Limitation Plea Raised for First Time at Hearing Without Supporting Facts: Madras HC Upholds Tribunal’s Rejection [Read Order]

The Madras High Court has upheld the Customs and Service Tax Appellate Tribunal’s (CESTAT) rejection of a limitation plea that was raised for the first time before it, under Section 11Aof the Central Excise Act, without supporting facts.

The appellant Modern Engineering & Plastics Pvt Ltd (MEPP) is engaged in the activity of fabrication.

In respect of the period 1995-96, a Show Cause Notice (SCN) dated 29.03.2000 was issued alleging that the appellant had floated two shadow units in the names of Modern Fabricators and Engineers (MFE) and Engineering Plastics Incorporation (EPI) during the years 1995-96 and 1996-97 and had cleared goods in the names of the shadow units solely to avail Small Scale Industry (SSI) exemption and with the intention of evading payment of excise duty on clearances in excess of the threshold of Rs.30.00 lakhs.

The Department issued a show cause notice in March 2000 proposing to club the clearances of the appellant with those of MFE and EPI, thereby denying SSI exemption and demanding duty along with penalties

Before the Assessing Authority, the appellant only contested the matter on merits and no plea regarding the invocation of the extended period of limitation under Section 11A of the Central Excise Act, 1944, was raised. The assessment came to be completed by an order-in-original, confirming the proposals under the show cause notice.

A first appeal was filed before the Commissioner (Appeals) who confirmed the order of adjudication vide order dated 31.05.2002. Even in first appeal, no plea relating to limitation was raised.

The Tribunal (CESTAT) later confirmed the order in May 2009, noting that both alleged units lacked independent premises or machinery and that all manufacturing activity was carried out at the appellant’s facility.

Even before the Tribunal, no written ground of limitation was taken. But an oral plea was attempted during the hearings. The Tribunal rejected this as a new argument raised for the first time and proceeded to decide the matter solely on merits. However, it confirmed suppression of facts and the applicability of the extended five‑year limitation period.

In the High Court, the appellant framed substantial questions of law on whether the Tribunal was right in rejecting the plea of limitation. The Court observed that limitation, if purely a question of law, can be raised at any stage, provided the necessary facts are available on record.

However, in this case, the facts required to determine whether the extended period of limitation was correctly invoked were not established. It was observed that while MFE had filed forms claiming SSI exemption in 1991, there was no evidence of EPI’s existence before its registration in 1998. Thus, the claim that the Department was aware of both units and could not invoke the extended limitation was not substantiated.

The Division Bench of Dr. Justice Anita Sumanth and Justice P. Dhanabal held that the issue of limitation here was a mixed question of law and fact, so in the absence of necessary factual material, the Tribunal was justified in rejecting the plea. It concluded that the substantial questions of law must be answered in favour of the Department and against the assessee. Accordingly, the Civil Miscellaneous Appeal was dismissed, with no order as to costs.

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