Extended period of limitation cannot be invoked merely on failure to pay Excise Duty in a non-fraud case

The Customs, Excise & Services Tax Appellate Tribunal (CESTAT) has ruled that the extended period of limitation for recovering unpaid Excise Duty cannot be invoked in cases of simple non-payment, unless fraud or wilful misstatement is involved. The tribunal found that a show cause notice issued over a year after the relevant date was invalid when there was no evidence of fraudulent intent by the appellant. Merely stating a case is 'self-assessment' is insufficient to justify invoking the extended period.

The Hon'ble Customs, Excise & Services Tax Appellate Tribunal, Delhi ("CESTAT") in the matter of M/s. Delta Power Solutions India Pvt. Ltd. v. Commissioner, Customs, Central Excise & Service Tax, Commissionerate, Hapur [Final Order No. 51919/2021 dated November 03, 2021], held that mere failure to pay Excise Duty, not due to fraud or wilful misstatement is not sufficient to attract the extended period of limitation and the Central Excise Officer should have issued notice within one year from the relevant date.

M/s. Delta Power Solutions India Pvt. Ltd. ("the Appellant")filed the current appeal being aggrieved ofthe Order-in-Appeal passed by the Commissioner of Customs (Appeals), Dehradun. Factually, the Appellant is a manufacturer of Power Rectifier systems, UPS systems, industrial automation devices, video and audio display systems and electric motors, etc. The Appellant claims that for this purpose it has been procuring various inputs, capital goods, and input services and also availed CENVAT Credit on excise duty and service tax paid on the said items. The Appellant has also stated that during the period of dispute from April 2010 to March 2011, it was also engaged in the manufacture of Solar Power Systems, but these goods were exempted from levy of excise duty. During this period, the Appellant manufactured 48 Solar Power Systems worth Rs.4,98,23,250/- and cleared the same from the factory without payment of excise duty.

Further, a show cause notice dated March 19, 2015 was issued mentioning therein that the Appellant manufactured 48 Solar Power Systems during the financial year 2010-11 on which no excise duty was paid. In this regard, the Appellant contended that under Section 11A(1) of the Central Excise Act, 1944 ("the Excise Act") the Central Excise Officer could have served a notice upon the Appellant within one year from the relevant date i.e. October 10, 2011 but in the instant case the show cause notice was issued on March 19, 2015 without there being any reason for invoking the extended period of limitation under Section 11A (4) of the Excise Act.

The Hon'ble CESTAT ruled that Section 11A(1) of the Excise Act shows that where any duty of excise has not been paid for any reason, other than the reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the Excise Act with intent to evade payment of duty, the Central Excise Officer shall, within one year from the relevant date, serve notice on the person requiring him to show cause why he should not pay the amount specified in the notice.

Further, held that the Department cannot be permitted to invoke the period of limitation by merely stating that it is a case of self-assessment. There is no averment in the show cause notice, nor there is any finding in the order passed by the Commissioner (Appeals) that the Appellant had provided incorrect information to any matter required to be stated in the self-assessment form with the intent to evade payment of service tax. All that has been stated is that the transaction details were not supplied to the Department and merely because of this, it has been assumed that the Appellant suppressed facts with intent to evade payment of service tax. Suppression in self-assessment matters can arise only when the information sought in the prescribed form is not supplied or incorrect information is supplied. Therefore, it cannot be said that the Appellant had suppressed any information with intent to evade payment of tax. Resultantly allowed the appeal.