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Thursday, January 24, 2013

Customs Act,- “28. Notice for payment of duties, interest, etc. = whether duty on the supply and receipt of furnace oil and electricity respectively was required to be paid. The Development Commissioner, referring to a circular dated 12.10.1999 of the Ministry of Commerce, said as follows: - “They are procuring surplus power from their sister concern M/s. Uniworth Ltd. (Unit- 1, LOP dated 31.01.1989) under Permission No. 248(93) dated 01.11.1994 and the unit transferred 2590.30 KL of furnace oil to M/s. Uniworth Ltd. (Unit- 1) for their captive power consumption. No permission is required from this office for duty free import/ procurement of POL products for captive power consumption. It is further to clarify as per the Exim Policy provision, one EOU may sell/ transfer surplus power to another EOU duty free in terms of Ministry of Commerce Letter No. 1/1/98-EP dated 12.10.1999 (sic)” [Emphasis supplied] The relevant portion of the Ministry of Commerce Letter No.1/98-EP is extracted below: “2. No duty is required to paid (sic) on sale of surplus power from an EOU/EPZ unit to another EOU/EPZ unit. Development Commissioner of EPZ concerned would be informed in writing for such supply and proper account of consumption of raw material would be maintained by the supplying unit for calculation of NFEP.” = Yet, the appellant received a show cause notice from the Commissioner of Customs, Raipur, demanding duty for the period during which the appellant imported furnace oil on behalf of Uniworth Ltd. = in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11- A(1) of the Act.’ = the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held: ...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11-A(1) , the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso....” = the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant. 27. In view of the afore-going discussion, the appeal is allowed and the decisions of the authorities below are set aside, leaving the parties to bear their own costs.




                                                          REPORTABLE
|IN THE SUPREME COURT OF INDIA                                     |
|CIVIL APPELLATE JURISDICTION                                      |
|CIVIL APPEAL NO. 6060 OF 2003                                     |
|                                                                  |
|M/S. UNIWORTH TEXTILES LTD.                 |—   |APPELLANT      |
|VERSUS                                                            |
|COMMISSIONER OF CENTRAL EXCISE, RAIPUR      |—   |RESPONDENT     |




                               J U D G M E N T



D.K. JAIN, J.



 1. This appeal under Section 130-E of the Customs Act, 1962 (for short “the
    Act”) arises from the final Order No. 142/03-B dated 18.02.2003,  passed
    by the Customs, Excise & Gold (Control) Appellate  Tribunal,  New  Delhi
    (for short “the Tribunal”). By the  impugned  order,  the  Tribunal  has
    upheld the levy of customs duty on the import of furnace oil as also the
    penalty under Section  112  of  the  Act,  rejecting  the  plea  of  the
    appellant that demand of the duty along with the penalty was  barred  by
    limitation.




 2. The appellant, an Export Oriented Unit (for short “EOU”), is engaged  in
    the manufacture of all wool and poly-wool worsted grey fabrics. 
 It  was
    granted the status of EOU  by  the  Government  of  India,  Ministry  of
    Industry, Department of Industrial Development by way  of  a  Letter  of
    Permission (for short “the LOP”) dated 31.08.1992 as amended  by  letter
    dated 4.5.1993. 
The appellant applied for a license for  private  bonded
    warehouse, which was granted  to  it  under  C.  No.  V  (Ch.51)     13-
    01/92/100%EOU dated  30.09.1992  by  the  Assistant  Collector,  Central
    Excise Division- Raipur for storing inputs, raw materials,  etc.  either
    imported duty-free by availing concessions available  for  100%  EOU  or
    procured locally without payment of duty for use in manufacture  of  all
    wool, poly-wool and other fabrics.




 3. For interaction with the appellant,  its  sister  unit,  Uniworth  Ltd.,
    another EOU, engaged in the generation of power  from  a  captive  power
    plant, obtained  another  LOP  dated  1.11.1994.
The  said  LOP,  dated
    1.11.1994, permitted usage of electricity generated by the captive power
    plant by both, Uniworth Ltd. and the appellant  Uniworth  Textiles  Ltd.
    The  appellant  purchased  electricity  from  Uniworth  Ltd.  under   an
    agreement which continued till 1999.




