In the significant case of Reliance Industries, the Supreme Court of India has held that penalty under the Central Excise Act, 1944 on suppression of facts without any valid provision of law demanding it is not tenable.
M/s Reliance Industries Ltd, the impugned order dated 17.03.2009 passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad, whereby, the Tribunal allowed the appeal therein.
The order impugned by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT or Tribunal) allowed an appeal filed by the Respondent-Assessee against an order of the Commissioner of Central Excise, 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.
The question revolved around the penalty imposed for the alleged suppression of facts about the valuation of goods. The assessee had not included the monetary value of duty benefits obtained from customers due to the transfer advance licenses. The valuation was done in line with the view taken by CESTAT during that period, although it was later reversed by the Supreme Court.
Moreover, there was no separate disclosure requirement in return for such sales involving the transfer of advance licenses. The extent of disclosure by an assessee is linked to their understanding of legal requirements.
The assessee self-assessed its liability based on the interpretation given by CESTAT. The self-assessment procedure did not mandate the submission of all contracts, agreements, and invoices. Hence, there is no basis for agreeing with the Commissioner’s findings that certain relevant documents were not filed and suppressed.
An assessee can be accused of suppressing only those facts that are required to be disclosed by law. The Revenue failed to demonstrate any provision or rule that necessitated additional disclosures in this case. Therefore, the claim of suppression of facts is deemed untenable.
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.
“An assessee can be accused of suppressing only such facts that it was otherwise required to be disclosed under the law. The counsel for the Revenue has failed 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.”, the Court held.
The two-judge bench comprising Justice Krishna Murari and Justice Bela M Trivedi dismissed the appeal filed by the Revenue on the ground that the demands are time-barred.
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