Suppression of facts cannot be alleged when all relevant facts were in knowledge of Department

CA Bimal Jain

Suppression of facts cannot be alleged while issuing subsequent SCN on same and similar facts, when all relevant facts were in knowledge of the Department at the issuance of first SCN

Rivaa Textiles Industries Limited (“the Respondent”) is the processor of man-made fabrics. On September 16, 1996 inspection was carried out at the godown-cum-business premises of the Respondent by the Central Excise Officers. On the basis of information gathered in the inspection dated September 16, 1996, the Department issued various SCNs dated March 14, 1997, April 20, 1998 and March 27, 2001.

The SCN dated April 20, 1998 was issued alleging clandestine removal of manmade fabric and Excise duty demand of Rs. 1,60,77,219/- for the period 1995-96 and 1996-97 was made. Further, the Department issued third SCN dated March 27, 2001 for the period relating to June 24, 1996 to September 13, 1996 (“third SCN”) asking the Respondent to pay Excise duty amounting to Rs. 25,76,598/- on account of illicit removal and invoked extended period of limitation on the premise of suppression of facts and willful mis-statements.

Later, the Ld. Commissioner vide Order dated January 11, 2002 confirmed the duty demand made in the third SCN and also imposed penalty after holding that the third SCN was issued within a period of five years from September 16, 1996 in terms of Proviso to Section 11A of the Excise Act. However, in the matter of Second SCN, the demand was dropped after observing that the issue has been settled by CEGAT and there is no point in proceeding with this aspect.

Being aggrieved by the Order of the Ld. Commissioner, the Respondent preferred an appeal before the Hon’ble CESTAT, Mumbai. The Hon’ble CESTAT, Mumbai vide Order dated December 20, 2005 quashed and set aside the order of the Ld. Commissioner. Thereafter, the Department preferred an appeal before the Hon’ble High Court of Gujarat.

The Hon’ble High Court of Gujarat relying upon the decision in case of Nizam Sugar Factory Vs. Collector of Central Excise [2006 (197) ELT 465 (SC)], allowed the appeal in favour of the Respondent and held that where all the relevant facts were in the knowledge of authorities when first SCN was issued, while issuing second and third SCN’s on same and similar facts and on the basis of same inspection made on September 16, 1996, Department cannot allege suppression of facts by Respondent.

It was further held that since the entire proceedings are time barred, Excise duty cannot be levied against the Respondent and, accordingly no penalty can be imposed.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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