Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6033 OF 2009
THE COMMISSIONER, CENTRAL EXCISE
AND CUSTOMS AND ANOTHER … APPELLANT(S)
VERSUS
M/S RELIANCE INDUSTRIES LTD. … RESPONDENT(S)
WITH
CIVIL APPEAL NO. 5714 OF 2011
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX … APPELLANT(S)
VERSUS
M/S RELIANCE INDUSTRIES LTD. … RESPONDENT(S)
JUDGMENT
KRISHNA MURARI, J.
1. The present appeals are directed against the impugned order dated
17.03.2009 passed by the Customs, Excise & Service Tax Appellate
Tribunal (CESTAT), Ahmedabad, in C.O No. M/419-21/WZB/AHD/08
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whereby, the learned Tribunal allowed the appeal therein. Since the
central issues involved in Civil Appeal Nos. 6033/2009 and 5714/2011
are the same, they are being adjudicated upon by this common order.
FACTS
2. For the sake of convenience, we are first taking up the facts of Civil
Appeal No. 6033/2009. The order impugned in this appeal is that of
Customs, Excise & Service Tax Appellate Tribunal (CESTAT or
Tribunal) dated 17.3.2009 which had, by a majority of 2:1, allowed an
appeal filed by the Respondent-Assessee against an order of the
Commissioner of Central Excise, Rajkot by which a demand for
differential duty was confirmed against the assessee by invoking the
extended period of limitation available under the proviso to Section
11A (1) of the Central Excise Act, 1944.
3. The demand for differential duty of excise was raised on the allegation
that the assessee had incorrectly determined the assessable value of its
finished goods by not including therein the monetary value of the duty
benefits that it had obtained from its customers as a result of the
transfer of the advance licenses.
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4. This demand for differential duty was raised for clearances made during
the period of September 2000 to March 2004. The Show Cause Notice
which was issued on 28.9.2005 relied upon a judgment of this Court on
9.8.2005 in the case of IFGL Refractories Ltd in support of the plea that
monetary value of duty benefits obtained through transfer of advance
licenses held by the customers constituted additional consideration
flowing to the assessee from such customers .
5. Since the demand for differential duty was being raised on 28.9.2005,
which was beyond the normal limitation period of one year prescribed
in Section 11A(1) of the Act, the show cause notice also alleged that the
noticee had deliberately suppressed relevant facts and had made willful
misstatements withholding material information and documents from
the departmental officers.
6. The allegations in the notice were confirmed by the Commissioner in
his order dated 30.10.2006 wherein the assessee's defense on merits as
well as on limitation were rejected.
7. The Commissioners' order was challenged by the assessee before
CESTAT, which allowed that appeal by a majority order by accepting
the assessee's plea that the dispute was revenue neutral having no
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Revenue implications since the customers of the assessee were eligible
to avail cenvat credit of duties actually paid or any differential duty
payable on the goods cleared by the assessee. We are not dwelling
deeper on the other findings of the Tribunal on the merits of the matter
since these appeals are being decided only on the issue of time bar.
8. On the issue of time bar, the CESTAT has held that during the relevant
period the Appellant could have entertained a bonafide belief that it had
correctly discharged its duty liability in view of the view taken by the
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Tribunal in the case of IFGL Refractories Ltd. which came to be
reversed by this Court only on 9.8.2005. It is relevant to note here that
insofar as the decision on time bar is concerned the view of the two
learned members who constituted the division bench of CESTAT was
unanimous.
9. The difference of opinion, therefore, arose only on the merits of the
matter which also came to be decided in favour of the assessee by a 2-1
majority. Since arguments before us are confined to the issue of
limitation, it is necessary to take note of the findings of the CESTAT on
the same. The finding of the Member (Technical) on the issue of
limitation was as under:
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[2001 (134) ELT 230]
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“As regards the submission on time bar, it is noticed that
the Commissioner has relied on the Hon'ble Supreme
Court's judgement dt. 9.8.2005 in the case of M/s. IFGL
Refractories Ltd. cited supra. This decision of the
Hon'ble Supreme Court has reversed the decision of the
Tribunal in the case of M/s IFGL Refractories Ltd. [2001
(134) ELT 230]. In other words, the Tribunal has taken a
view that discounts offered to advance licence holders
were not additional consideration which decision has
been reversed by the Hon'ble Supreme Court. Under
these circumstances, the claim that the appellant was
having a bonafide belief that the additional discounts are
permissible has to be accepted and demand of duty has
to be confined to duty within the normal period of
limitation. No penalty will be justified."
10. The corresponding finding of the Member (Judicial) on the issue of
limitation were as under:
“The orders proposed by learned Member (Technical)
allowed Appeal No. E/228/07, on point of limitation, by
setting aside the confirmation of demand and penalty
imposed upon the appellant. I agree with the said order
passed by learned Member (Technical) in the said
appeal.”
