Extended Period u/s 11A of CEA Cannot be Invoked without Misstatement or Suppression: SC Finds No Error in Tribunal’s Ruling on Kalyan Jewellers [Read Judegement]

The Supreme Court has dismissed the Revenue’s appeal against Kalyan Jewellers India Pvt. Ltd., confirming the finding of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) that the extended period of limitation under Section 11A of Central Excise Act cannot be invoked in the absence of any misstatement, suppression, or intent to evade duty.

The bench of Justices Manoj Misra and Ujjal Bhuyan observed that there was no palpable error in the Tribunal’s order holding the demand to be time-barred, while leaving the issue of classification open for future consideration.

A proceedings was initiated by the Commissioner of Central Tax, Kochi, alleging that Kalyan Jewellers had misclassified silver articles and wrongly availed exemptions, thereby evading central excise duty.

The adjudicating authority had confirmed demands along with interest and penalty for the period March 2016 to June 2017. The Department invoked the extended period of limitation under Section 11A of the Central Excise Act, contending suppression of material facts.

On appeal, CESTAT Bangalore set aside the adjudication order, holding that the demand was unsustainable both on limitation and merits. The Tribunal noted that the Show Cause Notice dated January 2021 sought to demand duty for clearances made during 2016-2017, far beyond the normal limitation period. It stated that extended limitation under Section 11A requires willful suppression or misstatement with intent to evade duty, which was absent in this case.

The company had duly filed ER-8 returns, maintained audited accounts, and did not collect excise duty from customers. The Tribunal relied on settled law, including Continental Foundation Jt. Venture and Densons Pultretaknik, to underline that mere omissions or interpretational disputes cannot justify invoking the extended period.

The Tribunal also dealt with the merits of classification and exemption. It found no admissible evidence that the articles manufactured and sold by Kalyan Jewellers were studded jewellery falling under CETH 7114, as alleged. On the contrary, records and invoices showed classification under CETH 7113, attracting a nil rate of duty under the applicable exemption notifications, subject to reversal of Cenvat credit where required.

On this basis, the Tribunal concluded that the demands raised were factually and legally unsustainable, including those relating to alleged ineligible credit and hedging transactions, which were held not to constitute trading activity.

However the apex court did not discuss the classification part and left it open. However refuses to entertain the part of extended limitation.

Accordingly the appeal was dismissed.

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