Full Judgment Text
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CASE NO.:
Appeal (civil) 2990 of 2006
PETITIONER:
M/s Larsen and Tubro Ltd
RESPONDENT:
The Commissioner of Central Excise, Pune-II
DATE OF JUDGMENT: 02/05/2007
BENCH:
S.B. SINHA & MARKANDEY KATJU
JUDGMENT:
J U D G M E N T
S.B. Sinha, J :
1. An order dated 16.2.2006 passed by the Customs, Excise and
Service Tax Appellate Tribunal (CESTAT) in Appeal No.E/3634/98-Mum.,
is in question before us. The appellant is a company incorporated under the
Companies Act. It undertook a contract for construction of bridges for M/s.
Konkan Railway Corporation Ltd. (’Konkan Railway’, for short), which is a
public sector undertaking. Appellant manufactured Pre Stressed Concrete
Girders (PSC Girders). It used to transport them to the site of construction
of bridges of the Railways. It did not register itself with the authorities of
the Central Excise.
2. Alleging that the appellant, for the period March 1993 and
December 1994, although was involved in the manufacturing activity, by
undertaking manufacture of 75 PSC Girders, but did not pay any excise
duty thereupon.
3. A notice was issued to the appellant directing it to show cause as to
why Central Excise duty to the tune of Rs.32,35,575/- should not be
demanded and recovered from them in terms of the proviso appended to
Rule 49(1) of the Central Excise Rules, 1944 (Rules) read with Section
11A of the Central Excise and Salt Act, 1944 (Act) and as to why penalty
should not be imposed on them and the plant & machinery and the
manufactured goods should not be confiscated. Cause was shown by the
appellant inter alia stating that no excise duty was payable. The said
notice was withdrawn stating:
"The said Show Cause Notice has been issued without
obtaining approval of the proper authority or by the
proper officer. Accordingly, Show Cause Notice dated
27.1.94 hereby withdrawn.
The withdrawal of the Show Cause Notice is without
prejudice to any action including issue of fresh Show
Cause Notice which may be taken against M/s. Konkan
Railway Corporation Ltd., Ratnagiri (North), Lanjekar
Compound, Phansi Baug, Udyamnagar, Ratnagiri of
Central Excise Law or any other law of the time being is
force."
4. After a long time, namely, on 1.5.1996, another show cause notice
was issued on the same premise for the period March 1993 and December,
1994. The extended period of limitation was invoked alleging suppression
of fact on the part of the appellant. Appellant herein filed a show cause
wherein inter alia the question of applicability of the extended period of
limitation as contained in the proviso appended to Section 11A of the Act
was specifically raised. The Commissioner of Central Excise, Pune, in his
judgment opined that basically following four issues were involved:
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"(i) Whether a process of ’manufacture’ is involved?
(ii) Whether the girders can be considered as immovable
property or not?
(iii) Whether the girders can be considered as marketable
or not and whether exemption under Notification
No.59/90 can be extended?
(iv) Whether there was suppression of facts on the part of
the noticees so as to invoke extended period?"
5. It was held that as construction of the bridges consists of many
things, including foundation and super structure, manufacture of PSC
Girders would come within the purview thereof; and the same would not be
immoveable property. It was further held that the longer period of
limitation has rightly been invoked as the appellant had suppressed the fact
from the department that the goods in question were excisable articles. It
was opined:
"12. As regards penalty on KRCL under Rule 209A, since
the manufacturing activity was undertaken by M/s. L & T
and there is no evidence of their mala fides in the matter,
further they have also alerted the contracting party about
discharge of central taxes etc. as seen from clause 47 of
contract, I refrain from imposing any penalty on them.
13. As regards confiscation of 75 Nos. of PSC girders,
though M/s. L & T were given a notice in writing
informing them the grounds on which it is proposed to
confiscate the goods and they were also given an
opportunity of making a representation within reasonable
time against the said proposed confiscation and a
reasonable opportunity of being heard in the matter, they
only stated that these were not liable for confiscation
being permanently embedded in the earth, thus
immoveable property. As already held since girders at the
earth, they came into existence were not embedded to the
earth, they cannot be considered as immoveable property
and therefore I hold these 75 Nos. of PSC girders liable
for confiscation under Rule 173Q read with Rule 226 of
CER, 1944."
6. The appeal preferred thereagainst by the appellant, as noticed
hereinbefore, was dismissed by the Tribunal.
7. Mr. Venkataraman, learned senior counsel appearing on behalf of
the appellant would raise two contentions in support of this appeal:
(i) That earlier notice having been withdrawn wherein no allegation
of suppression had been made, the same could not have been made in the
second notice dated 1.5.1996.
