Commissioner of Central Excise vs Garden Silk Mills

H.N. Devani, J.—Appellant-revenue has challenged the order dated 4th December 2008 made by the Customs, Excise & Service Tax Appellate Tribunal (the Tribunal) [2009 (237) E.L.T. 360 (Tribunal)], proposing the following questions:

(A) Whether in the facts and circumstances of the present case, the Tribunal has committed substantial error of law by not permitting the Department to invoke extended period of limitation under proviso to Sub-section (1) of Section 11A of the Central Excise Act, 1944?

(B) Whether the Tribunal has jurisdiction to entertain and consider issue between the same parties covering same period for invocation of extended period of limitation, which is already decided by its coordinate Bench in Appeal No. 850/91-D dated 22-11-1994?

(C) Whether in the facts and circumstances of the present case, the Tribunal has committed substantial error of law by exonerating respondent from payment of duty liability for sum of Rs. 19,87,123/- under Sub-section (2) of Section 11A of the Central Excise Act, 1944 read with Rule 9(2) of the Central Excise Rules, 1944 and liability to make payment of penalty of Rs. 3,00,000/- under Rule 173Q(1)(a)(b)(c) and (d) of the erstwhile Central Excise Rules, 1944?

Vide an order-in-original dated 23rd November 1990, demand of Central Excise duty came to be confirmed on taspa yarn and fancy yarn cleared by the respondent assessee. The assessee carried the matter in appeal before the Tribunal, who vide order dated 22nd November 1994 upheld the classifications made by the adjudicating authority. The Tribunal also upheld the invocation of the extended period of limitation. Against the said order the assessee preferred appeal before the Supreme Court which came to be allowed vide judgment and order dated 18th December 2002 Garden Silk Mills Ltd. Vs. Collector of Central Excise and Customs, whereby the order of the Tribunal was said aside and the matter was remitted to the Tribunal for deciding the case in accordance with law.

Pursuant to the order of remand, the Tribunal vide the impugned order dated 4th December 2008, upheld the order of the adjudicating authority insofar as the classification is concerned. However, the Tribunal held that the extended period of limitation could not have been invoked in the facts and circumstances of the case.

Assailing the impugned order, Mr. R.J. Oza, learned Senior Standing Counsel for the appellant revenue submitted that in the light of the provisions of Section 35L of the Central Excise Act, 1944, appeal can be preferred before the Supreme Court only on the question of classification. Insofar as the determination on the quantum of liability is concerned, the appeal would lie only before the High Court. It was contended that against the earlier order of the Tribunal, the respondent-assessee had preferred appeal challenging the order of the Tribunal only as regards the classification dispute, hence, the order of the Tribunal insofar as the question of limitation is concerned was not subject matter of challenge before the Supreme Court, and as such the Tribunal in remand could not have passed a contrary order. It was argued that the Tribunal could not have travelled beyond the scope of remand and considered the question of invocation of the larger period of limitation. Alternatively, it was submitted that that before the Supreme Court, the order of the Tribunal had been challenged only qua the question of classification and that no contention had been raised against the part of the order deciding the ground of limitation against the assessee. Hence, the assessee having accepted that part of the order, it was not permissible for the assessee to raise the said contention before the Tribunal in remand. Accordingly, the Tribunal ought not to have entered into the question of invocation of larger period of limitation.

A perusal of the judgment and order of the Supreme Court indicates that the earlier order made by the Tribunal had been set aside and the matter had been remitted to the Tribunal for deciding the case in accordance with law. The contention raised on behalf of the revenue that the earlier order of the Tribunal was in two parts, namely, qua the issue of classification and qua the question of determination of quantum of liability and that in respect of the two issues decided by the Tribunal, separate appeals would lie, one before the Supreme Court and another before the High Court, has only to be stated to be rejected. Once, an order of an inferior court is subject matter of challenge before the superior court, it is always open for the superior court to consider all aspects arising out of the said order. Hence, the contention that the respondent assessee should have challenged the order qua the question of invocation of larger period of limitation before the High Court cannot be countenanced.

Examining the impugned order of the Tribunal on merits, the Tribunal has recorded the contentions of the assessee on the question of the demand being beyond the period of limitation and has held as follows:

...We agree with the above contention of the appellant. Admittedly, during the relevant period, there was Board''s Circular in favour of the assessee, as also the entire dispute of correct classification was the subject matter of various decision of the Tribunal. Even Larger Bench decision of the Tribunal being in favour of the assessee, is sufficient fact and reasonable cause for them to entertain bona fide belief that the "Taspa Yarn" is not classifiable under Head 56. As such, it has to be held that there was no suppression or mis-statement on the part of the appellant with an intent to evade payment of duty so as to justifiably invoke longer period of limitation. We, accordingly, hold that the demand which is beyond the normal period of limitation, is not sustainable. Appellant''s liability to pay duty, within limitation, is upheld. The same shall be quantified accordingly by the proper officer.

(12) We also agree with appellant that the issue being bona fide issue of interpretation of two contending entries of CETA and having already held that there was no mala fide on part of the appellant, imposition of penalty upon them would not be justified. We, accordingly, set aside the same.

Thus, it is apparent that the Tribunal upon considering the material on record has found that there was no suppression or mis-statement on part of the respondent-assessee with an intent to evade payment of duty so as to justify invocation of larger period of limitation. As to whether there is suppression or misstatement is primarily a question of fact. The Tribunal having found as a matter of fact that there was no suppression or wilful misstatement on the part of the assessee was, therefore, justified in holding that the extended period of limitation could not have been invoked. In the circumstances it is not possible to state that the Tribunal has committed any legal error so as to warrant interference.

In absence of any question of law as proposed or otherwise, much less any substantial question of law, the appeal is dismissed.