No Evidence of Wilful Misstatement in SCN to Invoke Extended Limitation u/s 11A: CESTAT Set Aside Rs. 4.84 Lakh Duty Demand [Read Order]

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi recently set aside a Rs. 4.84 lakh central excise duty demand, holding that the department could not invoke the extended period of limitation in the absence of evidence of willful misstatement or misrepresentation.

M/s Shape Engineering Co. (P) Ltd., a registered manufacturer and supplier of turbine parts, filed an appeal challenging the Order-in-Appeal passed by the Commissioner (Appeals),. The impugned order had allowed the department’s appeal and set aside an earlier order-in-original dated by the Assistant Commissioner, who had dropped proceedings against the appellant.

The appellant had supplied turbine parts to M/s BHEL under a subcontracting arrangement and claimed the benefit of Notification No. 6/2006-CE dated 1 March 2006 (Sl. No. 91), which provides central excise duty exemption for supplies to mega power projects undertaken through International Competitive Bidding.

During an internal audit, the department concluded that the appellant was not entitled to the exemption and issued a Show Cause Notice (SCN). The SCN alleged non-payment of central excise duty amounting to Rs. 4,84,272, invoked the extended period of limitation under Sections 11A and 11AB, and proposed an equal penalty under Section 11AC.

The SCN claimed that the appellant had willfully misrepresented facts to wrongly avail the exemption, discovered only during the audit, and therefore, the extended period of limitation was applicable.

The Assistant Commissioner, relying on a CESTAT order in the case of M/s BHEL Ranipur Haridwar held in favour of the appellant and dropped the proceedings, noting that the exemption was rightly claimed. Notably, the Assistant Commissioner did not examine the issue of limitation as the appellant had succeeded on the merits.

On appeal, the Commissioner (Appeals) reversed this decision, reasoning that the earlier CESTAT order dealt with CENVAT credit reversal, whereas the present case concerned non-payment of duty. However, the Commissioner (Appeals) did not examine the validity of invoking the extended period of limitation.

The Tribunal reviewed the SCN and the orders below and observed that the extended limitation can only be invoked if one of the following elements is established: fraud, collusion, willful misstatement, suppression of facts, or violation of the Act or Rules with intent to evade duty. The tribunal found that the SCN did not provide any evidence to substantiate willful misstatement or misrepresentation by the appellant.

Given the absence of evidence, the tribunal concluded that the invocation of the extended period of limitation was unjustified. As a result, the demand covering the period from June 2010 to October 2010 was time-barred under normal limitation rules.

The two-member bench of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) therefore, set aside the impugned order of the Commissioner (Appeals) and allowed the appellant’s appeal, granting consequential relief. The Rs. 4.84 lakh central excise duty demand, along with any interest or penalty premised on the extended limitation, was quashed.

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