JUDGMENT
Satish Kumar Mittal, J.
1. This appeal filed by the revenue under Section 35G of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’) has been directed against the order dated 18.6.2007, passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as ‘the CESTAT’), whereby E/Appeal No. 178/95 filed by the respondent-assessee, has been allowed and the order dated 24.11.2004, passed by the Collector of Central Excise, New Delhi (hereinafter referred to as ‘the Collector’), has been set aside.
2. In this appeal, the following substantial question of law has been raised by learned Counsel for the appellant for consideration of this Court:
Whether in the instant case duty can be demanded from the party under the proviso to Section 11A(1) of the Central Excise and Salt Act, 1944, by invoking extended period of limitation of five years, when a show cause notice has been issued to the party for the normal period, before the issue of the show cause notice invoking extended period as provided under the Section quoted supra, when relevant data were not being supplied by the party inspite of best of efforts of the department and apparent non cooperation on the part of the party, with the sole intent of suppression of facts?
3. The relevant facts of the case are that the assessee (M/s Escorts Limited (TED), Faridabad) was engaged in manufacture of Tractor parts falling under Tariff heading 8708.00 of the Schedule to Central Excise. Tariff Act, 1985. The unit has been manufacturing and clearing tractor parts on the basis of price lists supported by costing certificate duly certified by a Chartered Accountant, which were to be transferred to its sister division for captive use in the manufacture of tractors. Subsequently, on scrutiny, it was revealed that all the parts transferred by the assessee to its sister division were not being used captively, as some of the parts were being sold in open market as spare parts. Therefore, on 29.4.1993, a show cause notice dated 29.4.1993 was issued proposing demand of duty for the period from 1.10.1992 to 11.3.1993, while asserting that assessable value of the goods issued by the tractor division should have been at the same rate on which the goods were sold in open market through the spare parts in terms of Rule 6(b)(i) of the Central Excise Valuation Rules, 1975. The said demand was confirmed by the adjudicating authority and was also upheld by the Commissioner vide final order dated 5.10.1993.
4. After one year of the said show cause notice, another show cause notice dated 1.6.1994 demanding duty on the same ground for the period from 1.5.1989 to 30.9.1992 was issued, which is the subject matter of dispute in the present appeal. Though the said notice as barred by limitation, but the venue claimed the said notice to be within limitation by invoking the extended period of limitation under Section 11A of the Act, on the ground that the assessee has willfully suppressed and misstated the facts while not paying the duty on the price on which part of the goods were sold in open market by the sister concerns. The said show cause notice was adjudicated by the Collector vide Order in-Original dated 24.11.1994 and demand of Rs. 9,95,85,316.41 was confirmed on the assessee under the proviso to Section 11A (1) of the Act and a penalty of Rs. 25,00,000/-was imposed under Section 173Q of the Central Excise Rules, 1944.
5. Against the said order, the assessee filed appeal before the CESTAT, which has been allowed and the order passed by the Collector has been set aside, which holding that in view of the decision of the Supreme Court in ECE Industries Ltd. v. CCE, New Delhi , the extended period of limitation under proviso to Section 11A of the Act cannot be invoked in the facts and circumstances of the case. It was thus, held that the demand is barred by limitation. The CESTAT has taken the view that in the earlier show cause notice dated 29.4.1993 for demand of duty for the period from 1.10.3992 to 11.3.1993, which was confirmed by the adjudicating authority and upheld by the Tribunal vide order dated 5.10.1998, there was no allegation that the assessee suppressed any material fact with intent to evade payment of duty. In the said notice, it was alleged that all parts transferred from M/s Escorts Ltd. (Tractor Equipment Division) (the assessee herein) to M/s Escorts Ltd. (Tractor Division) were not being used captively by the Tractor Division as some of the parts were sold in open market through another sister concern. There was neither any allegation nor any material that the assessee had any knowledge of selling some of the goods by their sister concern in open market. It was further held that there could not be any intention to conceal facts to evade payment of duty, because the assessee cleared all the spare parts to its sister division for captive consumption, who has been availing Modvat credit. In any event, if the assessee would pay the amount of duty as demanded, their sister unit could avail Modvat credit. Thus, there was no intention of the assessee to evade payment of tax. The CESTAT held that in view of the decision of the Supreme Court in ECE Industries Ltd. v. CCE, New Delhi (supra), the extended period of limitation is not invokable in subsequent proceedings, when earlier proceeding on the subject matter was decided without allegation of suppression and misstatement of material facts with intent to evade payment of duty. The CESTAT has also placed reliance upon the decision in M/s P & B Pharmaceuticals (P) Ltd. v. Collector of Central Excise , where a question was decided as to whether the extended period of limitation could be invoked where the department has earlier issued show cause notices in respect of the same subject matter. It was held that in such circumstances, it could not be said that there was any willful suppression or mis-statement and, therefore, the extended period under Section 11A of the Act could not be invoked.
6. We have heard learned Counsel for the appellant and have gone through the impugned order.
7. In the present appeal, the question involved is whether in the facts and circumstances of the present case, the revenue was justified in invoking the extended period of limitation under proviso to Section 11A of the Act, though admittedly, the issuance of the demand notice dated 1.6.1994 demanding duty for the period from 1.5.1989 to 30.9.1992 is barred by limitation beyond period of one year. Section 11A of the Act is being re-produced below:
11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.- (1) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was oh the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this Sub-section shall have effect, as if for the words “one year” , the words “five years” were substituted:
Explanation: Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be.
