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June 2008

Important rulings under Central Excise

By Puloma Dalal, Bakul B. Mody, Chartered Accountants
Reading Time 5 mins
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6. Important rulings under Central Excise :


An illustrative list of important judicial rulings under
Central Excise which could be useful for Service Tax, depending upon the facts
and circumstances of a given case, are set out hereafter :


(a) No suppression if all facts disclosed :


(i) If an assessee has disclosed all details in price list,
it is futile to contend that there was suppression of facts. Extended period
of limitation held as not available to the Department [CCE v. ITEC (P)
Ltd., (2002) 145 ELT 280 (SC).]

(ii) If facts are disclosed in classification list,
extended period be invoked [Primella Sanitary Products Pvt Ltd. v. CCE,
(2005) 184 ELT 117 (SC 3-member Bench).

(b) Mere inaction is not suppression of facts :


(i) Suppression means not providing information which the
person is legally required to state, but has intentionally or deliberately not
stated. The Supreme Court, in CCE v. Chemphar Drugs and Liniments,
(1989) 40 ELT 276, has held that mere inaction or failure on part of
manu-facturer will not amount to suppression of facts. Conscious or deliberate
withholding of information when the manufacturer knew otherwise, is required
to be established, before saddling the manufacturer with liability for a
period beyond one year (that time 6 months) [The same view has been held in
MK Kotecha v. CCE, (2005) 179 ELT 261 (SC 3-member Bench).]

(ii) Extended period of limitation can be invoked only on a
positive act of fraud, etc. Such a positive act must be in contra distinction
to mere inaction like non-taking of licence, etc. [ITW Signode India Ltd.
v. CCE, (2004) 158 ELT 403 (SC 3-member Bench).]

(iii) There can be no suppression of facts if facts which
are not required to be disclosed are not disclosed [Smt. Shirisht Dhawan v.
Shaw Brothers, AIR 1992 SC 1555; Apex Electricals Pvt Ltd. v. UOI,
(1992) 61 ELT 413 (Guj HC)]

(c) Ground for invocation of extended period should be specified in the
SCN :


(i) Since the longer period of limitation can be invoked on
a variety of grounds, the particular ground which is alleged against an
assessee must be specifically made known to the assessee. There is no scope
for assuming that the ground is implicit in the issuance of SCN [CCE v. HMM
Ltd., (1995) 76 ELT 497 (SC); Raj Bahadur Narayan Singh Sugar Mills v.
UOI, (1996) 88 ELT 24 (SC); Kaur & Singh v. CCE, (1997) 94 ELT 289
(SC)].

(ii) Extension of the period of limitation entails both
civil and criminal consequences and therefore must be specifically stated in
the SCN, in absence whereof the Court would be entitled to raise an inference
that the case was not one where the extended period of limitation could be
invoked. [CCE v. M/s. Payal Laminates Pvt. Ltd., (2006) 7 SCC 431;
Larsen & Toubro Ltd. v. CCE, (2007) 211 ELT 513 (SC)]

(d) Omission to provide facts must be deliberate :



Suppression of facts does not mean any omission and it must
be deliberate and willful to evade payment of duty. In taxation, it can have
only one meaning that the correct information was not disclosed deliberately
to escape payment of duty. Mere failure to declare does not amount to willful
suppression. There must be some positive act from the side of the assessee to
make it willful suppression. [Anand Nishikawa Co. Ltd., CCE (2005) 188
ELT 149 (SC); CCE v. Damnet Chemicals Pvt. Ltd., (2007) 216 ELT 3
(SC)].


(e) No suppression of facts if an assessee had a bona fide belief :


(i) If an assessee bona fide believes in a legal
position (e.g., that no duty is payable or no licence is required in
his case) and if there is scope for such belief and doubt, provisions of
proviso to S. 11A will not apply [Padmini Products v. CCE, (1989) 43
ELT 195 (SC); CCE v. Surat Textile Mills Ltd., (2004) 167 ELT 379 (SC 3
member bench) Gopal Zarda Udyog v. CCE, (2005) 188 ELT 251 (SC 3-member
Bench).]

(ii) If there were conflicting decisions of various High
Courts and when the assessee was under bona fide belief that he need
not declare production of an exempted item, extended period is not applicable.
[Jaiprakash Industries v. CCE, (2002) 146 ELT 481 (SC 3-Member Bench).]

(iii) If different views were expressed at different stages
by Tribunal and High Court, extended period of five years is not invocable [Mentha
& Allied Products Ltd. v. CCE, (2004) 167 ELT 494 (SC)]

(iv) If there was difference of opinion in the Department
itself and Departmental officials were regularly visiting factory and were in
knowledge of process of manufacture adopted by the assessee, pleas of the
assessee of bona fide belief is sustainable and extended period is not
invocable [Ugam Chand Bhandari v. CCE, (2004) 167 ELT 491 (SC)]

(v) If there was bona fide dispute whether process
is ‘manufacture’ or not — extended period is not invocable [Tecumesh
Products India Ltd. v. CCE, (2004) 167 ELT 498 (SC).]

(f) No suppression if Department aware of facts :


(i) If the Department had issued SCN earlier and had
considered the matter earlier, there cannot be any suppression of facts, if at
a later stage authorities come to a different conclusion [P & B
Pharmaceuticals v. CCE, (2003) 153 ELT 14 (SC)]

(ii) If the Department had issued SCN earlier and it was
adjudicated, another SCN in respect of the same subject matter cannot be
issued invoking extended period of limitation. [Nizam Sugar Factory v. CCE,
(2006) 197 ELT 465 (SC)]

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