 4. Prior to January-February, 2000, the  sister  unit  i.e.  Uniworth  Ltd.
    procured furnace oil required for running the captive power plant.  
This
    purchase of furnace oil was exempted from payment of customs duty  under
    Notification No. 53/97-Cus., 
the relevant  portion  of  which  reads  as
    follows: -
      “Notification No. 53/97-Cus., dated 3-6-1997

      Exemption to specified goods imported  for  production  of  goods  for
      export or for use in 100% Export-Oriented Undertakings -- New Scheme --
       Notification No. 13/81-Cus. rescinded


      In exercise of the powers conferred by sub-section (1) of  section  25
      of the Customs Act, 1962 (52 of 1962), the  Central  Government  being
      satisfied that it is necessary in the public interest so to do, hereby
      exempts goods specified in the Table below (hereinafter referred to as
      the goods), when imported into India, for the purpose  of  manufacture
      of articles for export out of India, or for being used  in  connection
      with the production or packaging or job work for export  of  goods  or
      services out of India  by  hundred  per  cent  Export  Oriented  units
      approved by the  Board  of  Approvals  for  hundred  per  cent  Export
      Oriented Units appointed by the notification of Government of India in
      the  Ministry  of  Industry,  Department  of  Industrial  Policy   and
      Promotion for this purpose,  (hereinafter  referred  to  as  the  said
      Board), from the whole of duty of customs leviable thereon  under  the
      First Schedule to the Customs Tariff Act, 1975 (51 of  1975)  and  the
      additional duty, if any, leviable thereon under section 3 of the  said
      Customs Tariff Act...”


Entry 11 of the said notification at the relevant time read as follows:
-


      “11. Captive power plants including captive generating sets and  their
      spares for such plants and sets as recommended by the  said  Board  of
      Approvals.”




5. In January-February, 2000, Uniworth Ltd. exhausted the  limit  of  letter
   of credit opened by it for the duty-free import of furnace oil. 
 It  made
   an alternative arrangement of  procuring  duty  free  furnace  oil  under
   Notification No. 01/95 titled “Specified goods meant for manufacture  and
   packaging of articles in  100%  EOU  or  manufacture  or  development  of
   electronic hardware and software in EHTP or  STP” dated  04.01.1995.  
The
   said notification reads as follows :-

       “Notification No. 1/95-Central Excise


      In exercise of the powers conferred by sub-section (1) of  section  5A
      of the Central Excises and Salt Act/ 1944 (1 of 1944), read with  sub-
      section (3) of section 3 of the Additional Duties of Excise (Goods  of
      Special Importance) Act, 1957 (58 of  1957),  the  Central  Government
      being satisfied that it is necessary in the public interest so to  do,
      hereby exempts excisable  goods,  specified  in  Annexure  I  to  this
      notification (hereinafter referred to as the said goods), when brought
      in connection with -


        a) the manufacture and packaging of articles, or for production  or
           packaging or job work for export of goods  or  services  out  of
           India  into  hundred   percent   export   oriented   undertaking
           (hereinafter referred to as the user industry); or;


           XXX              XXX                    XXX


           from the whole of,


           (i)    the duty of excise leviable thereon under  section  3  of
           the  Central Excise Act, 1944 (1 of 1944), and


           (ii)    the additional duty of excise leviable thereon under sub-
           section (1) of section 3 of  the  Additional  Duties  of  Excise
           (Goods of Special Importance) Act, 1957 (58 of 1957),


                    XXX           XXX                    XXX


           ANNEXURE I


           3.    Captive power plants including captive generating sets and
           transformers    as    recommended     by     the     Development
           Commissioner/Designated Officer.


           3B.    Spares, fuel, lubricants, consumables and accessories for
           captive power  plants  including  captive  generating  sets  and
           spares, consumables and accessories for transformers as approved
           by the Assistant Commissioner or Deputy Commissioner of  Central
           Excise.


           3C.    Furnace oil required for the boilers as approved  by  the
           Assistant Commissioner of  Customs  or  Central  Excise  on  the
           recommendation of the Development Commissioner.”




6. Therefore, Uniworth Ltd. informed the appellant  that  it  would  require
   the arrangement for running the captive power plant for its own use,  and
   hence, would be compelled to  stop  the  supply  of  electricity  to  the
   appellant.
 Consequently, as a  temporary  measure,  for  overcoming  this
   difficulty, the appellant, while availing  the  benefit  of  Notification
   No. 53/97-Cus, procured furnace oil from Coastal Wartsila Petroleum Ltd.,
   a Foreign Trade Zone unit.
 It supplied the  same  to  Uniworth  Ltd.  for
   generation of electricity, which it continued to receive as before.




