Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL NO. 3297 OF 2009
(Arising out of Special Leave petition (C) No.17739 of 2008)
M/s. Kushal Fertilisers (P) Ltd. …. Appellant
Versus
The Commissioner of Customs and
Central Excise, Meerut …. Respondent
J U D G M E N T
S.B. SINHA, J.
1. Leave granted.
2. Appellant is a company incorporated and registered under the Indian
Companies Act, 1956. It is engaged in the manufacturing of M.S. conduit
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pipes with effect from 29 March, 1990. It is registered as a Small Scale
Industrial Unit with the Directorate of Industries of the State of U.P.
3. An investigation was said to have been carried out by the Preventive
Unit of Saharanpur Division of the Central Excise Department in regard to
the business activities of the appellant in which it was observed that it had
neither obtained any Central Excise licence for manufacture of conduit pipes
nor filed any declaration with the department for granting them exemption
from the licensing provisions. It is, however, now not disputed that the
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appellant on or about 22 January, 1991 informed the Section Officer of the
Central Excise, Roorkee that it had been manufacturing M.S. conduit pipes
and its production is exempt from payment of Excise Duty in terms of
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Notification No.202/98-CE dated 20 May, 1988. It, furthermore, appears
from the letters addressed by the appellant to the Superintendent, Customs
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and Central Excise, Rishikesh dated 29 April, 1991 and the Superintendent,
Preventive and Intelligence Branch, Central Excise Division, Saharanpur
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dated 6 June, 1991 that the officers of the Central Excise Department had
been visiting the appellant’s factory for inspection of their factory.
4. Indisputably again the appellant submitted its production and raw
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material register for inspection. However, by a notice dated 12 August,
1992 the appellant was directed to file a declaration under Rule 174 of the
Central Excise Rules, 1944 (for short ‘the Rules’) for the purpose of
claiming exemption from licensing control.
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5. However, a show cause notice was issued on or about 28 March,
1994, proposing demand of Central Excise Duty of Rs.57,80,363/- under
Section 11A of the Central Excise Act, 1944 (for short ‘the Act’) and also
asking the appellant to show cause as to why penalty shall not be levied in
terms of Rule 209A of the Rules contending that the appellant was not
entitled for exemption as the gate passes covering the inputs described the
product as ‘bars’ and it suppressed the said fact with an intention to evade
payment of duty.
6. Appellant filed his reply to the said show cause notice.
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7. By reason of an order dated 21 July, 1994 the Commissioner of
Central Excise, Merrut opined that the appellant was not entitled for
exemption under Notification No.202/88 and that it suppressed the material
facts with an intention to evade payment of duty as a result whereof
extended period of limitation could be invoked. Appellant, however, was
held to be entitled for Modvat credit of duty paid on inputs but restricted the
credit to the extent of duty payable on bars.
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8. The appeal preferred by the appellant before the Customs, Excise &
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Gold (Control) Appellate Tribunal was allowed by an order dated 23
November, 2000 whereby the matter was remanded bank to the
Commissioner for his consideration afresh. The Commissioner, however,
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reaffirmed his earlier order by an order dated 19 March, 2004.
9. An appeal preferred by the appellant thereagainst was allowed by the
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Customs, Excise & Service Tax Appellate Tribunal by its order dated 3
March, 2005, directing :-
“….However, we observe that in their letter dated
22.01.91 they had requested the department for
certificate to the effect that their product is exempt
from the levy of duty. The department had thus
acquired knowledge, on receipt of the said letter,
that the Appellants are manufacturing tubes and
pipes and are availing the benefit of exemption
under Notification No.202/88. Whether further
details were provided by the Appellants or not in
the said letter, the department cannot deny the fact
that they had come to know about the Appellants
manufacturing tubes and pipes and availing benefit
of exemption and nothing prevented the
department from conducting investigation or
seeking further information from the Appellants.
In view of this we hold that the suppression of
facts stopped from 22.01.91 and the extended
period is applicable only prior to 22.01.91.”
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10. Respondent preferred an appeal thereagainst in terms of Section 35-G
of the Act which by reason of the impugned judgment was allowed treating
the same to be a Reference in terms of old Section 35-G of the Act.
11. The short questions which arise for our consideration are:-
i) Whether the said Reference was maintainable; and
ii) Whether in the facts and circumstances of this case the
extended period of limitation was applicable.
12. Before, however, adverting to said questions, we may notice that the
Commissioner of Central Excise, Meerut sought to make the reference to the
High Court stating :-
“ The order passed by the Hon’ble Tribunal
does not appear to be legal and correct in so far as
it relates to holding that the demand w.e.f.