(ii) In any event, the question as to whether the activities of the
appellant would attract excise duty or not having been decided for the first
time by a larger Bench of the Tribunal in Asian Techs Ltd. vs.
Commissioner of Central Excise, Pune-II, [2005 (189) ELT 420] it was not
a case where the extended period of limitation should have been invoked.
8. Mr. Gopal Subramanium, learned Additional Solicitor General
appearing on behalf of the Union of India, on the other hand, would
submit:
(i) For construction of the notice dated 27.1.1994, the allegations
made therein as a whole must be taken into consideration for the purpose
of arriving at a conclusion as to whether a case for suppression had been
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made out or not.
(ii) Withdrawal of the first notice per se would not disentitle the
Department from issuing another notice as the same had been issued by an
officer who had no authority in relation thereto.
(iii) As the appellant had been seeking exemption from payment of
excise duty, suppression of fact on its part must be inferred as it did not get
itself registered for the purpose of payment of excise duty.
9. Whether the activities carried out by the appellant would amount to
manufacture or not was a debatable issue. Our attention has been drawn to
several decisions of the Tribunal, namely, Asian Techs Ltd. (supra),
Rajeswari Enterprises (Constructions) Pvt. Ltd. vs. CCE, Madurai, [2005
(180) ELT 66 (Tri. - Chennai)], Tecco vs. CCE, Madurai, [2002 (149)
ELT 133 (Tri.- Chennai)]; Delhi Tourism and Transportation Development
Corporation vs. C.C.E., [1999 (114) ELT 421 (Tri.-Delhi)]; M.
Ramachandra Rao vs. CCE, Guntur, [2005 (186) ELT 353 (Tr.-
Bangalore)]; Raghunath Ramachandra Shanbag vs. CCE, Mumbai-VII,
[2004 (178) ELT 488 (Tr.-Mumbai)]; and Gammon India Ltd. vs. CCE,
Goa, [2002 (146) ELT 173], which held the field at the relevant point of
time.
10. Questions involving similar cases came for consideration before the
Tribunal at different points of time. They were answered differently by
different Benches.
11. The Tribunal in its order dated 25.4.2003, in the case of M/s. B.E.
Billimoria & Co. Pvt. Ltd. opined that similar goods manufactured by
others do not attract the provisions of the Central Excise Act. It is stated
that the same bench of the Tribunal in its judgment dated 10.5.2004, in
Ragunath Ramchandra Shanbhag (supra), came to a similar conclusion.
12. During the period in question being 1993-94, no direct decision on
the point involved was available. It was noticed that different benches of
the Tribunal in different cases had rendering their decisions differently. In
the case of Billimoria (supra), it was categorically held that manufacture of
PSC Girders would not attract the provisions of Central Excise Act, 1944.
13. Correctness of Billimoria (supra) was questioned by another Bench
of the Tribunal and the matter was referred to a larger Bench. The larger
Bench in Asian Techs Ltd. (supra) relying upon or on the basis of a large
number of decisions of this Court opined that the excise duty was payable
and the principles of works contract would not be applicable in a case of
this nature. We, therefore, accept the contention of the learned counsel
that it was not a case where element of suppression extended to apply to
extended period of limitation. It is also not a case where the appellant did
not plead bona fide. It is furthermore not a case where the Tribunal and
consequently this Court, could have arrived at a finding that the appellant
took recourse to suppressio veri.
14. Acts of fraud or suppression, it is well settled, must be specifically
pleaded. The allegations in regard to suppression of facts must be clear and
explicit so as to enable the noticee to reply thereto effectively. It was not
the case of the revenue that the activities of the appellant were not known
to it.
15. Admittedly, when the first show cause notice was issued, the
extended period of limitation was not resorted to. A notice should
ordinarily be issued within a period of six months (as the law then stood)
i.e. within the prescribed period of limitation but only in exceptional cases,
the said period could be extended to 5 years. When in the original notice,
such an allegation had not been made, we are of the opinion that the same
could not have been made subsequently as the facts alleged to have been
suppressed by the appellant were known to them.
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16. In P & B Pharmaceuticals (P) Ltd. vs. Collector of Central Excise,
[2003 (153) ELT 14 (SC)], this Court held as under:
"19. However, Mr. Jaideep Gupta submits that the
Tribunal did not accept that here has been assignment of
logo in favour of the assessee. We are unable to accept
the contention of the learned counsel. The tenor of the
order, ’the assessee had produced certain documents such
as registration form, trade mark authorities assigning the
trade mark to them but the fact remains that there was
material evidence by way of seizure of goods
manufactured by M/s. P & B Laboratories bearing the
same logo much after the alleged transfer of trade mark
to the appellants" discloses that the Tribunal accepted
that there has been an assignment but proceeded to deal
with the case of inapplicability of the exemption under
the notification on the ground that the logo was being
used by M/s. P & B Laboratories also. We have already
indicated above that use of logo of the manufacturer by
third parties is alien for purposes of denial of exemption
on the strength of para 7 of the notification. In this view
of the matter, we are unable to uphold the order of the
Tribunal denying the exemption to the assessee.
