Commissioner of C. EX. and Cus. vs Bilag Industries Pvt. Ltd.

Harsha Devani, J.—In this appeal u/s 35G of the Central Excise Act, 1944 [the Act], the Appellant, Commissioner of Central Excise & Customs, Daman has challenged order dated 5th February 2009 made by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad, [the Tribunal] proposing the following three questions:

Whether in the facts and circumstances of the case the Tribunal has committed a substantial error of law in allowing appeal of the Respondent by holding that the demand raised for the period April 2000 to March 2003 by show cause notice issued in April 2004 is barred by limitation, except for the period which falls within limitation?

Whether in the facts and circumstances of the case the Tribunal has committed a substantial error of law in applying ratio of the decision in case of M/s. Mafatlal Industries [2009 (245) E.L.T. 265 (Tribunal)] in holding that demand made in the subject show cause notice is barred by limitation?

Whether in the facts and circumstances of the case the Department has not validly invoked extended period of limitation in issuing show cause notice to the Respondent?

The Respondent-Assessee is engaged in the manufacture of excisable goods. The Assessee used Light Diesel Oil (L.D.O.) as fuel in the manufacture of chemicals. The Assessee used part of the quantity of the said L.D.O. for generation of steam. However, it sold part of the steam so generated to its subsidiary unit, that is, M/s. Mitsu Ltd., which was situated near the factory of the Assessee, without payment of duty, from April 2000 to March 2003. According to the Department, since, MODVAT/CENVAT credit had been taken on the inputs which were used in the manufacture of dutiable and exempted products, the Assessee was required to maintain separate accounts of the inputs used in the manufacture of exempted products or to pay 8% of the value of exempted products upon clearance thereof in terms of the erstwhile Rules 57C(i) and 57AD of the Central Excise Rules, 1944 (the Rules) read with Rule 6 of CENVAT Credit Rules, 2001 and 2002. A show cause notice came to be issued to the Assessee as to why Mod-vat/CENVAT credit wrongly availed on LDO used in the manufacture of Steam and sold to M/s. Mitsu Limited amounting to Rs. 50,79,488/- should not be recovered from it to the extent of the quantity of LDO used in the manufacture of steam which was supplied to M/s. Mitsu Limited. The show cause notice culminated into an order dated 30-8-2004 made by the adjudicating authority whereby the Assessee was directed to pay Rs. 50,79,488/- being the credit fraudulently availed on the quantity of LDO used in the manufacture of steam sold to M/s. Mitsu Limited during the period from April 2000 to March 2003. Penalty of equivalent amount also came to be imposed along with interest at the appropriate rate. Being aggrieved, the Assessee carried the matter in appeal before the Tribunal.

Before the Tribunal, the learned advocate appearing on behalf of the Assessee had conceded that an identical issue had been considered by the Tribunal in the case of M/s. Mafatlal Industries vide order dated 26-11-08 and by taking note of the judgment of the Supreme Court in the case of Collector of Central Excise Vs. Solaris Chemtech Limited and Others, as also the Tribunal''s decision in the case of M/s. Reliance Industries and had denied the benefit. However, it was contended that the demand raised after the normal period of 6 months was barred by limitation. The Tribunal, placing reliance upon its own earlier decision in the case of M/s. Mafatlal Industries held that the demand raised for the period from April 2000 to March 2003, would be barred by limitation.

Assailing the impugned order of the Tribunal, Mr. R.J. Oza, learned Senior Standing Counsel appearing on behalf of the Appellant submitted that the Tribunal had merely applied the ratio of the decision in the case of M/s. Mafatlal Industries without adverting to the facts of the present case as to how the said decision was applicable in the present case. Inviting attention to the order made by the Adjudicating Authority, it was pointed out that the Adjudicating Authority has recorded specific findings as regards suppression, based on which the Adjudicating Authority has invoked the extended period of limitation. It was submitted that the Tribunal has not recorded any reasons as to why the findings recorded by the Adjudicating Authority as regards suppression are not justified; but by merely reproducing the relevant paragraph from the decision in the case of M/s. Mafatlal Industries has held that in the facts of the present case also, the show cause notice is barred by limitation. The learned Counsel submitted that suppression is a question of fact and there cannot be a straight jacket formula as to the mode and manner of suppression and as such the Tribunal, by merely relying on its earlier decision in the case of M/s. Mafatlal industries and without recording any findings on the question of suppression, was not justified in holding that the show cause notice was barred by limitation and that extended period of limitation could not be invoked. It was submitted that the Tribunal, being the last fact-finding authority, was required to record its findings in respect of each aspect of the matter and that the Tribunal has miserably failed in doing so. Reliance was also upon a decision of this Court in the case of The Commissioner of Central Excise and Customs Vs. Chandubhau Shiroya, , wherein this Court has held that while making an order u/s 35C of the Act the Tribunal must keep in mind that proceedings before it are likely to have far reaching implications as far as parties, that is, the Assessee as well as the revenue are concerned and it is, therefore, essential that the order made by the Tribunal should reflect an application of mind before fastening of liability upon an Assessee or granting relief against the revenue. It was pointed out that in the said case, the matter was remanded to the Tribunal for deciding the matter on merits after giving reasonable opportunity of hearing to both the sides, to submit in the present case also, since the Tribunal has not recorded any findings on the issue of suppression, the matter is required to be remanded to the Tribunal for deciding the question as to whether the period of limitation has rightly been invoked by the Adjudicating Authority, afresh.

