Extended period of demand is unsustainable if there is no malafide intention to evade tax

Last updated: 17 September 2024

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The CESTAT has ruled that an extended period of limitation for duty demands cannot be invoked solely because an assessee operates under self-assessment. The tribunal emphasised that the department must prove wilful suppression of facts or intent to evade tax. Merely discovering discrepancies during an audit does not automatically imply malafide intention on the part of the assessee.

Court :
CESTAT, New Delhi

Brief :
The CESTAT, New Delhi in the case of Kanoria Energy & Infrastructure Ltd. v. Commissioner, CGST & Central Excise [Final Order No's 58092-58097/2024 dated August 28, 2024] held that an assessee may genuinely believe that duty is not leviable, while the department may believe that duty is leviable. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, atleast one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self-assessment. Even otherwise, merely because facts came to light only during the audit does not prove that there is an intent on the part of the assessee to evade payment of duty. Hence, intention to evade tax must be proved by the Department. Thus, the extended period of limitation contemplated under the proviso to Section 11A(1) of the Central Excise Act, 1944 cannot be invoked, the impugned order passed by the Commissioner deserves to be set aside as the entire demand is covered under the extended period of limitation.

Citation :
Final Order No's 58092-58097/2024 dated August 28, 2024

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