22.01.1991 is time barred in view of the following
submissions.
While arriving at above and observation,
Hon’ble CESTAT observed that when the party
vide their letter 22.01.1991 requested the
department for certificate to the effect that their
product is exempt from duty, the department had
thus acquired the knowledge on receipt of this
letter and accordingly charges of suppression of
facts stopped w.e.f. 22.01.1991 whereas the total
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period involved in the SCN is w.e.f. 26.03.1990 to
31.03.1991 and the SCN was issued on
28.03.1994.
It is observed that though the party vide its
letter dated 22.01.1991 requested the department
for certificate to the effect that their product was
exempt from duty, they were directed by the
Sector Officer through letter dated 25.01.1991 to
provide complete information to the jurisdictional
Assistant Commissioner, for which the party
willfully abstained themselves. Further, one of the
Director of the party Shri Pankaj Gupta in his
statement dated 26.05.1992 stated that as he
considered their product exempt from excise duty
they neither obtained a licence nor filed proper
declaration. This clearly showed suppression on
the part of party. This submission was also found
not enable in as much as even if the conduit pipes
(final product) manufactured by the party were
considered as exempt, the party was under legal
obligation to obtain Central Excise licence under
Rule 174 as these rules had nothing to do with the
dutiability of the product and it simply laid down
that any person engaged in the manufacture of
exciseable goods must obtain a Central Excise
licence.”
13. The High Court although initially treated the same to be an appeal in
terms of Section 35-G of the Act, a Division Bench thereof was of the
opinion that the same was a reference in terms of Section 35-G of the
Central Excise and Salt Act, 1944, stating:-
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“ This reference (wrongly registered as
Appeal), made under Section 35-G of the Central
Excise and Salt Act, 1944, by the Commissioner of
Central Excise, Meerut-I, Mangal Pandey Nagar,
Meerut, is directed against the order dated
21.03.2005, passed by the Customs Excise and
Service Tax Appellate Tribunal, New Delhi
(hereinafter referred as CESTAT), in E/Appeal
No.3154/2004-NB(B), whereby the appeal of the
revenue was partly allowed.”
14. Evidently the High Court did not notice the amendments carried out in
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the said Act. The word ‘and Salt’ was omitted with effect from 28
September, 1996 by Section 70 of the Finance Act, 1996 (Act No.33 of
1996).
Section 35-G of the Act provided for a reference. However, the said
provision was also substituted by Section 144 of the Finance Act, 2003 (Act
No.32 of 2003), relevant provisions whereof read as under:-
“35G. Appeal to High Court
(1) An appeal shall lie to the High Court from
every order passed in appeal by the Appellate
Tribunal on or after the 1st day of July, 2003 (not
being an order relating, among other things, to the
determination of any question having a relation to
the rate of duty of excise or to the value of goods
for the purposes of assessment), if the High Court
is satisfied that the case involves a substantial
question of law.
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(2) The Commissioner of Central Excise or the
other party aggrieved by any order passed by the
Appellate Tribunal may file an appeal to the High
Court and such appeal under this sub-section shall
be--
(a) filed within one hundred and eighty days
from the date on which the order appealed
against is received by the Commissioner of
Central Excise or the other party;
(b) accompanied by a fee of two hundred
rupees where such appeal is filed by the other
party;
(c) in the form of a memorandum of appeal
precisely stating therein the substantial question
of law involved.”
15. We may also notice the provisions of Section 35-G of the Act, as it
prior to its amendment :
"35G. Statement of case to High Court.--
(1) The Commissioner of Central Excise or the
other party may, within sixty days of the date upon
which he is served with notice of an order under
section 35C passed before the 1st day of July, 1999
(not being an order relating, among other things, to
the determination of any question having a relation
to the rate of duty of excise or to the value of
goods for purposes of assessment), by application
in the prescribed form, accompanied, where the
application is made by the other party, by a fee of
two hundred rupees, require the Appellate Tribunal
to refer to the High Court any question of law
arising out of such order and, subject to the other
provisions contained in this section, the Appellate
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Tribunal shall, within one hundred and twenty
days of the receipt of such application, draw up a
statement of the case and refer it to the High Court:
Provided that the Appellate Tribunal may, if it
is satisfied that the applicant was prevented by
sufficient cause from presenting the application
within the period herein before specified, allow
it to be presented within a further period not
exceeding thirty days.
