IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Ex.Ref.11 of 2000 alongwith Ex.Ref.Nos.11 & 23 of 2001. Judgment reserved on: 29.8.2008. Date of Judgment: 3rd Sept. 2008. Commissioner, Central Excise (in all cases) ….Petitioner(s) -Versus- M/s.Fermenta Pharma Biodil Ltd. (in all cases) ….Respondent(s) Coram: The Hon’ble Mr.Justice Deepak Gupta, Judge. The Hon’ble Mr.Justice V.K. Ahuja, Judge. Whether approved for reporting? Yes For the Petitioner: Mr.Sandeep Sharma, Assistant Solicitor General. For the Respondent: Mr.M.M Khanna, Senior Advocate with Ms.Bhawana Sharma, Advocate Deepak Gupta, J. These reference petitions have been admitted on the following questions of law: “1.Whether in the facts and circumstances of the case CEGAT was right in interpreting the provisions of proviso to Sub Section (1) of Section 11A of the Central Excise Act, 1944 and holding that the extended period was not invokable in facts of the case? 2.Whether in the facts and circumstances of the case CEGET ought to have taken into account Section 110 of the Finance Act, 2000 which seeks to validate certain actions taken under Section 11A of the Central Excise Act, 1944 with retrospective effect?” 2 Briefly stated the facts of the case are that the assessee Firm is manufacturing a product known as Penicillin G. Amidase Biocatalyst. The assessee declared the classification of this produce under sub-heading 3002.00 in the classification list w.e.f. 24.10.1999. The items classified under heading 3002.00 attract nil rate of duty. The list furnished by the assessee was approved by the Assistant Commissioner (Excise). However, later it was felt by the department that the product was in the nature of yeast classifiable under Chapter 21. This dispute was raised before various authorities and finally the Central Excise Gold (Control) Appellate Tribunal vide its order dated 22.5.2000 came to the conclusion that the product in question was an enzyme and classifiable under heading 35.07 of the Central Excise Tariff schedule. The plea of the manufacturer that the produce fell under sub heading 3002.00 was rejected. It is not disputed that this portion of the judgment has been upheld by the Apex Court and therefore there is no dispute with regard to the classification of the product. The Tribunal went on to hold that since the manufacturer assessee had given the complete details of the produce and had furnished the list to the Department which had been accepted by the Assistant Commissioner, the extended period provided under Section 11-A of the Central Excise Act could not be invoked against them and therefore the demand for the period February, 1990 to July, 1994 under show cause notice dated 24.2.1995 was held to be time barred and not sustainable in law. 3 To decide the questions which have been raised in this case it would be relevant to refer to the unamended and amended portions of Section 11-A of the Central Excise Act. The relevant part of unamended Section 11A was as under- "Section 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, a Central Excise Officer may, within six months 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 "six months", the words "five years" were substituted." Clause 97 of the Finance Act provided that in sub-section (1) of Section 11A of the Act following shall be added :- “(a) in the opening portion, for the words "erroneously refunded", the words "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 on 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", shall be substituted and shall be deemed to have been substituted on and from the 17th day of November, 1980; (b) for the words "six months", wherever they occur, the words "one year" shall be substituted; (c) after the proviso and before the Explanation, the following provisos shall be inserted, namely: 'Provided further that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is one crore rupees or less a notice under this sub-section shall be served by the Commissioner of Central Excise or with his prior approval by any officer subordinate to him: 4 Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served without the prior approval of the Chief Commissioner of Central Excise". After amendment, relevant part of Section 11A reads thus: "Section 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 on 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." We shall now take up the second question first since we will first have to decide whether the amended provisions of Section 11-A as amended by Section 10 of the Finance Act, 2000 have retrospective effect or not. It is not disputed that though the amendment was brought in by the Finance Act of 2000, it was given retrospective effect and was brought into force from 17.11.1980 the date on which Section 11-A was introduced. The Apex Court in Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore, (2003) 3 SCC 410, has 5 clearly held that this amendment has been given retrospective effect and the said amendment has been upheld. The Court held as follows: “15. Now, after amendment, this can be done by the Central Excise Officer within a