ANALYSIS
11. We have heard the contentions of both the parties in great detail.
12. Section 11A of the Central Excise Act, 1944, which deals with the
issue of limitation for issuing show cause notices for recovery of duties
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which have been short paid or short levied, is the governing law in the
present case. Sub-section (1)of Section 11(A), which is most relevant to
the present case, for the sake of convenience, is being reproduced
hereunder:
“(1) When any duty of excise has not been levied or
paid or has been short-levied or short-paid or
erroneously refunded, whether or not such non-levy or
non-payment, short-levy or short payment or erroneous
refund, as the case may be, was on the basis of any
approval, acceptance or assessment relating to the rate
of duty on or valuation of excisable goods under any
other provisions of this Act or the rules made
thereunder, a Central Excise Officer may, within one
year from the relevant date, serve notice on the person
chargeable with the duty which has not been levied or
paid or which has been short-levied or short paid or to
whom the refund has erroneously been made, requiring
him to show cause why he should not pay the amount
specified in the notice: ”
13. The first proviso to the abovementioned sub-section (1), which is the
relevant provision relating to the extended period of limitation, reads as
under:
"Provided that where any duty of excise has not been
levied or paid or has been short levied or short-paid or
erroneously refunded by reason of fraud, collusion or
any wilfull misstatement or suppression of facts, or
contravention of any of the provisions of this Act or of
the rules made thereunder with intent to evade payment
of duty, by such person or his agent, the provisions of
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this sub-section shall have effect, for the words one year
the words five years were substituted."
14. In the case of Pushpam Pharmaceuticals Company Vs. Collector of
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Central Excise, Bombay , this Court, while dealing with a similar fact
circumstance wherein the extended period of limitation under the
abovementioned proviso had been invoked, held that since the
expression “suppression of facts” is used in the company of terms such
as fraud, collusion and willful misstatement, it cannot therefore refer to
an act of mere omission, and must be interpreted as referring to a
deliberate act of non-disclosure aimed at evading duty, that is to say, an
element of intentional action must be present.
15. Similarly, in the case of Collector of Central Excise, Hyderabad Vs.
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M/s. Chemphar Drugs and Liniments, Hyderabad , this Court, while
dealing with a similar situation of invocation of extended period of
limitation under Section 11(A) of the Act, this Court held as under:
“In order to make the demand for duty sustainable
beyond a period of six months and up to a period of 5
years in view of the proviso to sub-section 11A of the Act,
it has to be established that the duty of excise has not
been levied or paid or short-levied or short-paid, or
erroneously refunded by reasons of either fraud or
2 1995 Sup (3) SCC 462
3 1989 (2) SCC 127
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collusion or willful misstatement or suppression of facts
or contravention of any provision of the Act or Rules
made thereunder, with intent to evade payment of duty.
Something positive other than mere inaction or failure on
the part of the manufacturer or producer or conscious or
deliberate withholding of information when the
manufacturer knew otherwise, is required before it is
saddled with any liability, before the period of six
months. Whether in a particular set of facts and
circumstances there was any fraud or collusion or willful
misstatement or suppression or contravention of any
provision of any Act, is a question of fact depending
upon the facts and circumstances of a particular case.
The Tribunal came to the conclusion that the facts
referred to hereinbefore do not warrant any inference of
fraud. The assesse declared the goods on the basis of
their belief of the interpretation of the provisions of the
law that the exempted goods were not required to be
included and these did not include the value of the
exempted goods which they manufactured at the relevant
time. The Tribunal found that the explanation was
plausible, and also noted that the Department had full
knowledge of the facts about manufacture of all the
goods manufactured by the respondent when the
declaration was filed by the respondent. The respondent
did not include the value of the products other than those
falling under Tariff Item 14E manufactured by the
respondent and this was in the knowledge, according to
the Tribunal, of the authorities. These findings of the
Tribunal have not been challenged before us or before
the Tribunal itself as being based on no evidence”
16. The main submission of the Learned Counsel appearing on behalf of
the assesse was that during the period under reference i.e. September
2000 to March 2004, the practice of valuation followed by the assessee
was strictly in accordance with the view taken by CESTAT in IFGL's
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case. The CESTAT in that case held that duty benefits received by an
assessee under the duty exemption scheme announced by the
Government cannot be considered as part of the consideration flowing
from the buyer, either directly or indirectly. The Tribunal order refers to
several other orders and judgements for coming to the conclusion that
subsidies, incentives and duty drawbacks received by an assessee from
the Central Government or the State Government cannot be regarded as
part of the consideration flowing from the buyer to the seller.
