PETITIONER: COLLECTOR OF CENTRAL EXCISE Vs. RESPONDENT: M/S. H.M.M. LIMITED DATE OF JUDGMENT18/01/1995 BENCH: AHMADI A.M. (CJ) BENCH: AHMADI A.M. (CJ) SINGH N.P. (J) CITATION: 1995 SCC Supl. (3) 322 JT 1995 (2) 517 ACT: HEADNOTE: JUDGMENT:
ORDER
1. In exercise of power conferred by Section 11-A of
the Central Excise and Salt Act, 1944, (hereinafter called
‘the Act’) three show cause notices were issued to the
respondent on the allegation that it had failed to pay the
duty on coal cinders payable under Tariff Item No.68. The
first notice is dated 17.10.1983 covering duty period from
1.4.1981 to 31.1.1983. The other two notices dated 7.11.1983
and 19.11.1983 are to show cause why penalty should not be
imposed under Rule 9(2) read with Rule 173-Q of the Central
Excise Rules, 1944. The question of penalty would arise
only if the department is able to sustain its demand under
the first notice dated 17.10.1983.
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2.The assessee contended before the Additional Collector of
Central Excise that the show cause notice was time barred
under the main part of Section 11-A since it was issued
after the expiry of the period of six months stipulated
therein but the Additional Collector sustained the notice on
the ground that it was within five years impliedly holding
that the purported action was under the proviso to Section
11 A of the Act. There is no dispute that the show cause
notice cannot be sustained under sub-section (1) of Section
11-A unless the proviso is attracted. Admittedly, it is
beyond the period of limitation of six months prescribed
under Section 11-A (1) but it is within the extended period
of 5 years under the proviso to that sub-section. Now in
order to attract the proviso it must be shown that the
excise duty escaped payment by reason of fraud, collusion or
wilful misstatement or suppression of fact or contravention
of any provision of the Act or of the Rules made thereunder
with intent to evade payment of duty. In that case the
period of six months would stand extended to 5 years are
provided by the said proviso. Therefore, in order to
attract the proviso to Section II -A (1) it must be alleged
in the show cause notice that the duty of excise had not
been levied or paid by reason of fraud, collusion or wilful
misstatement or suppression of fact on the part of the
assessee or by reason of contravention of any of the
provisions of the Act or of the Rules made thereunder with
intent to evade payment of duties by such person or his
agent. There is no such averment to be found in the show
cause notice. There is no averment that the duty of excise
had been intentionally evaded or that fraud or collusion had
been noticed or that the assessee was a guilty or wilful
misstatement or suppression of fact. In the absence of such
averments in the show cause notice it is difficult to
understand how the Revenue could sustain the notice under
the proviso to Section 11-A(1) of the Act. The Additional
Collector while conceding that the notice had been issued
after the period of six months prescribed in Section 11-A(1)
of the Act had proceeded to observe that there was wilful
action of withholding of vital information apparently for
evasion of excise duty due on this waste/by-product but
counsel for the assessee contended that in the absence of
any such allegation in the show cause notice the assessee
was not put to notice regarding the specific allegation
under the proviso to that sub-section. The mere non-
declaration of the waste/by-product in their classification
list cannot establish any wilful withholding of vital
information for the purpose of evasion of excise duty due on
the said product. There could be, counsel contended, bona
fide belief on the part of the assessee that the said waste
or by-product did not attract excise duty and hence it may
not have been included in their classification list. But
that per se cannot go to prove that there was the intention
to evade payment of duty or that the assessee was guilty of
fraud, collusion, misconduct or suppression to attract the
proviso to Section II -A(1) of the Act. ‘Mere is consid-
erable force in this contention. If the department proposes
to invoke the proviso to Section II -A(1), the show cause
notice must put the assessee to notice which of the various
commissions or omissions stated in the proviso is committed
to extend the period from six months to 5 years. Unless the
assessee is put to notice, the assessee would have no
opportunity to meet the case of the department. The de-
faults enumerated in the proviso to the said sub-section are
more than one and if the
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excise department places reliance on the proviso it must be
specifically stated in the show cause notice which is the
allegation against the assessee falling within the four
comers of the said proviso. In the instant case that having
not been specifically stated the Additional Collector was
not justified in inferring (merely because the assessee had
failed to make a declaration in regard to waste or by-
product) an intention to evade the payment of duty. The
Additional Collector did not specifically deal with this
contention of the assessee but merely drew the inference
that since the classification list did not make any mention
in regard to this waste product it could be inferred that
the assessee had apparently tried to evade the payment of
excise duty.
3. For the above reasons, we see no merit in this appeal
and dismiss the same with no order as to costs.
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