On the other hand, Mr. Anand Nainavati, learned advocate appearing on behalf of the Assessee submitted that at the relevant time, the legal position in relation to the main controversy in dispute was not clear and that there were decisions in favour of the Assessee prevailing at the relevant of time. Thus, the Assessee was entertaining a bona fide belief that it was not required to maintain any separate accounts in respect of the fuel which was supplied by it to its sister concern. Reliance was placed upon several decisions of the Supreme Court and more particularly in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III, wherein the Court on merits held against the Assessee. However before concluding the Court observed thus:

Before concluding, it may be clarified that on account of repeated amendments in the CENVAT Credit Rules, huge litigation in the country stands generated. In the circumstances, we are of the view that penalty is not leviable on the Appellant/Assessee, particularly when in a large number of other cases, on account of conflict of views expressed by the various Tribunals/High Court, the Assessees have also succeeded. Hence, although Maruti Suzuki Ltd. (the Appellant) has failed in their civil appeals the Department will not impose penalty.

Referring to various other decisions of the Supreme Court, it was pointed out that in cases where the legal position was not settled and there were decisions in favour of the Assessee, the Court had taken a view that penalty should not be imposed and that the extended period of limitation should not be invoked.

On merits, Mr. Nainavati submitted that the fact that the Assessee was availing credit in respect of LDO; the fact that steam is one of the items manufactured by the Respondent on which credit is taken; as well as the fact that steam was being cleared to M/s. Mitsu was known to the Department. Thus, all the facts relevant were within the knowledge of the department and therefore, it cannot be said that there is any suppression on the part of the Assessee so as to justify invocation of the extended period of limitation. It was further submitted that all these facts were before the Tribunal also, and it was after considering the same that the Tribunal has held that the extended period of limitation cannot be invoked. It was urged that on merits, on the basis of the available record, the Respondent is in a position to satisfy the court that there was no case for invoking the extended period of limitation, hence, merely because the Tribunal has not recorded detailed findings, the matter may not be remitted to the Tribunal for another round of litigation and that the Court may decide the appeal on merits.

As can be seen from the impugned order of the Tribunal, the same consists of three paragraphs. In the first paragraph, the Tribunal has recorded the submissions made by the learned advocate for the Assessee to the effect that the controversy involved in the appeal stood concluded by the decision of the Supreme Court in case of M/s. Solaris [supra]. Thereafter the Tribunal recorded the submissions of the learned advocate that the demand raised after the normal period of 6 months is barred by limitation. In the second paragraph, the Tribunal has reproduced paragraph 4 of the Tribunal''s order in the case of Mafatlal Industries. In the third paragraph, the Tribunal has held as under:

By applying the ratio of the above decision, we hold that the demand raised for the period April 2000 to March 2003 by way of show cause notice issued in April 2004 would be time barred by limitation, except for the period which falls within the limitation. The same is required to be quantified by authorities below.

Thus, the Tribunal has merely applied the ratio of the decision in the case of M/s. Mafatlal Industries without recording any reasons as to how the ratio of the said decision would be applicable to the facts of the present case.

For the purpose of invoking extended period of limitation, the revenue has to make out a case that there was fraud, collusion or any willful misstatement or suppression of facts, or contravention of any provisions of the Act or the rules made thereunder with intent to evade payment of duty. In the present case, the revenue has alleged suppression on the part of the Respondent-Assessee. As to whether or not there is any suppression of facts on the part of the Respondent is always a question of fact. Therefore, when such a plea was raised before the Tribunal, before concluding that extended period of limitation cannot be invoked the Tribunal was required to record findings of fact as to whether or not there was any suppression on the part of the Assessee. However, a perusal of the impugned order of the Tribunal indicates that the Tribunal has recorded no such findings of facts.

The question that arises for consideration is whether merely because the Tribunal, which is the last fact finding authority has failed to record such findings, the matter is required to be remitted to the Tribunal for the purpose of deciding the said issue afresh giving rise to another round of litigation?