17. After referring to the detailed observations and finding of the
CESTAT, in IFGL's case, particularly those in para 9 and 10 thereof, the
Ld. Counsel for the assessee submitted that, though the above view of
the Tribunal was reversed by this Court on 9.8.2005 while deciding
Civil Appeal No.4472 of 2001, it cannot be denied that during the
period from 28.7.2000 (the date when the Tribunal decided the IGL's
case) till 9.8.2005 (when the Supreme Court reversed it) the view taken
by the Tribunal in IFGL's case held the field and thus provided the basis
for the assesse to believe that its method and approach of determining
the assessable value was in accordance with law. The Ld. Counsel
further pointed out that there was otherwise no justification for alleging
suppression of facts in the present case as the assessee had submitted to
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the Revenue authorities copies of their pricing policy from time to time.
Our attention was invited to para 2 of the Show Cause Notice dated
28.9.2005 wherein this fact has been recorded in the notice.
18. The Ld. Counsel for the revenue on the other hand submitted that the
Tribunal had failed to apply its mind to the allegations and specific
finding of the adjudicating authority. It was submitted that the
adjudicating authority had specifically found that the subject
transactions where additional discounts had been offered to certain
customers who had agreed to transfer to the assessee duty benefits
flowing from advance licence held by them were wrongly clubbed with
domestic clearances with a view to mislead range officer tasked with
the responsibility of checking the transactions. The Ld. Counsel for the
Revenue accordingly submitted that the assesse was guilty of
suppressing material facts from the Revenue authorities and that the
Range officer had thus been misled into believing that the duty had
been correctly paid. The Ld. Counsel also invited our attention to the
fact that during the relevant period the assessee was working under self-
assessment procedure were the onus to correctly assess duty vested
upon the assesse. The Ld. Counsel for the Revenue also submitted that
the finding of the CESTAT about bonafide belief based on the
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CESTAT's decision on the IGL's case was also unsustainable in view of
the specific findings of the adjudicating authority of suppression of
material facts by clubbing of the clearances with domestic clearances
which mislead the range officer tasked with the responsibility of
checking all transactions.
19. Per contra the Ld. Counsel for the assesse submitted that the
arguments made on behalf of the Revenue traverse beyond the grounds
taken in the appeal and also the allegations in the show cause notice. It
was his further submission that there was no wrongful clubbing of
deemed export clearances with domestic clearances. It was pointed out
that the monthly returns (ER-1/RT-12) that the assessee was required to
file does not have any separate column for declaring deemed export
clearances. Since the subject clearances on which differential duty has
been demanded has been initially been made upon payment of duty,
such clearances had correctly been shown as duty paid domestic
clearances.
20. We have seen the format of the ER-1/RT-12 return which the assessee
was required to file on a monthly basis for intimating to the department
the value of clearances effected and the amounts of duties paid thereon.
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We do not find any separate column or requirement in these forms for
declaring the value and other details of clearances effected to the
deemed export buyers i.e. holders of advance licenses. Note 4 under
Form ER-1 does require separate details to be mentioned for exports
under bond. Indisputedly clearance made to domestic buyers even if
they are considered deemed exports are not clearances for "exports
under bond" for which category of clearances alone requirement existed
for separate disclosure in the ER-1/RT-12 returns. In the absence of any
specific column or note similar to note 4, requiring separate disclosure
of the value of deemed export clearances, we do find any merit in the
findings of the adjudicating authority that there was suppression of facts
as a consequence of assessee's failure to separately disclose the value of
deemed export clearances. An accusation of non-disclosure can only be
made if there is in the first instance a requirement to disclose.
21. We also find that Note 4 to Form ER-1 requires separate details of
clearances to be mentioned for exports under Bond. There is no
reference in the said notes to deemed exports or supplies made to
holders of advance licenses. We therefore agree with the submissions of
the counsel for the assessee that the assesse was never required to
separately furnish details of clearances made to holders of advance
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licenses. We also find that neither the show cause notice nor the civil
appeal filed by the Revenue before this Court contain any reference to
the wrongful clubbing of deemed export clearances under the details
meant for domestic clearances. Also the order of the Tribunal does not
contain any reference to this particular aspect which was the main
thrust of the oral arguments made by the Ld. Counsel for the Revenue
before this Court. In our considered view, the Revenue cannot be
permitted to argue its matters by going beyond the written pleadings
filed by it before this Court. The mere fact that the oral arguments are
supported by findings of the adjudicating authority, which is not the
order impugned before this Court, does not entitle the Revenue to
resurrect a point which though made at the original stage, was never
pressed before the Tribunal or even incorporated in the memo of appeal
filed before this Court.