 7. Since the appellant was procuring furnace oil for captive power plant of
    another  unit,  it  wrote  to  the  Development   Commissioner   seeking
    clarification that
whether duty on the supply and receipt of furnace oil
    and electricity respectively was required to be  paid.
The  Development
    Commissioner, referring to a circular dated 12.10.1999 of  the  Ministry
    of Commerce, said as follows: -

      “They are procuring surplus  power  from  their  sister  concern  M/s.
      Uniworth Ltd. (Unit- 1, LOP dated  31.01.1989)  under  Permission  No.
      248(93) dated 01.11.1994  and  the  unit  transferred  2590.30  KL  of
      furnace oil to M/s. Uniworth Ltd. (Unit- 1) for  their  captive  power
      consumption. No permission is required from this office for duty  free
      import/ procurement of POL products for captive power consumption.  It
      is further to clarify as per the Exim Policy provision,  one  EOU  may
      sell/ transfer surplus power to another EOU  duty  free  in  terms  of
      Ministry      of   Commerce  Letter  No.  1/1/98-EP  dated  12.10.1999
      (sic)”

                                           [Emphasis supplied]




 The relevant portion of the Ministry  of  Commerce  Letter  No.1/98-EP  is
 extracted below:

      “2. No duty is required to paid (sic) on sale of surplus power from an
      EOU/EPZ unit to another EOU/EPZ unit. Development Commissioner of  EPZ
      concerned would be informed in writing  for  such  supply  and  proper
      account of consumption of raw material  would  be  maintained  by  the
      supplying unit for calculation of NFEP.”







 8. Yet, the appellant received a show cause notice from the Commissioner of
    Customs,  Raipur,  demanding  duty  for  the  period  during  which  the
    appellant imported furnace oil on behalf of Uniworth Ltd.
It  gave  the
    following reason for the same: -

      “1.1. M/s. Uniworth Ltd. (Power Division), Raipur, is engaged  in  the
      generation of power. M/s. Uniworth Textiles  Ltd.  and  M/s.  Uniworth
      Ltd. both are distinct companies having different LOP  Central  Excise
      Registration No. and different board of directors. 
They are  different
      companies as per Companies  Act  and  they  prepare  separate  balance
      sheet…




      4.2. Therefore it appears that the noticees had not received 742.5  KL
      of furnace oil … from M/s. Coastal Wartsila Petroleum  Ltd…  in  their
      factory at all as neither they  had  storing  facility  to  store  the
      furnace oil so procured nor they had any power plant  to  utilize  the
      said furnace oil to generate electricity. They also did not  have  LOP
      from Government of India… to procure and use furnace oil  to  generate
      electricity as they did not have any power  plant  in  their  factory…
      Considering the above fact it is clear that the procurement  of  742.5
      KL of furnace oil under shipping  bill,  without  payment  of  customs
      duty, is against the provisions of Customs Act, 1962  and  rules  made
      hereunder (sic).”







 9. The show cause notice was issued on 02.08.2001, more  than  six  months
    after the appellant had imported furnace oil on behalf of Uniworth Ltd.
    in January,  2001.  
This  time  period  of  more  than  six  months  is
    significant due to the proviso to Section 28 of the Act.  The  Section,
    at the relevant time, read as follows: -

      “28. Notice for payment of duties, interest, etc.

      (1) When any duty has not been levied  or  has  been  short-levied  or
      erroneously refunded, or when any interest payable has not been  paid,
      part paid or erroneously refunded, the proper officer may,-


      (a) in the case of any import made by any individual for his  personal
      use or by Government or by any  educational,  research  or  charitable
      institution or hospital, within one year;


      (b) in any other case, within six  months,  from  the  relevant  date,
      serve notice on the person chargeable with the duty  or interest which
      has not been levied or charged or which has been  so  short-levied  or
      part paid or to whom the refund has erroneously been  made,  requiring
      him to show cause why he should not pay the amount  specified  in  the
      notice:


      Provided that where any duty has not been levied or  has  been  short-
      levied or the interest has not been charged or has been part  paid  or
      the duty or interest  has  been  erroneously  refunded  by  reason  of
      collusion or any wilful misstatement or suppression of  facts  by  the
      importer or the exporter or the agent or employee of the  importer  or
      exporter, the provisions of this sub-section shall have effect  as  if
      for the words “one year” and “six Months”, the words “five years” were
      substituted.


