Commissioner of C. Ex. vs Havukal Tea and Produce Co. (P) Ltd.

F.M. Ibrahim Kalifulla, J.—The substantial question of law that arise for consideration in these appeals are as under:

In the facts and circumstances of the case, whether the Tribunal was right in holding that the extended period to demand central excise duty in

terms of proviso to Sub-section (1) of Section 11A of Central Excise Act, 1944 could be invoked in the case of the Respondent as there was no

suppression and the Respondent was under the bona fide belief that he has satisfied the conditions prescribed in the Notification No. 41/99-C.E.,

dated 26-11-1999.

The issue concerns the period between April 2000 and February 2005. The excise exemption was covered by three notifications bearing No.

41/99-C.E., dated 26-11-1999, 13/2003-C.E., dated 1-3-2003 and 42/2003-C.E., dated 14-5-2003. The Respondent availed the Central

Excise exemption based on the above notifications. As per the above notifications the manufacturer of tea, who cleared such manufactured tax

from a ''bought leaf factory during any financial year subsequent to 1999-2000 was exempted from the whole of the duty of excise leviable thereon

u/s 3 of the Central Excise Act, 1944. The main condition for availing such exemption as prescribed in the notification is as under:

(b) not less than two-thirds of the green leaf used by the factory, during the period from the date of aforesaid undertaking till the end of the financial

year, shall be purchased from growers, each having holding not exceeding ten hectares under tea cultivation.

Based on the above notification, the Respondent availed total exemption in respect of tea manufacture between April 2000 and February 2005.

In support of such claim, the Respondent produced the Village Administrative Officer''s certificate, the Respondent produced the Village

Administrative Officer''s certificate, the certificate issued by Tea Board and also a self declaration of the respective land owners to the effect that

each one of them from whom such green tea leaves were purchased were holding lands less than 10 hectacres.

u/s 11A of Central Excise Act, 1944, when any such non-levy of such excise was erroneously made, the central excise officer may within one

year from the levied date serve notice on the person chargeable to duty which has not been appropriately levied asking him to show cause why he

should not pay the amount that is specified in the notice.

Proviso to Section 11A(1), however, prescribe that if such non-levy was due to any wilful mis-statement or suppression of facts, or

contravention of any of the provisions of the 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 and the period of limitation would be five years.

In the case on hand, on 28-3-2006, the Appellant issued a show cause notice to the Respondent alleging that the purchase effected by the

Respondent was from persons, who were holding lands in excess of 10 hectares and therefore, they were not entitled for the benefit granted under

the above stated three notifications. Based on the show cause notice, it is stated that the Respondent also paid the excise duty. Further, the

Respondent approached the Commissioner of Central Excise seeking for the refund of whatever excise duty collected by contending that the

proceedings initiated by the Appellant was beyond the time prescribed u/s 11-A(1) of the Act and therefore, they are entitled for the refund of the

excise amount collected. The original authority namely the Commissioner of Central Excise rejected their claim for refund. The Respondent went

on appeal before the Customs, Excise and Service Tax Appellate Tribunal and by the order impugned dated 3-7-2008 2009 (233) E.L.T. 518

(Tribunal), the Tribunal having allowed the claim of the Respondent, the Appellant has come forward with this appeal with the question of law

raised as stated above.

We heard Mr. Thirumalavan, learned Senior Central Government Standing Counsel for the Appellant and Mr. Jay Kumar for the first

Respondent. We also perused the provision contained in the notification providing for exemption and Section 11A(1) along with its proviso.

The sum and substance of the stand of the Appellant was that the Respondent is a agricultural income tax Assessee, that the land holdings with

reference to whom the purchase of green leaves were stated to have been made were also agriculture income tax Assessees and that during the

relevant years, the returns filed by those suppliers of green tea leaves under the agriculture income tax revealed that some of them were holding

lands in excess of 10 hectares and that since the said fact was suppressed by the Respondent, which suppression was wilful, the Appellant was

entitled for the extended period of limitation provided under the proviso to Section 11A(1) of the Act.

As against the above submission, Mr. Jaikumar, learned Counsel for the Respondent would contend that the same cannot be construed as

''wilful suppression'', inasmuch as the Respondents produced certificates issued by the Tea Board in respect of the land holdings of its suppliers

apart from the Village Administrative Officer''s certificate as well as self declaration of land owners themselves and that the Appellant cannot

expect the Respondent to indulge in any other extraordinary exercise of finding out other document pertaining to the land owners and its suppliers.

The learned Counsel would contend that the notification does not call for such an exercise to be carried out in order to avail the benefit of

exemption provision under the notification.

We find force in the said submission of the learned Counsel for the Respondents.

A perusal of the notification and the extracted part of it discloses that the manufacturer has to file an undertaking that not less than two-thirds of

the green leaf used by the factory during the relevant period from the date of the undertaking till the end of the financial year, was purchased from

growers, who were holding not less than ten hectares under tea cultivation. Indisputably, the Tea Board is a statutory body. Various tea growers

are stated to be the members of the Tea Board and that when the Tea Board issued certificates, it will have to be presumed that the particulars

furnished in such certificates were true and one can act upon it. Therefore, when the Respondent while furnishing its undertaking enclosed such

certificates issued by the Tea Board, the Village Administrative Officer as well as the self declaration made by the concerned land owners, it had to

be held that there was sufficient compliance of the requirements to claim exemption as provided under the notification. One can understand if the

Appellant was not satisfied with such an undertaking and the enclosed materials at the time when it was produced and that they wanted any other

proof to support the claim made by the manufacturer. Admittedly, the Appellant did not ask for any such further proof as regards the land holdings

of the suppliers. When the Respondent furnished those particulars which were based on the certificate issued by the statutory body viz., Tea

Board, it is quite understandable that one can rely upon such a document issued by an independent statutory body to support the claim of the land

owners about the extent of their land holdings.

In such circumstances, it cannot be held that there was a erroneous or bogus or fraudulent claim made by the Respondent while seeking for

exemption. It cannot also be held that there was wilful suppression in order to hold that the Appellant was entitled to invoke the extended period of

limitation as provided under the proviso to Section 11A(1) of the Act. The conclusion of the Tribunal that the Respondent was not aware of the

agricultural income tax returns submitted by the concerned land owners in quite convincing and the said reasoning of the Tribunal cannot be faulted.

Merely because, the Respondent is also an agriculture income tax Assessee, it cannot be expected to make a rowing enquiry about the agriculture

income tax returns of other land holdings for the purpose of availing the benefit under the exemption notification. One can understand if such a

specific prescription is provided in the notification on order to avail the exemption. In the absence of any such specific prescription in the

notification, the certificates produced by the Respondent one of which was issued by a statutory body cannot be held to be a false claim in order to

invoke the proviso to Section 11A(1) for rejecting the exemption granted based on the notification by availing the extended period of limitation.

Looking at from any angle, we do not find any flaw in the conclusion of the Tribunal. The appeal therefore, fail and the substantial question of

law is answered against the Appellant and in favour of the Assessee. We further make it clear that it is always open to the Appellant to insist for

productions of agriculture income tax returns or such other details furnished in such returns for the grant of exemption for any future period. In the

light of our order passed in C.M.A. No. 3695 of 2008, we find that there is no scope to entertain the appeal No. 3696 of 2008. Both the appeals

fail and the same are dismissed. Consequently, connected miscellaneous petitions are closed.