(order of the court was made by Huluvadi G.Ramesh, J.) The Civil Miscellaneous Appeal is filed by the assessee calling in question the correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai-6, dated 16.4.2009 in Final order No.449 of 2009, which was admitted on 17.09.2010 for consideration of the following substantial questions of law;
"1. Whether the first respondent was correct in holding that the appellant is a manufacturer when M/s.C.P.Spinning Mills was running the appellant's factory by virtue of the memorandum of understanding dated 8.7.2000.
2. Whether the first respondent failed to see that the appellant had no role at all in the manufacturing activity and the manufacturing activity was entirely carried out as per the whims and fancies, directions and controls of CPSM. CPSM have themselves manufactured the goods in the premises of the appellant by utilizing the facilities and labour of the appellant, by exercising absolute control over the manufacturing operations, meeting all expenses, undertaking statutory liabilities etc.
3. Whether the first respondent failed to see that in the instant case, the provisions of Notification No.214/86 would become operational, only if the appellant had undertaken the manufacturing process, on job work basis, on behalf of CPSM. Though the appellant has chosen to declare the transaction under the said Notification, the said Notification is estopped from its application, in as much as this is not a case of appellant manufacturing on behalf of CPSM, but CPSM themselves manufacturing at the appellant's premises?
(4) Whether the first respondent has erred in ignoring the inadmissibility of certain evidences in terms of Sections 36A and 36B of the Central Excise Act, 1944?"
2. The appellant is engaged in the business of manufacturing cotton yarn falling under tariff sub heading 5205.11 of the first schedule of the Central Excise Tariff Act,2006. On account of labour unrest and financial constraints, it stopped its production activities and subsequently during the year 2000, the appellant Mill was taken over by M/s.CP Spinning Mills (P) Ltd, pursuant to which, manufacturing activities once again commenced. Thereafter, various MOUs were entered into between the parties, as per which, M/s.CP Spinning Mills (P) Ltd had been sending the raw materials viz., cotton to the Appellant's factory and it would receive back the cotton yarn from the appellant unit and thereafter it would sell the same.
3. Whileso, the appellant premises was visited by the officials of Directorate General of Central Excise Intelligence and certain documents were recovered. After enquiry, a show cause notice dated 14.12.2004 was issued to the appellant alleging that cotton yarn in cone was manufactured and cleared without payment of duty of excise duty by the Appellant during the period August 2000 to June 2002 and in some cases, cotton yarn in cone had been cleared in the guise of hank yarn, which was exempted from payment of duty and in some case, the cotton yarn had been undervalued, thus demanding duty of Rs.2,90,92,416/- and penalty thereon under section 11AC was imposed in addition to demand of interest under section 11 AB of the Act and further appropriating the amount of Rs.11,00,000/- already paid towards duty. The show cause notice also proposed to impose penalty on the other indiviudals viz., P.Balakrishnan, Managing Director of MSML, P.K.Mahamune, Proprietor of Preeetha Cotton Traders and D.Krishnan, Proprietor of SP Trading Company. Thereafter on 31.10.2006, the Commissioner of Customs and Central Excise, Salem, the 2nd respondent herein passed order in original bearing No.10 of 2006 confirming the duty demand of Rs.2,90,92,416/- and appropriating Rs.11,00,000/- already paid by the appellant; demanding interest on the proposed demanded duty under section 11AB of Central Excise Act 1944; imposing penalty of Rs.2,79,92,416/- under Rules 9(2), 52A, 173Q and 210 of the Central Excise Rules 1944, Rule 25 of central Excise(No.2) Rules, 2001 (erstwhile) and Rule 25 of the Central Excise Ruloes, 2002 r/w.Section 11 Ac of Central Excise Act, 1944; The 2nd respondent also imposed a penalty of Rs.2,75,00,000/- on Mr.P.Balakrishnan, Managing Director of M/s.CPSML ; Rs.10,00,000/- on Mr.P.K.Mahamune, proprietor of Preetha Cotton Traders, Tirupur; Rs.10,00,000/- on Mr.D.Krishnan, Proprietor of SP Trading company and Rs.5,00,000/- on Mr.M.Kathiresan, Partner, Bhagavathi Yarns, Palladam under the Act. Aggrieved against the above said order, the appellant preferred an appeal before the first respondent and the second respondent herein also preferred cross appeal. The first respondent, vide final order No.449 of 2009 dated 16.4.2009, allowed the appeal preferred by the second respondent upholding the duty demand as well as penalty imposed by it and enhanced the penalty to Rs.2,90,92,416/-. Aggrieved against the order passed by the 1st respondent, the appellant is before this Court.