22. We also find no merits in the other argument urged by the Ld. Counsel
for the Revenue that the Tribunal’s order in the case of IFGL
Refractories could not have constituted a valid basis for the belief
entertained by the assesse in view of the fact that the relevant valuation
provisions had undergone amendments in the year 2000. The argument
of the Revenue's Counsel was that in view of the amendments to
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Section 4 and Rule 6 of the Valuation Rules the ratio of the Tribunal's
decision in IFGL's case was no longer relevant for the period under
consideration in these appeals. We have no hesitation in rejecting this
contention for two independent reasons. Firstly, this contention too has
not been urged in the Civil Appeal filed by the Revenue and has been
urged only during the course of the hearing before this Court. On this
count alone the contention deserves to be ignored. Secondly, we also
find this contention to be diametrically opposite to what the Revenue
itself has been contending on merits right from the Show cause notice
till the appeal filed before this Court. On merits, the Revenue's case
throughout had been that the issue of valuation is covered against the
assessee by the judgement of this Court in the case of IL Refractories.
Even in the order of the CESTAT under challenge the Tribunal has
proceeded on the basis that the principle of valuation laid down by this
Court in the case of IFGL Refractories holds good and remains valid
even under the amended valuation provisions for the period post July
2000. We therefore find it strange that for the purposes of justifying its
case on limitation, the Revenue wishes to take a position exactly
contrary to what it has taken in the Show Cause Notice on merits. We
cannot allow the Revenue to blow hot and cold in the same breath by
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relying upon IL's case on merits while at the same time arguing that the
same had no relevance for the purposes of examining the plea for a
bonafide belief.
23. We are in full agreement with the finding of the Tribunal that during
the period in dispute it was holding a bonafide belief that it was
correctly discharging its duty liability. The mere fact that the belief was
ultimately found to be wrong by the judgment of this Court does not
render such belief of the assessee a malafide belief particularly when
such a belief was emanating from the view taken by a division bench of
Tribunal. We note that the issue of valuation involved in this particular
matter is indeed one were two plausible views could co-exist. In such
cases of cases of disputes of interpretation of legal provisions, it would
be totally unjustified to invoke the extended period of limitation by
considering the assessee's view to be lacking bonafides. In any scheme
of self-assessment it becomes the responsibility of the assessee to
determine his liability of duty correctly. This determination is required
to be made on the basis of his own judgment and in a bonafide manner.
24. The extent of disclosure that an assessee makes is also linked to his
belief as to the requirements of law. In the present case the assessee
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who was required to self-assess his liability determined the assessable
value on the basis of an interpretation given by CESTAT in its order
dated 28.7.2000. It could not have foreseen that the view taken by
CESTAT would be upset and overturned by the Supreme Court as it
happened on 9.8.2005. The assessee's conduct during the material
period i.e. between 2000 to 2005 cannot be considered to be malafide
when it merely followed the view taken by the Tribunal in IFGL's case.
On the question of disclosure of facts, as we have already noticed above
the assessee had disclosed to the department its pricing policy by giving
separate letters. It is also not disputed that the returns which were
required to be filed were indeed filed. In these returns, as we noticed
earlier there was no separate column for disclosing details of the
deemed export clearances. Separate disclosures were required to be
made only for exports under bond and not for deemed exports, which
are a class of domestic clearances, entitled to certain benefits available
otherwise on exports. There was therefore nothing wrong with the
assessee's action of including the value of deemed exports within the
value of domestic clearances.
25. We also take note of the fact that in the show cause notice itself it has
been accepted by the revenue that the self-assesment procedure did not
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require an assessee to submit copies of all contracts, agreements and
invoices. This being the admitted position in the notice we do not find
any basis for agreeing with the findings of the Commissioner that
certain relevant documents had not been filed and thereby suppressed
from the scrutiny of the revenue officers. An assessee can be accused
for suppressing only such facts which it was otherwise required to be
disclosed under the law. The counsel for the Revenue has, while
pleading that facts was suppressed been unable to show us the provision
or rule which required the assessee in this case to make additional
disclosures of documents or facts. The assertion that there was
suppression of facts is therefore clearly not tenable.
26. Insofar as the appeal No. 5744/2011 is concerned, we find that the
same pertains to a different plant of the Assessee-Respondent where
clearances were affected during the period January 2001 to November
2003. The Show Cause Notice in this case was issued on 29.12.2005
and sought to invoke the extended period of limitation by making
similar allegations as in Civil Appeal No. 6033 of 2009. The order
impugned in this appeal, however is an order dated 4.4.2010 of the
Gujarat High Court by which the Court had dismissed an appeal filed
by the revenue against an order of CESTAT, by holding that no question
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of law could be stated to arise from the order of CESTAT. Our
conclusions with regard to Civil Appeal 6033 of 2009 apply equally to
this appeal. In the result both the appeals filed by the Revenue are
dismissed on the ground that the demands are time barred. We make it
clear that we express no opinion on the merits of the matter including
the aspects of revenue neutrality.
……...…....………………,J
(KRISHNA MURARI)
……...…....………………,J
(BELA M. TRIVEDI)
NEW DELHI;
th
04 JULY, 2023
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