      Explanation.-- Where the service of the notice is stayed by  an  order
      of a court, the period of such stay shall be excluded in computing the
      aforesaid period of one year or six months or five years, as the  case
      may be."
                                                         [Emphasis supplied]




10. The Section imposes a limitation period of six months within  which  the
    concerned authorities must commence action against an  importer/assessee
    in case of duties not levied, short-levied or erroneously  refunded.  
It
    allows the said limitation period to be read as five years only in  some
    specific  circumstances,  viz.  collusion,   willful   misstatement   or
    suppression of facts. 
Since the said show-cause notice was issued  after
    the elapse of six months, the revenue, for its action to be legal in the
    eyes of law, can only take refuge under the proviso to the section.




11. Both the appellate authorities, viz. the  Commissioner  of  Customs  and
    Central Excise (Appeals) and the Tribunal, rejected the  claims  of  the
    appellant and affirmed payment of duty and penalty. They  reasoned  that
    since the appellant procured the furnace oil not  for  its  own  captive
    power plant, but for that of another, it could not claim exemption  from
    payment of duty; entitlement of duty free import of fuel for its captive
    power plant lies with the owner of the captive power plant, and not  the
    consumer of electricity generated from that power plant.  Little  or  no
    attention was paid to the issue of limitation, which in our opinion,  is
    the primary question for consideration in this case. The  Tribunal  only
    made the following observations in this regard:

      “2. … He however, submitted that the  demand  of  duty  is  barred  by
      limitation as the show  cause  notice  was  issued  on  02.08.2001  by
      demanding the duty for the  period  January/February  2001;  that  the
      Department was aware that the appellants do not have power  plant  and
      as such furnace oil could not have been used by them  captively;  that
      this is evident from letter dated 17.07.2001…




      4… The appellants have also not brought  on  record  any  material  in
      support of their contention that the Department was aware of the  fact
      that the appellants did not have captive power plant. In view of  this
      the demand cannot be held to be hit by the time limit.”







      Hence, the appellant is before us in this appeal.




12. We have heard both  sides,  Mr.  R.P.  Bhatt,  learned  senior  counsel,
   appearing on behalf of the appellant, and Mr. Mukul Gupta, learned senior
   counsel appearing on behalf of the Revenue. We are not convinced  by  the
   reasoning of the Tribunal. The conclusion that mere non-payment of duties
   is equivalent to collusion or  willful  misstatement  or  suppression  of
   facts is, in our opinion, untenable. If that were to be true, we fail  to
   understand which form of non-payment would amount  to  ordinary  default?
   Construing mere non-payment as any of the three  categories  contemplated
   by the proviso would leave no situation for which, a limitation period of
   six months may apply. In our opinion, the main body of  the  Section,  in
   fact, contemplates ordinary default in payment of duties and leaves cases
   of collusion or willful misstatement or suppression of facts, a  smaller,
   specific and more serious niche, to  the  proviso.  Therefore,  something
   more must be shown to construe the acts of the appellant as fit  for  the
   applicability of the proviso.






13. This Court, in Pushpam Pharmaceuticals Company Vs. Collector of  Central
   Excise,  Bombay[1],  while  interpreting  the  proviso  of  an  analogous
   provision in Section 11A of The Central Excise Act, 1944, which  is  pari
   materia to the proviso to Section 28 discussed above, made the  following
   observations:



      “4. Section 11A empowers the Department to re-open proceedings if  the
      levy has been short-levied or not levied within six  months  from  the
      relevant date. But the proviso carves out an exception and permits the
      authority to exercise this power within five years from  the  relevant
      date in the circumstances mentioned in the proviso, one  of  it  being
      suppression of facts. The meaning of the word both  in  law  and  even
      otherwise is well known. In normal understanding it is  not  different
      that what is explained in various dictionaries unless  of  course  the
      context in which it has been used indicates otherwise.  A  perusal  of
      the proviso indicates that it has been used in company of such  strong
      words as fraud, collusion or wilful default. In fact it is the mildest
      expression used in the proviso. Yet the surroundings in which  it  has
      been used it has to be  construed  strictly.  It  does  not  mean  any
      omission. The act must be deliberate. In taxation, it  can  have  only
      one  meaning  that  the  correct   information   was   not   disclosed
      deliberately to escape from payment of duty. Where facts are known  to
      both the parties the omission by one to do what he might have done and
      not that he must have done, does not render it suppression.”




