In a significant case, the Meghalaya High Court quashed the order since the excise duty exemption under notification was rejected without stating any reason.
Pawan Kumar Sharma, Shiw Bhagwan Sharma and Vansha Enterprises LLP, the assessees in appeal upon duty, interest and penalty being levied on the assessee for non-payment or short payment of duty for a period more than one year before the date of issuance of the show-cause notice.
Section 11A of the Central Excise Act, of 1944 provided for a period of limitation of one year. However, the period of limitation would not apply if the short-levy or non-payment or the like was as a result of any fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or the rules made thereunder with intent to evade payment of duty.
The Department issued a show-cause notice, at the relevant point of time, for short payment or nonpayment of duty and the like for a period beyond a year from the date of issuance of the notice, the element of mens rea on the part of the assessee had to be established.
It was argued that since the assessee was in a quandary as to whether it was liable to pay excise duty on the soya nuggets manufactured by it, it approached the Range Superintendent of the Department and obtained an opinion to the effect that it was not liable either to pay excise duty or to obtain excise registration.
The assessee asserted that since no case of fraud or collusion or wilful misstatement or wilful suppression had been made out or indicated in the original show-cause notice issued in the year 2008, the Department was not entitled to the extended period and had to confine its demand and claim to the period within limitation which, at the relevant time, was one year.
When a person undertakes a commercial venture and commences a manufacturing process or the like, such person is obliged to know the formalities necessary for the purpose and the duty, tax or the like payable thereupon.
The assessee has relied on notifications under which it claims exemption in the sense that it would have had to pay the duty and obtain the refund by the location of its manufacturing unit. However, no reason has been indicated as to why the assessee in this case could not have obtained the benefit under the relevant notifications.
It was evident that the order impugned gives sufficient reason as to why the notifications for exemption or refund would not apply to the assessee, but a closer inspection would reveal that no reasons have been proffered in such regard.
A division bench comprising Justice Sanjib Banerjee, Chief Justice and Mr. Justice W. Diengdoh, set aside the judgment and order impugned passed by the CESTAT on August 25, 2022. Since the assessee has already made payment of the duty that it was liable to from March 1, 2006, onwards, there will be no further liability to the assessee on such account.
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