(2) On receipt of notice that an application has
been made under sub-section (1), the person
against whom such application has been made,
may, notwithstanding that he may not have filed
such an application, file, within forty-five days of
the receipt of the notice, a memorandum of cross-
objections verified in the prescribed manner
against any part of the order in relation to which an
application for reference has been made and such
memorandum shall be disposed of by the
Appellate Tribunal as if it were an application
presented within the time specified in sub-section
(1).
(3) If, on an application made under sub-section
(1), the Appellate Tribunal refuses to state the case
on the ground that no question of law arises, the
Commissioner of Central Excise, or, as the case
may be, the other party may, within six months
from the date on which he is served with notice of
such refusal, apply to the High Court and the High
Court may, if it is not satisfied with the correctness
of the decision of the Appellate Tribunal, require
the Appellate Tribunal to state the case and to refer
it, and on receipt of any such requisition, the
Appellate Tribunal, shall state the case and refer it
accordingly.
(4) Where in the exercise of its powers under sub-
section (3), the Appellate Tribunal refuses to state
a case which it has been required by an applicant
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to state, the applicant may, within thirty days from
the date on which he receives notice of such
refusal, withdraw his application and, if he does
so, the fee, if any, paid by him, shall be refunded"
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16. The order of the Tribunal having been passed on 3 March, 2005 an
appeal was maintainable to the High Court in terms of the substituted
provision and not a reference. Whereas a reference could be made on a
question of law, Section 35G of the Act, as it stands, provides for an appeal
on a substantial question of law. Such a question of law is required to be
formulated by the High Court itself. Even otherwise the question of law
purported to have been referred to by the learned Commissioner of Central
Excise would have been maintainable provided a substantial question of law
arose for consideration of the High Court and not otherwise.
17. Whether non furnishing of information was willful and would amount
to suppression of material fact in terms whereof the extended period of
limitation as provided for in Section 11-A of the Customs Act, 1944 could
be invoked or not, in our opinion, was not a substantial question of law. The
finding of fact arrived at by the Tribunal should have been treated to be
final. It would be binding on the High Court while exercising its appellate
jurisdiction. A ‘substantial question of law’ would mean - of having
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substance, essential, real, of sound worth, important or considerable. It is to
be understood as something in contradistinction with – technical, of no
substance or consequence, or academic merely. ( See Boodireddy
Chandraiah v. Arigela Laxmi, [ (2007) 8 SCC 155 ] ).
18. The High Court has not said that the finding of fact arrived at by the
High Court was perverse and/or was based on applying wrong legal
principles etc. The High Court proceeded on the basis that the failure on the
part of the appellant to submit required declaration or application for licence
for establishment, would amount to concealment of facts from the
department. We will assume to be so. But, as we have noticed earlier,
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requisite information was not only furnished on 22 January, 1991,
indisputably the officers of the Central Excise Department made inspection
of the factory and the books maintained by the appellant, including the
production register, which must have disclosed the nature of the products
from the factory in question. If the requisite information had been given to
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the authorities on 22 January, 1991, the question which should have been
posed and answered was as to whether despite such knowledge, the
Commissioner of Central Excise could have proceeded on the basis that
there had been a suppression on the part of the appellant.
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19. Section 11-A of the Central Excise Act, 1944 provides for penalty. It,
therefore, requires strict consideration. Period of limitation provided for in
the Act bars the jurisdiction of the Commissioner to initiate a proceeding for
imposition of penalty on the expiry thereof. The proviso appended to
Section 11-A(1) of the Act makes an exception to the said Rule, the
ingredients whereof are thus required to be established for invoking the
extended period of limitation. If on the materials produced by the parties,
the Tribunal had arrived at a finding of fact that there had been no
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suppression on the part of the appellant after 22 January, 1991, the question
of invoking the extended period of jurisdiction did not arise. The show
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cause notice dated 28 March, 1994 thus having been issued after the expiry
of the period prescribed under Section 11A of the Act, was clearly barred by
limitation.
20. In any view of the matter, whether a party is guilty of suppression of
fact or not is essentially a question of fact. It does not per se give rise to
substantial question of law per se. [See Commissioner of Central Excise,
Chandigarh v. Punjab Laminates (P) Ltd, [ (2006) 7 SCC 431 ] and M/s.
Larsen and Toubro Ltd. v. The Commissioner of Central Excise, Pune-II,
[ 2007 (6) SCALE 524 ].
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21. For the reasons aforementioned the impugned judgment cannot be
sustained. It is set aside accordingly. The appeal is allowed with costs.
Counsel’s fee assessed at Rs.10,000/-.
……………..………………J.
[ S.B. Sinha ]
……………..………………J.
[ Dr. Mukundakam Sharma ]
New Delhi
May 06, 2009
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