                                                         [Emphasis supplied]







14.  In  Sarabhai  M.  Chemicals   Vs. Commissioner   of   Central   Excise,
   Vadodara[2],  a three- judge bench of this Court, while referring to  the
   observations extracted above, echoed the following views:

      “23. Now coming to the question of limitation, at the outset, we  wish
      to clarify that there are two concepts which are required to  be  kept
      in  mind  for  the  purposes  of  deciding  this  case.  Reopening  of
      approvals/assessments is different from raising of demand in  relation
      to the extended period  of  limitation.  Under  section 11A(1) of  the
      Central  Excise  Act,  1944,  a  proper   officer   can   reopen   the
      approvals/assessments in cases of escapement of duty on account of non-
      levy, non-payment, short-levy, short-  payment  or  erroneous  refund,
      subject to it being done within one year from the  relevant  date.  On
      the other hand, the demand for duty in relation to extended period  is
      mentioned in the proviso to section 11A(1).  Under  that  proviso,  in
      cases where excise duty has not been levied or paid or has been short-
      levied or short-paid or erroneously  refunded  on  account  of  fraud,
      collusion or wilful mis-statement  or  suppression  of  facts,  or  in
      contravention of any provision of the Act or Rules with the intent  to
      evade payment of duty, demand can be made within five years  from  the
      relevant date. In the present case, we are concerned with the  proviso
      to section 11A(1).


      24. In the case of Cosmic Dye Chemical v. Collector of Central Excise,
      Bombay (1995) 6 SCC 117, this Court held that intention to evade  duty
      must be proved for invoking the proviso to section 11A(1) for extended
      period of limitation. It has been further held that  intent  to  evade
      duty is built into the  expression  "fraud  and  collusion"  but  mis-
      statement and suppression is qualified by the preceding word "wilful".
      Therefore, it is not correct to say that there can be  suppression  or
      misstatement of fact, which  is  not  wilful  and  yet  constitutes  a
      permissible ground for invoking the proviso to section 11A.


      25. In case of Pushpam Pharmaceuticals Company v.  C.C.E.  [1995  (78)
      ELT 401(SC)], this Court has held that the  extended  period  of  five
      years under the proviso to section 11A(1) is not applicable  just  for
      any omission on the part of the assessee, unless it  is  a  deliberate
      attempt to escape from payment of duty. Where facts are known to  both
      the parties, the omission by one to do what he might have done and not
      that he must have done does not constitute suppression of fact.”



15.  In  Anand  Nishikawa  Co.  Ltd.  Vs. Commissioner  of  Central  Excise,
   Meerut[3], while again referring to  the  observations  made  in  Pushpam
   Pharmaceuticals Company (supra), this Court clarified the requirements of
   the proviso to Section 11- A, as follows:-

      “26…This  Court  in  the  case  of Pushpam   Pharmaceuticals   Company
      v. Collector of Central Excise, Bombay (supra), while dealing with the
      meaning of  the  expression  "suppression  of  facts"  in  proviso  to
      Section 11A of  the  Act  held  that  the  term  must   be   construed
      strictly, it does not mean any omission and the act must be deliberate
      and willful to evade payment of duty. The Court, further, held :-


           ‘In taxation, it ("suppression of  facts")  can  have  only  one
           meaning  that the  correct   information   was   not   disclosed
           deliberately to escape payment of duty. Where facts are known to
           both the parties the omission by one to do what  he  might  have
           done and not  that  he  must  have  done,  does  not  render  it
           suppression.’




      27. Relying on the aforesaid observations of this Court  in  the  case
      of Pushpam  Pharmaceutical  Co.  v.   Collector   of   Central Excise,
      Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of  facts"
      can have only  one  meaning  that  the  correct  information  was  not
      disclosed deliberately to evade payment of duty. When facts were known
      to both the parties, the omission by one to do what he might have done
      and not that he must have done, would not render it suppression. It is
      settled law that mere failure to declare does not  amount  to  willful
      suppression. There must be some positive act  from  the  side  of  the
      assessee to find  willful  suppression.  Therefore,  in  view  of  our
      findings made herein above that there was no deliberate  intention  on
      the part of the appellant not to disclose the correct  information  or
      to evade payment of duty,  it  was  not  open  to  the  Central Excise
      Officer to proceed to recover duties in the manner  indicated  in  the
      proviso to Section 11A of the Act.”


16. In Collector of Central Excise Vs. H.M.M. Ltd.[4], this Court held  that
   mere non- disclosure  of  certain  items  assessable  to  duty  does  not
   tantamount to the mala fides elucidated in the proviso to  Section 11A(1)
   of the Central Excise Act, 1944.  It  enunciated  the  principle  in  the
   following way: -

      “The  mere  non-declaration   of   the   waste/by-product   in   their
      classification list cannot establish any wilful withholding  of  vital
      information for the purpose of evasion of excise duty due on the  said
      product. There could be, counsel contended,  bonafide  belief  on  the
      part of the assessee that the said waste or by-product did not attract
      excise duty  and  hence  it  may  not  have  been  included  in  their
      classification list. But that per se cannot go to prove that there was
      the intention to evade payment of duty or that the assessee was guilty
      of fraud, collusion, mis-conduct or suppression to attract the proviso
      to Section 11A(1) of the Act. There  is  considerable  force  in  this
      contention.