period of one year from the relevant date. As amendment is given retrospective effect, it would be applicable to all the pending proceedings. By this amendment, the basis for arriving at the conclusion that Rule 10 (now Section 11A) does not deal with the classification list or relate to re-opening of classification list is altered by specifically providing that in such cases also, show-cause notice could be issued. Hence, the conditions on which the judgment was based are fundamentally altered and the decision in Cotspun's case would not have been rendered if amended Section 11A was in existence. This is done by re-enacting retrospectively a valid and legal provision. It is settled principle that legislature can change the basis on which a decision is given by the Court and thus change the law in general. It is also well settled law that the legislature can always render a judicial decision ineffective by enacting a valid law on the topic within its legislative field by fundamentally altering or changing its character retrospectively. {Re: Indian Aluminium Co. v. State of Kerala [(1996) 1 SCC 637]}.” Therefore, it is obvious that the amended provisions will apply. The amended provisions consist of two parts. Under the main Section 11-A a limitation of one year is provided for recovery of excise duties not paid or paid in short or erroneously refunded even when the said non-payment or short payment etc. was on the basis of any approval, acceptance or assessment relating to the rate of duty under the provisions of the Excise Act or the Rules made thereunder. It is thus obvious that when the Department has given its approval the main provision of Section 11-A will apply and the limitation will be one year. Sh.Sandeep Sharma, learned Assistant Solicitor General has urged that the proviso contains the words ‘with intent to evade 6 payment of duty”. He submits that the wrong declaration was made in the list with an intent to evade payment of duty and therefore the limitation should be five years as provided in the proviso to amended Section 11-A. We cannot accept this argument. Both the main section and the proviso have to be read together. It is well settled law that the proviso is an exception and cannot be read in a manner that it over-shadows the main provision itself. If we read the proviso in its entirety it is clear that the same is applicable only in a case where the non-payment, short levy, short payment or erroneous refund is on account of fraud, collusion or willful mis-statement or suppression of facts or contravention of the provisions of the Acts or Rules. The words contravention of any provision of this Act will have to be read ‘ejusdem generis’ with the words fraud, collusion, willful mis-statement and suppression of facts. The intention of the enactment is that where the manufacturer of goods has made fraudulent claims or has purposely mis-stated facts then the limitation is 5 years. This proviso will apply only if the Department can show that there is some positive act done by the manufacturer which was covered by the words mentioned above. It must be established that the non-payment of duty or short levy or short payment or erroneous refund is on account of fraud, collusion, willful mis-statement etc. In Easland Combines’ case (supra) the Apex Court held as follows: “31. It is settled law that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded 7 because of either fraud, collusion, willful mis-statement, suppression of fact or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or willful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.” Applying the aforesaid principle, we find that in the present case the Department has failed to point out any positive act on the part of the manufacturer which could be said to be fraudulent, collusive or amounted to making a willful mis-statement etc. In the present case the Company had not hidden or mis-stated the product which it was manufacturing. It had clearly given the name of the product. Its claim was that it fell under item 3002.00. This list was accepted by the Department. The assessee had not made any mis- statement of facts nor had done any positive act to mis-lead the Department. This statement may have been wrong but it cannot be said to have been made with an intention to defraud the State. It would be difficult to hold that such a mistake was a willful mis- statement or suppression of facts. In view of the above discussion, we answer the questions in the following manner: 1.That CEGAT was right in holding that the extended period was not invokable in the facts and circumstances of the case. 2.In answer to question No.2 we hold that CEGAT should have taken into account the amended provisions of Section 11-A which had been amended with retrospective effect vide Section 10 of the Finance Act of 2000. 8 The result would be that the period of limitation for which recovery can be made would be one year and not six months as held by the CEGAT. The References are answered in the aforesaid manner. No order as to costs. ( Deepak Gupta ), Judge September 3, 2008. ( V.K. Ahuja ), PV Judge