4. We have heard the learned Senior Counsel Mr.R.Venkatraman appearing for the appellant and Mr.V.Sundareswaran, learned Standing Counsel appearing for the Department.
5. This Civil Miscellaneous Appeal was filed by the assessee against the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai against the imposition of the duty and penalty thereon as the appellant had clandestinely disposed of some manufactured goods to some third parties other than to the required customers/purchasers. It appears that the appellant herein is shown to have clandestinely sold the goods to the tune of more than 2 crore and 90 lakhs on which, duty/tax is chargeable and since the appellant had escaped out of his liability to pay duty, penalty of Rs.2,79,92,416/- was imposed along with interest by the Commissioner of Central Excise, Salem/the 2nd respondent herein.
6. The said order was assailed before the Commissioner of Central Excise, Salem, who, after considering various materials available on record and the documents seized from the premises with regard to selling of the manufactured goods without payment of duty to some third parties, confirmed the duty demand of Rs.2,90,92,416/- and imposed penalty of Rs.2,79,92, 416/- and demanded interest thereupon. Aggrieved against the order of the Commissioner of Central Excise, Salem, the appellant preferred appeal before the Customs, Excise and Service Tax Appellate Tribunal, the 1st respondent herein, who after having gone through the details of non disclosure and non payment of duty, proceeded to pass the impugned order.
7. It appears that in the course of discussion, with regard to non disclosure having been found based on the materials available on record which were seized in the appellant premises, the department has issued a show cause notice imposing penalty equivalent to the amount due have to be paid as noted above. In the circumstances of the case, though duty is to be levied within a period of five years, however, for certain types of issues, extended period of limitation could be invoked. However, invocation of extended period of limitation is possible only in the case of the department establishing fraud. For better clarity, the relevant provision is extracted hereunder;
Section 11A of Central Excise Act reads as follows;
"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;
Proviso to Section 11A of the Central Excise Act reads as under;
"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 wilful 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."
In the present case, it is evident from the record that the assessee has challenged the invocation of the extended period of limitation and raised the specific ground among other grounds before the CESTAT in this regard. However, the order of the CESTAT does not reflect any findings on the point of extended period as raised by the appellant and also issuance of show cause notice demanding duty by invoking the extended period of limitation under section 11(A)(1) of the Act. Without there being a finding or discussion on the said point by CESTAT, it should not be appropriate for this Court to deal with the issue on merits.
9. Therefore, in the facts and circumstances of the case, we are of the view that instead of disposing the matter on merits, it would be appropriate for us to direct the CESTAT/1st respondent herein to consider the same on the issue of invocation of extended period of limitation as well as the action being initiated after the extended period, invoking proviso to section 11A of the Central Excise Act.
10. Therefore, without expressing any opinion on the point of limitation, we hereby direct the CESTAT/1st respondent herein to afford an opportunity to the assessee/appellant herein and after addressing/adverting to all the grounds raised, pass appropriate orders on the point of limitation.
11. However, it may not be open for CESTAT to reconsider the findings already rendered by it on merits. The substantial questions of law 1 to 4 are kept pending to be revived by the parties at the appropriate stage, if necessary. The entire exercise shall be completed within a period of three months from the date of receipt of a copy of this order.
12. This Civil Miscellaneous Appeal is disposed of on the above terms. No costs.
Index:Yes Internet: Yes/No msr To [H.G.R.,J.] & [A.S.M.,J] 09.02.2017 The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai HULUVADI G. RAMESH, J.
& DR.ANITA SUMANTH, J.
msr
C.M.A.No.2364 of 2010
09.02.2017
http://www.judis.nic.in