Therefore, if non- disclosure of certain items assessable to duty  does  not
invite the wrath of the proviso, we fail to understand how  the  non-payment
of duty on disclosed items, after  inquiry  from  the  concerned  department
meets, with that fate.



17. In fact,  the  Act  contemplates  a  positive  action  which  betrays  a
   negative intention of willful default.  The  same  was  held  by  Easland
   Combines, Coimbatore Vs. The Collector of Central  Excise,  Coimbatore[5]
   wherein this Court held:-
      “31.It is settled  law  that  for  invoking  the  extended  period  of
      limitation duty should not have been paid, short levied or short  paid
      or erroneously refunded because of  either  fraud,  collusion,  wilful
      misstatement, suppression of facts or contravention of  any  provision
      or rules. This Court has  held  that  these  ingredients  postulate  a
      positive act and, therefore, mere failure to pay duty and/or take  out
      a licence which  is  not  due  to  any  fraud,  collusion  or  willful
      misstatement or suppression of fact or contravention of any  provision
      is not sufficient to attract the extended period of limitation.”


                                                         [Emphasis supplied]



18. We are in complete agreement with the principle enunciated in the  above
   decisions, in light of the proviso to Section 11A of the  Central  Excise
   Act, 1944. However, before extending it to the Act,   we  would  like  to
   point out the niceties that separate the analogous provisions of the two,
   an issue which received the indulgence of this Court in Associated Cement
   Companies Ltd. Vs. Commissioner of Customs[6] in the following words:-

      “53…Our attention was drawn to the cases of CCE v. Chemphar Drugs  and
      Liniments (1989) 2 SCC 127, Cosmic Dye Chemical v. CCE  (1995)  6  SCC
      117, Padmini Products v. CCE (1989) 4 SCC 275, T.N. Housing  Board  v.
      CCE 1995 Supp (1) SCC 50  and CCE v. H. M.  M.  Ltd. (supra).  In  all
      these cases the Court was concerned  with  the  applicability  of  the
      proviso to Section 11-A of the Central Excise Act which, like  in  the
      case of the Customs Act, contemplated the increase in  the  period  of
      limitation for issuing a show-cause notice in the case of non-levy  or
      short-levy to five years from a normal period of six months...

      54. While interpreting the said provision in  each  of  the  aforesaid
      cases, it was observed by this Court that for proviso to Section  11-A
      to be invoked, the intention to evade payment of duty must  be  shown.
      This has been clearly brought out in Cosmic  Dye  Chemical  case where
      the  Tribunal  had  held  that  so  far  as  fraud,   suppression   or
      misstatement of  facts  was  concerned  the  question  of  intent  was
      immaterial. While disagreeing with the aforesaid  interpretation  this
      Court at p. 119 observed as follows: (SCC para 6)

           ‘6. Now so far as fraud  and  collusion  are  concerned,  it  is
           evident that the requisite intent, i.e., intent to evade duty is
           built  into  these  very  words.  So  far  as  misstatement   or
           suppression of facts are concerned, they are  clearly  qualified
           by the  word  ‘wilful’  preceding  the  words  ‘misstatement  or
           suppression of facts’ which means with intent to evade duty. The
           next set of words ‘contravention of any  of  the  provisions  of
           this Act or  Rules’  are  again  qualified  by  the  immediately
           following words ‘with intent to evade payment of duty’.  It  is,
           therefore, not correct to say that there can be a suppression or
           misstatement of fact, which is not wilful and yet constitutes  a
           permissible ground for the purpose of the proviso to Section 11-
           A. Misstatement or suppression of fact must be wilful.’


      The aforesaid observations show that the words “with intent  to  evade
      payment of duty” were of utmost relevance while construing the earlier
      expression  regarding  the  misstatement  or  suppression   of   facts
      contained in the proviso. Reading the proviso as  a  whole  the  Court
      held that intent to evade duty  was  essentially  before  the  proviso
      could be invoked.