In this regard, a perusal of the order made by the Adjudicating Authority indicates that before the Adjudicating Authority it was the case of the Assessee that steam was not its final product. The Assessee used the said input viz. LDO as input for fuel, hence there was no requirement either to reverse the duty or make payment of 8% duty on value of steam so cleared to M/s. Mitsu Ltd. The Assessee used LDO as fuel in its factory premises for the manufacture of its final product apart from selling a part of the steam so generated to M/s. Mitsu Ltd. According to the Assessee, credit had, therefore, been rightly availed and there was no contravention of Rule 57AD(i) of the Central Excise Rules, 1944 read with Rule 6 of CENVAT Credit Rules, 2001 and 2002 since the scope of the two rules suggested that the same apply to manufacture of both exempted and dutiable final products. In all the rules, viz. Rules 57C, 57AD and now Rule 6, inputs intended to be used as fuel were excluded. It is in the aforesaid background that it was contended by the Assessee that it was not required to maintain separate records as regards consumption of LDO, as contended by the Department. On the question of suppression, it was the case of the Assessee that it had submitted its declaration under Rule 173B of the Central Excise Rules in respect of the steam and that in its letter dated 20th September 1999 it had disclosed the fact regarding sale of steam to M/s. Mitsu Limited and the said letter had been acknowledged by the Central Excise Officer in charge of the unit. Therefore, the allegation regarding suppression of facts was non-existent. The Assessee had also paid sales tax on the sale of steam. Hence the Assessee had no intention to suppress facts. Based upon the aforesaid, it was contended on behalf of the Assessee that the extended period of limitation could not have been invoked in the present case.

On a perusal of the findings recorded by the Adjudicating Authority for the purpose of invoking extended period of limitation, the Court is of the view that the said findings would have been relevant had it been the case of the Assessee that it was required to maintain separate accounts under the relevant rules and still not maintained the same. However, in the facts of the present case it was the specific case of the Assessee before the Adjudicating Authority that it had used LDO as fuel and that the scope of Rule 57AD of the Central Excise Rules and Rule 6 of the CENVAT Credit Rules suggests that the same are applicable to both manufacture of exempted as well as dutiable goods and that in all the said rules, inputs intended to be used as fuel were excluded. Hence, it was not required to maintain separate accounts in respect of the LDO used by it as fuel in the manufacture of exempted and dutiable products. The findings regarding suppression recorded by the Adjudicating Authority are mainly based on the fact that the Assessee did not maintain separate records and that the Assessee had not declared either in the 173B declaration or in its forwarding letter that it had utilized any input for manufacture of steam on which CENVAT credit had been availed. This finding clearly overlooks the case of the Assessee that inputs used as fuel were excluded from the purview of the said Rules. In the circumstances, the evidence on record clearly does not substantiate the findings of the Adjudicating Authority as regards suppression. Besides, as rightly contended by the learned advocate on behalf of the Assessee, at the relevant time, the legal position in this regard was not clear and there were various decisions of the Tribunal and different High Courts in favour of the Assessee, hence, the Assessee was entitled to entertain a bona fide belief that it was not required to maintain separate accounts in respect of the inputs used as fuel and that it was entitled to avail of CENVAT Credit in respect of the same.

In the light of the aforesaid, though the learned Counsel for the Appellant is justified in assailing the impugned order of the Tribunal as being a non-speaking one as also on the ground that the Tribunal has not recorded any findings on the question of suppression, this Court is of the view that no useful purpose would be served by remitting the matter back to the Tribunal, inasmuch as the learned advocate for the Respondent- Assessee on the basis of the record of the case, has been able to make out a case before this Court that there was no suppression on its part and as such the extended period of limitation could not have been invoked.

Before concluding, it may be noted that the Tribunal in its quest for easy disposals has lost sight of the fact that an easy disposal for the Tribunal translates into extra work for the High Court. Had the Tribunal spared a few more minutes for recording a line or so on the merits of the case and a finding on the question of suppression, it would have obviated the need to issue notice to the other side and would have also saved a few hours of the precious time of this Court, which is already burdened with a huge pendency of cases. Merely because the Tribunal has made a short shrift of the matter, this Court in a case which could otherwise have been disposed of in a matter of a few minutes was required to undertake the exercise of going through the entire record and hearing the parries at length. Besides, notice was required to be issued to the Assessee who needlessly had to bear the expenditure of having the case defended. Despite the fact that in matters after matter the High Court as well as the Supreme Court have held that the Tribunal should support its findings with reasons, the Tribunal seems to have resolved to turn a blind eye to the same and continues to churn out decisions after decisions without recording basic facts and without recording reasons as to why and how a decision of the Tribunal, the High Court or the Supreme Court is applicable to the facts of a particular case. This reflects a very sorry state of affairs, which needs to be rectified at the earliest. It is hoped and expected that in future the Tribunal would supplement its orders, with some reasons. The Tribunal is not expected to write a lengthy thesis, but at least the bare minimum facts and reasons are required to be recorded.

In the light of the aforesaid discussion, it is not possible to state that the impugned order of the Tribunal gives rise to any question of law as proposed or otherwise, much less a substantial question of law so as to warrant interference. The appeal is accordingly dismissed.