The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chandigarh bench has held that the extended period for invoking Section 11A of the Central Excise Act, 1944 cannot be applied without concrete evidence of wilful suppression of facts, fraud, collusion or wilful default.
The decision came in response to an appeal filed by the revenue, Commissioner of Central Excise, Chandigarh against M/s. C.S. Zircon Private Limited.
The case revolved around the classification of products manufactured by the respondent, specifically Zirconium Oxide and Zirconium Oxychloride.
The respondent had applied for an amendment to the classification of these products from CETSH 28.25 to 26.15 in the year 2003. They also filed a declaration in 2004 intending to avail the benefit of Notification No.50/2003 dated 10.06.2003. Despite these actions, the respondent company continued to classify their products under CETSH 26.15.
The Commissioner (Appeals) initially ruled in favour of the respondent company, stating that the products should be classified under CETSH 26.15. However, CESTAT later overturned this decision and classified the products under CETSH 28.25.
During these proceedings, the department issued four show cause notices (SCNs), alleging suppression of facts and invoking the extended period.
The appellant revenue, represented by Shri Aneesh Dewan, argued that the respondent changed the classification of their products with the intent to unduly avail the benefit of Notification No. 50/2003.
The respondent-assessee, represented by Shri Gaurav Aggarwal and Shri Arun Mahajan, contended that they had submitted a declaration to the department on 12.03.2004, showing their intent to avail the benefit of exemption Notification No. 50/2003 and classifying the impugned products under a different Central Excise Tariff Sub-Heading (CETSH 26.15).
The respondent highlighted that there was continuous correspondence between them and the department regarding the classification of goods and the department was in knowledge of the classification adopted by them.
The respondent asserted that the department did not challenge the benefit of the Small Scale Industries (SSI) Notification as allowed by the Commissioner.
The CESTAT found that the department’s claim of suppression of facts and wilful misclassification was unfounded. The bench noted that the respondent had already informed the department of their intent to change the classification in March 2003, even before the issuance of the relevant notification in June 2003.
The bench emphasised that mere knowledge on the part of the department was insufficient to invoke the extended period. There needed to be a deliberate act of suppression with the intention to evade payment of duty to substantiate the extended period for invoking Section 11A of the Central Excise Act, 1944.
The bench cited the judgment of the Supreme Court in the case of Pushpam Pharmaceuticals, which defined “suppression of facts” in the context of tax law as a “deliberate act of non-disclosure to escape duty payment”.
In result, the two-member bench comprising Mr. S. S. Garg (Judicial Member) and Mr. P. Anjani Kumar, (Technical Member) concluded that the extended period could not be invoked without evidence of wilful suppression of facts, fraud, collusion, or wilful default.
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