Case: M/S. Anand Nishikawa Company Ltd Vs. Commissioner Of Central Excise, Meerut

1. Appellant M/s. Anand Nishikawa Co. Ltd. is a manufacturer of rubber profiles which product after extrusion is subject to notching or drilling of a few holes or slitting. The appellant had classified such extruded rubber profiles under sub-heading 4008.29 of the Central Excise Tariff which attracted Nil rate of duty. The Revenue, however, classified such rubber under heading 4016.19.2. According to Revenue, the operations like notching, drilling and slitting are further working and in view of Note 9 to Chapter 40, these goods fall outside Heading 40.08. According a show cause notice was issued in October, 1995 demanding duty of over Rs. 2.18 crores for the period from September, 1990 to February, 1994 under the proviso to Section 11A of the Central Excise Act, 1944 (hereinafter referred to as the Act). The Commissioner by his order dated 2nd August, 1996 discharged the show cause notice, inter-alia, on the ground that proviso to Section 11A of the Act was inapplicable in the facts of the case. In his order, the Commissioner observed that the authority had knowledge of the manufacturing process of the appellant and was seized of the matter from the very beginning and on few occasions, the department officers visited the factory for collection of samples and study etc. Adverse inference was also drawn by the Commissioner in his order dated 2nd August, 1996 against the department as show cause notice did not deal with the correspondence exchanged between the appellant and the department on the issue of classification from the year 1988. An appeal was carried by the Department against the aforesaid order of the Commissioner before the Customs, Excise and Gold (Control) Appellate Tribunal, (hereinafter referred to as "CEGAT") New Delhi which was allowed by the CEGAT on the issue of limitation that is to say extended period of limitation under proviso to Section 11A of the Act would be available in the facts of this case. However, the matter was sent back to the Commissioner for a decision on the question of classification and availability of MODVAT credit etc. Against this order of remand, passed by the CEGAT, this appeal has been filed under section 35(L), of the Act in this Court which, on admission, was listed for final disposal.

Reasoning: 8. We have carefully examined the erstwhile Rule 10 of the Central Excise Rules, section 11A of the Act as introduced in the year 1980 and section 11-A of the Act after the amendment in the year 2000. From a plain reading of Rule 10 of Central Excise Rules, we find that the proper officer is conferred with power to recover duties not levied or not paid or short-levied or not paid in full or erroneously refunded to initiate recovery proceedings within six months from the relevant date. However, Rule 10 of the Central Excise Rules and Section 11-A of the Act prior to the 2000 amendment, did not say that recovery of duties not levied or not paid or short-levied or not paid in full or erroneously refunded could be done even where the classification of the goods was approved by the Department.9. Section 11A of the Act as it stands today, however, confers powers not on the proper officer but on a Central Excise Officer to initiate recovery proceedings when any duty of excise has not been levied or not paid or has not been short-levied or not paid in full or erroneously refunded whether or not such non-levy or non-payment or short-levy or short-payment or erroneously refund, as the case maybe, was on the basis of any approval etc., relating to the rate of duty on or valuation of excise goods within one year from the relevant date.As noted herein earlier, the Commissioner while adjudicating the show cause notice confirmed by the duty demand on goods found short and also imposed a penalty of Rs. 10,000/- on the assessee but he dropped the rest of the proceedings on the ground that there was no "suppression of facts" on the part of the appellant herein and accordingly extended period of limitation was found by him not be available to the department under the proviso to section 11A of the Act. In appeal, CEGAT, however, as noted herein earlier, reversed this finding of the Commissioner and found "suppression" of facts" from the materials on record. If CEGAT was justified in holding that there was "suppression of facts" by the appellant either regarding their method of process of the product in question and applicability of different classification lists, then certainly CEGAT was correct in holding that extend period of limitation under proviso to section 11-A of the Act could be applied in the facts and circumstances of the case. In that event, this Court would not be in a position to interfere with the order impugned in this appeal.In this view of the matter, we are unable to persuade ourselves to agree with the finding of the CEGAT as admittedly, the products of the appellant were inspected from time to time and the department was aware of the manufacturing process of the products although the appellant might not have disclosed the post forming process in detail.For the reasons aforesaid, we are of the view that the CEGAT was not justified in holding that the extended period of limitation would be available to the Department for initiating the recovery proceedings under section 11A of the Act on a finding that there was suppression of facts by the appellant. Accordingly, it was not open to the excise authorities to invoke proviso to section 11A of the Act and therefore, the demand of the Revenue must be restricted to six months prior to the issue of notice dated 19.10.1995 instead of five years. In view of this conclusion, it is not necessary for us to consider the question of applicability of the classification lists namely of 4008.29 and 4016.19 and the question of MODVAT facilities.