Water Resource Development Authority had no intention to evade payment of Excise duty in any manner: Bombay HC

Appel before the Bombay High Court under Section 35G of the Central Excise Act, 1944 raising the subsequent question before the court: 

Whether the Customs, Excise and Service Tax Appellate Tribunal was justified in law and in facts to hold that the demand under the show cause notice was not barred by law of limitation? 

Facts  

• Appellant is the manufacturer of mechanical gates, parts and hoists that are required to be installed on dam constructed by the Government of Maharashtra.  
• The Irrigation Department take on the construction work of dams and as a part of that, the gates and hoists manufactured were supplied to the said Department. In view of the exemption Notification No.74/1993 dated 28.2.1993, these goods were exempt from payment of excise duty. 
• On 1.4.1996 Maharashtra Act No. XV of 1996 was enacted and the Vidarbha Irrigation Development Corporation was formed under that Act.  
• A show cause notice was issued on 8.5.2001 regarding to the goods cleared for the period commencing from 1997- 1998 to 2000-2001 by the Office of the Directorate General of Central Excise Intelligence calling upon the appellant to show cause why central excise duty of Rs.29,17,879/- should not be demanded under Section 11A (1) of the said Act. Interest under Section 11AB as well as penalty under Section 11AC of the said Act was also sought to be imposed. 
• On 15.1.2002 the appellant replied to the show cause notice by stating that being a State Government Department and there was no transaction entered concerning payment of excise duty. There was no intention to evade payment of central excise duty. 
• An order dated 25.3.2003 was passed by the Commissioner for the confirmation of show cause notice and the amounts mentioned in the said notice were held to be recoverable from the appellant. 
• Being aggrieved by the order dated 25.3.2003, the appellant filed appeal before the Customs, Excise and Service Tax Appellate Tribunal. After feeling dissatisfied by the judgement of tribunal the appellant is before this court.  

Findings  

The Hon’ble Supreme Court in M/s. Chemphar Drugs and Liniments, Hyderabad case has held that besides mere inaction or failure on the part of the manufacturer or producer as regards deliberate withholding of information, there ought to be an intention to evade payment of duty. If the explanation furnished by the manufacturer or producer is found to be plausible there would be no justification in concluding that there was any intention to evade payment of duty. 

In Cosmic Dye Chemical case large bench held that mis-statement or suppression of facts must be willful on the part of the manufacturer or producer. Mere suppression or mis-statement of facts if not willful would not be a sufficient ground. 

Judgement  

The Bombay HC answered the subsequent question raised before the law by holding that the Tribunal was not justified in law and in facts in holding that the demand under the show cause notice was not barred by limitation. Consequently, the judgment dated 31.1.2011 is set aside and Appeal No.E/1670/2003 stands allowed. Needless to state that it is open for the appellant to seek refund under Section 11B of the said Act if so advised. If such proceedings are initiated the same shall be decided on their own merit and in accordance with law.