      55. Though it was sought to  be  contended  that  Section  28  of  the
      Customs Act is in pari materia with Section 11-A of the Excise Act, we
      find there is one material difference  in  the  language  of  the  two
      provisions and that is the words “with  intent  to  evade  payment  of
      duty” occurring in proviso to Section 11-A of the Excise Act which are
      missing in Section 28(1)  of  the  Customs  Act  and  the  proviso  in
      particular…

      56. The proviso to Section 28 can inter alia be invoked when any  duty
      has not been levied or has been short-levied by reason of collusion or
      any wilful misstatement or suppression of facts by the importer or the
      exporter,  his  agent  or  employee.  Even  if  both  the  expressions
      “misstatement” and “suppression of facts” are to be qualified  by  the
      word “wilful”, as was  done  in  the Cosmic  Dye  Chemical  case while
      construing the proviso to Section 11-A, the making of  such  a  wilful
      misstatement or suppression of facts would attract the  provisions  of
      Section 28 of the Customs Act. In each of these appeals it  will  have
      to be seen as a fact whether there has been a non-levy  or  short-levy
      and whether that has  been  by  reason  of  collusion  or  any  wilful
      misstatement or suppression of facts by the importer or his  agent  or
      employee.”

                                                         [Emphasis supplied]



19. Thus, Section 28 of the Act clearly contemplates  two  situations,  viz.
   inadvertent non-payment and deliberate default. 
The former  is  canvassed
   in the main body of Section 28 of the Act and is met  with  a  limitation
   period of six months, whereas the latter, finds abode in the  proviso  to
   the section and  faces  a  limitation  period  of  five  years.  
For  the
   operation of the proviso, the intention  to  deliberately  default  is  a
   mandatory prerequisite.



20.   This  Court  in  Aban  Loyd  Chiles  Offshore  Limited  and  Ors.  Vs.
   Commissioner of Customs, Maharashtra[7] observed:-

      “The proviso to Section 28(1)can be invoked where the payment of  duty
      has escaped by reason of collusion  or  any  willful  misstatement  or
      suppression of facts. So far as “misstatement or suppression of facts”
      are concerned, they are qualified by  the  word  "willful".  The  word
      "willful" preceding the words "misstatement or suppression  of  facts"
      clearly spells out that there has to be an intention on  the  part  of
      the assessee to evade the duty.”






21. The Revenue contended that of the three categories, the conduct  of  the
   appellant falls under the case of “willful misstatement” and  pointed  to
   the use of the word “misutilizing” in the following  statement  found  in
   the order of the Commissioner of Customs, Raipur in  furtherance  of  its
   claim:

      “The  noticee  procured  742.51  kl  of  furnace  oil  valued  at  Rs.
      54,57,357/- without  payment  of  customs  duty  by  misutilizing  the
      facility available to  them  under  Notification  No.  53/97-Cus.  dt.
      3.6.1997”






22.  We  are  not  persuaded  to  agree  that  this   observation   by   the
   Commissioner, unfounded on any material fact or  evidence,  points  to  a
   finding of collusion or suppression or misstatement. 
The use of the  word
   “willful” introduces a mental element and hence,  requires  looking  into
   the mind of the appellant by gauging its actions, which is an  indication
   of one’s state of mind. 
 Black’s Law Dictionary, Sixth Edition (pp  1599)
   defines “willful” in the following manner: -

      “Willful. Proceeding from a conscious motion of the  will;  voluntary;
      knowingly; deliberate. Intending the result which  actually  comes  to
      pass…




       An act or omission is  “willfully”  done,  if  done  voluntarily  and
      intentionally and with the specific intent to  do  something  the  law
      forbids, or with the specific intent to fail to do something  the  law
      requires to be done…”




23. In the present case, from the evidence adduced  by  the  appellant,  one
   will draw an inference of bona fide conduct in favour of  the  appellant.
   The appellant laboured under the very doubt which forms the basis of  the
   issue before us and  hence,  decided  to  address  it  to  the  concerned
   authority, the Development Commissioner, thus, in a  sense  offering  its
   activities to assessment. The Development Commissioner answered in favour
   of the appellant and in its reply, even quoted a letter by  the  Ministry
   of Commerce in favour of an exemption the appellant  was  seeking,  which
   anybody  would  have  found  satisfactory.   Only   on   receiving   this
   satisfactory reply did the appellant decide to claim exemption.  Even  if
   one were to accept the argument that  the  Development  Commissioner  was
   perhaps not the most suitable repository of the answers  to  the  queries
   that the appellant laboured under, it does not take away  from  the  bona
   fide conduct of the appellant.  It  still  reflects  the  fact  that  the
   appellant made efforts in pursuit of adherence to the law rather than its
   breach.