20. In any event, the ground that the assessee has
suppressed the fact that M/s. P & B Laboratories was
also using the logo for availing the benefit under the
notification cannot be a valid reason to invoke the proviso
to Section 11A of the Act. There is no obligation on the
owner of a logo to make a roving enquiry to ascertain
whether any other person is also using his logo and
disclose it to the authorities to avert a possible allegation
of suppression of fact for purposes of invoking the
proviso."
17. Yet again in Nizam Sugar Factory vs. Collector of Central Excise,
A.P., [2006 (197) ELT 465 (SC)] the ratio rendered in P & B
Pharmaceuticals Ltd. (supra) has been reiterated stating:
"Allegation of suppression of facts against the appellant
cannot be sustained. When the first SCN was issued all
the relevant facts were in the knowledge of the
authorities. Later on, while issuing the second and third
show cause notices the same/similar facts could not be
taken as suppression of facts on the part of the assessee
as these facts were already in the knowledge of the
authorities. We agree with the view taken in the aforesaid
judgments and respectfully following the same, hold that
there was no suppression of facts on the part of the
assessee/appellant."
18. In the said decision, this Court followed the earlier judgment of the
Division Bench of this Court in ECE Industries Limited v. Commissioner
of Central Excise (2004) 13 SCC 719 = 2004 (164) ELT 236, wherein it
was categorically stated:
"6. Appellant was served with a second SCN by the
Collector on 16.7.1987 alleging that the appellant was
supplying carbon dioxide to another unit as per
agreement dated 19.3.1983; that they had not taken
necessary licence; had not followed the procedure
prescribed under the rules; and had not discharged duty
liability. The said SCN covered the period of assessment
years 1982-83 to 1986-87. Appellant responded to the
second SCN and took the plea that the SCN under
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consideration was practically a repetition of the
allegations contained in the SCN dated 28.2.1984 and for
the period April, 1982 to September, 1982 the
department had raised demands under two different
SCNs. It was pointed out that carbon dioxide in the
impure form was not marketable as it also contained
carbon monoxide in lethal proportions. It was contended
that they were under bona fide belief that since such
impure carbon dioxide was not exigible to payment of
duty, they were not required to file either Classification
List or the Price List or take out licence. It was submitted
that resorting to extended period of limitation under
Section 11A(1) was not justified in the circumstances of
the case. Appellant was served with the third SCN on
12.9.1988 for the period 16.3.1988 to 27.6.1988 on the
same allegations. Assessee filed its reply in terms of the
earlier replies i.e. reply to SCN dated 16.7.1987. The
adjudicating authority did not accept the appellant’s
contention and the demands raised in the SCN were
confirmed.
xxx xxx xxx
8. Without going into the question regarding
Classification and marketability and leaving the same
open, we intend to dispose of the appeals on the point of
limitation only. This Court in the case of P & B
Pharmaceuticals (P) Ltd. v. Collector of Central Excise
reported in (2003) 3 SCC 599 = 2003 (153) ELT 14
(SC) has taken the view that in a case in which a show
cause notice has been issued for the earlier period on
certain set of facts, then, on the same set of facts another
SCN based on the same/similar set of facts invoking the
extended period of limitation on the plea of suppression
of facts by the assessee cannot be issued as the facts were
already in the knowledge of the department\005"
19. Furthermore, extension of the period of limitation entails both civil
and criminal consequences and, therefore, must be specifically stated in the
show cause notice, 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.
[See Commissioner of Central Excise, Chandigarh vs. M/s. Punjab
Laminates Pvt. Ltd., (2006 (7) SCC 431)]
20. Another aspect of the matter cannot also be lost sight of. Appellant
as also the Konkan Railawy raised a definite plea of bona fide. Such a plea
had not been rejected. As a matter of fact, while considering imposition of
penalty under Section 11A of the Act, the Commissioner has refused to
impose any penalty upon the appellant on the premise that it was not
guilty of any act of mala fide. We, therefore, keeping in view the facts and
circumstances of this case, are of the considered view that the impugned
judgment cannot be sustained. It is set aside accordingly. We hold that the
Revenue was not justified in invoking the extended period of limitation in
the instant case.
21. For the reasons aforementioned, the impugned judgment cannot be
sustained and it is set aside accordingly. The appeal is allowed. However,
in the facts and circumstances of the case, there shall be no order as to
costs.