rs.55,01,282/-.
3. Ms. Shweta Chauhan, learned counsel for the appellants submits that the impugned order is liable to be set aside being barred by limitation; the demand is unsustainable as it pertains to the period from January 29, 1990 to September 19, 1991 and Section 11D was introduced only w.e.f. September 20,1991 and the same cannot be applied retrospectively. She submits that it was held in Mahatma Sugar and Power Limited, Nagpur (Central Excise Appeal No.3/2014 dated December 5, 2025) and Hindalco Industries Ltd. – 2017 (52) STR 2023 (Del.) that Section 11D will only be prospective and cannot be applied retrospectively. She also submits that the demand is otherwise barred by limitation as the same was issued in 1998; it was held in Omid Engineering Pvt. Ltd. – 2024 (7) TMI 61- CESTAT Chandigarh that even if there is no prescribed timelimit under Section 11D, show cause notice has to be issued within a reasonable time. She further submits that this being a pure question of law can be taken at any point of time; the impugned order proceeds to confirm the demand incorrectly stating that the appellant has not submitted any documents to establish the proof of payment of duty; the appellant has furnished RT-12 Returns and financial statements. She relies on the following cases.
4. Shri Yashpal Singh, learned Authorized Representative for the Revenue reiterates the findings of the impugned order.
5. Heard both sides and perused the records of the case. We find that the main argument of the appellant is about the retrospective application of Section 11D. We find that the issue involved in the case pertains to a period prior to September 19, 1991 whereas Section 11D was inserted w.e.f September 20, 1991. We find that any statutory provision unless expressly stated cannot be applied retrospectively. We find that in the instant case, there is nothing on record to show that the amendment is retrospective. We find that Hon’ble High Court of Mumbai in the case of Mahatma Sugar and Power Ltd. (supra) relying on the judgment of Hon’ble Supreme Court in the case of Jalna Sahakari Shakkar Karkhana Ltd. (Appeal No. 646/ 2006 dated 08.09.2017) held as follows: para 7, 8, 9at page 4 & 5
6. We also find that Hon’ble Delhi High Court in the case of Hindalco Industries (supra) held as under: para 9, 10 at page5
7. In view of the above, we find that Revenue has not made out any case to recover the duty collected and retained by the appellants prior to the introduction of Section 11D. Moreover, learned counsel for the appellants has further submitted on limitation. We find that the appellants have also a strong case on limitation in view of the cases cited by her as above. However, as we find that the issue is squarely covered on merits, we do not find it necessary to give findings on the issue of limitation. Therefore, we find that the impugned order is not sustainable. Accordingly, the appeal is allowed.
(Order pronounced in the open court on 06/07/2026)
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