24. Further, we are not convinced with the finding  of  the  Tribunal  which
   placed the onus of providing evidence in support of bona fide conduct, by
   observing that “the appellants had not brought  anything  on  record”  to
   prove their claim of bona  fide  conduct,  on  the  appellant.  It  is  a
   cardinal postulate of law that the burden of proving  any  form  of  mala
   fide lies on the shoulders of the one alleging it. This Court observed in
   Union of India Vs. Ashok Kumar & Ors.[8] that “it  cannot  be  overlooked
   that burden of establishing mala fides is very heavy on  the  person  who
   alleges it. The allegations of mala fides are often more easily made than
   proved, and the very seriousness of such allegations demand  proof  of  a
   high order of credibility.”



25. Moreover, this Court, through a catena of decisions, has held  that  the
   proviso to Section 28 of the Act finds application only when specific and
   explicit averments challenging the fides of the conduct of  the  assessee
   are made in the show cause notice, a  requirement  that  the  show  cause
   notice in the present case fails to meet. In Aban  Loyd  Chiles  Offshore
   Limited and Ors. (supra), this Court made the following observations:



      “21. This Court while interpreting Section 11-A of the Central  Excise
      Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed
      that in order to attract the proviso  to  Section 11-A(1) it  must  be
      shown that the excise duty escaped by reason of  fraud,  collusion  or
      willful misstatement of suppression of fact with intent to  evade  the
      payment of duty. It has been observed:







           ‘...Therefore, in order to attract the  proviso  to  Section 11-
           A(1) it must be alleged in the show-cause notice that  the  duty
           of excise had not been  levied  or  paid  by  reason  of  fraud,
           collusion or willful misstatement or suppression of fact on  the
           part of the assessee or by reason of contravention of any of the
           provisions of the Act or  of  the  Rules  made  thereunder  with
           intent to evade payment of duties by such person or  his  agent.
           There is no such averment to be found in the show cause  notice.
           There  is  no  averment  that  the  duty  of  excise  had   been
           intentionally  evaded  or  that  fraud  or  collusion  had  been
           practiced or that the assessee was guilty of wilful misstatement
           or suppression of fact. In the absence of any such averments  in
           the show-cause notice it is  difficult  to  understand  how  the
           Revenue could sustain the notice under the proviso to Section 11-
           A(1) of the Act.’





      It was held that the show cause notice must put the assessee to notice
      which of the various omissions or commissions stated in the proviso is
      committed to extend the period from six months  to  five  years.  That
      unless the assessee is put  to  notice  the  assessee  would  have  no
      opportunity to meet the case of the Department. 
It was held:




           ...There is  considerable  force  in  this  contention.  If  the
           department proposes to invoke the proviso  to  Section 11-A(1) ,
           the show-cause notice must put the assessee to notice  which  of
           the various commissions or omissions stated in  the  proviso  is
           committed to extend the period  from  six  months  to  5  years.
           Unless the assessee is put to notice, the assessee would have no
           opportunity to meet the case of  the  department.  The  defaults
           enumerated in the proviso to the said sub-section are more  than
           one and if the Excise Department places reliance on the  proviso
           it must be specifically stated in the show-cause notice which is
           the allegation against the  assessee  falling  within  the  four
           corners of the said proviso....”

                                                         (Emphasis supplied)





26. Hence, on account of the fact that the burden of proof of  proving  mala
   fide conduct under the proviso to Section 28 of the  Act  lies  with  the
   Revenue; 
that in furtherance of the same, no specific  averments  find  a
   mention in the show cause notice which is  a  mandatory  requirement  for
   commencement of action under the said proviso;
 and that nothing on record
   displays a willful default on the part of the appellant, we hold that the
   extended period of limitation under  the  said  provision  could  not  be
   invoked against the appellant.





27. In view of the afore-going discussion, the appeal  is  allowed  and  the
   decisions of the authorities below are set aside, leaving the parties  to
   bear their own costs.




   |                            |……..………………………………….                  |
|                            |             (D.K. JAIN, J.)        |
|                            |                                    |
|                            |……..………………………………….                  |
|                            |          (MADAN B. LOKUR, J.)      |
|NEW DELHI,                  |                                    |
|JANUARY 22, 2013.           |                                    |


RS



























-----------------------
[1]    1995 Supp(3) SCC 462
[2]    (2005) 2 SCC 168
[3]    (2005) 7 SCC 749
[4]    1995 Supp(3)SCC 322
[5]    (2003) 3 SCC 410
[6]    (2001) 4 SCC 593, at page 619
[7]    (2006) 6 SCC 482
[8]    (2005) 8 SCC  760


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