In the present case, it has not been disputed that earlier a demand notice was issued on 29.4.1993, proposing demand of duty for the period from 1.10.1992 to 11.3.1993. The said demand raised by the show cause notice was confirmed by the adjudicating authority and upheld by the Tribunal vide order dated 5.10.1998. Undisputedly, in the said show cause notice, there was no allegation of suppression or mis-statement of facts with intent to evade payment of duty. When the second show cause notice was issued on 1.6.1994 for demand of duty for the period from 1.5.1989 to 30.9.1992, the same was clearly barred by limitation. However, the revenue can invoke the extended period of limitation, as provided under proviso to Section 11A of the Act. It is the case of the revenue that the assessee deliberately did not disclose the fact that the tractor parts transferred by the assessee to its sister concern for captive consumption were not wholly used for the manufacture purpose and some of the parts were sold in open market. Therefore, the assessee was liable to pay the duty on the valuation, at which those goods were sold in open market under Rule 6(b)(i) of the Central Excise Valuation Rules, 1975. This contention of the revenue was rejected by the CESTAT and it was held that there was no intention of the assessee to evade payment of duty because all the spare parts were cleared by the assessee to their sister unit for captive consumption. It is also not disputed that the transferee unit division of the assessee was availing the Modvat credit and all the payments of demanded duty could have been availed as Modvat credit. In the present case, when the earlier show cause notice was issued by the revenue to the assessee, no avernment with regard to suppression and mis-statement of material facts with intention to evade the duty was made. Therefore, in our opinion, in the facts and circumstances of the case, the CESTAT, while following the decision in ECE Industries Ltd v. CCE, New Delhi, and M/s P and B Pharmaceuticals (P) Ltd. v. Collector of Central Excise (supra) has rightly come to the conclusion that if the earlier proceeding on the subject matter was decided without allegation of suppression and mis-statement of material facts, then in the subsequent show cause notice, it cannot be said that there was any suppression or mis-statement of material facts, and the extended period of limitation under proviso to Section 11A of the Act was not available to the revenue. The Supreme Court in the case of M/s P and B Pharmaceuticals (P) Ltd. v. Collector of Central Excise (supra) has taken the view that in a case in which a show cause notice has been issued for the earlier period on certain set of facts, then on the same facts another show cause notice based on the same/similar set of facts invoking the extended period of limitation on the plea of suppression of facts by the assessee cannot be issued as the facts were already in the knowledge of the department. It was observed in para 14 of the said judgment as follows:
14. We have indicated above the facts which make it clear that the question whether M/s Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the first show cause notice was issued in 1985 and also at the stage when the second and the third show cause notices were issued in 1988. At all these stages, the necessary material was before the authorities. They had then taken the view that M/s Pharmachem Distributors was not a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a suppression of fact on the part of the assessee so as to saddle with the liability of duty for the larger period by invoking proviso to Section 11A of the Act. So far as the assessee is concerned, it has all along been contending that they were not related persons, so, it cannot be said to be guilty of not filling up the declaration in the prescribed proforma indicating related persons. The necessary facts had been brought to the notice of the authorities at different intervals from 1985 to 1988 and further, they had dropped the proceedings accepting that M/s Pharmachem Distributors was not a related person. It is, therefore, futile to contend that there has been suppression of fact in regard M/s. Pharmachem Distributors being a related person. On that score, we are unable to uphold the invoking of the proviso to Section 11A of the Act for making the demand for the extended period.
The aforesaid judgment was followed by the Supreme Court in ECE Industries Ltd. v. CCE, New Delhi (supra). In para 4 of the said judgment, it was observed as under:
4. In the case of M/s P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise , the question was whether the extended period of limitation could be invoked where the Department has earlier issued show cause notices in respect of the same subject-matter. It has been held that in such circumstances, it could not be said that there was any willful suppression or mis-statement and that therefore, the extended period under Section 11A could not be invoked.
Again, the Supreme Court has followed the aforesaid judgment in the case of Hyderabad Polymers (P) Ltd. v. Commissioner of Central Excise, Hyderabad and Nizam Sugar Factory v. Collector of Central Excise, A.P. 2006(197) E.L.T. 465.(S.C.).
8. It is settled law, as has been held by the Supreme Court in Pahwa Chemicals Private Limited v. Commissioner of Central Excise Delhi 2005 (189) E.L.T. 257 (S.C), that mere failure to declare does not amount to wilful mis-declaration or wilful suppression. There must be some positive act on the part of the party to establish either willful mis-declaration or wilful suppression. When all facts are before the Department and a party in the belief that affixing of a label makes no difference does not- make a declaration, then there would be no willful mis-declaration or willful suppression.
9. In the present case, a finding has been recorded by the CESTAT that it cannot be samthat there was any willful suppression or mis-statement of facts with intention to evade payment of duty. Hence, we are of the opinion that no substantial question of law is arising from the order of the CESTAT.
Dismissed.