By TIOL News Service

MUMBAI, JULY 22, 2014: THE appellant is a manufacturer of bakery products such as biscuits and cakes and also manufactures ice-creams. The appellant was availing the benefit of small-scale exemption. However, on crossing the exemption limit, the appellant did not discharge excise duty liability. The appellant also did not take any registration nor did they file any statutory returns or maintain records.

Therefore, a SCN dt.06/11/2001 was issued to the appellant demanding excise duty of Rs.1,26,636/- for the period 1997-98 and 1999-2000. The Addl. Commissioner adjudicated the SCN by confirming a duty demand of Rs.65,793/- along with interest and equivalent penalty. In appeal, the Commissioner(A) extended cum-duty benefits and thus the duty demand was reduced to Rs.63,267/- along with interest and equal penalty.

The appellant is before the CESTAT against this order.

It is submitted that they were under the bona fide belief that the goods manufactured by them were not subject to excise duty; that the department was aware of the activities of the appellant inasmuch as they had exchanged correspondences with the department on 23/06/1999 indicating the details of clearances for the years 1996-1998 and on 16/09/2000 for the period 01/04/1999 to 31/03/2000. And, therefore, the SCN issued on 06/11/2001 has to be considered as time barred in law and the duty demand is to be set aside.

The revenue representative submitted that even after repeated reminders by the department to file the statutory returns they failed to file details so that the department could issue the show cause notice. And in the absence of submission of details, it has to be held that the appellant had suppressed the facts with intent to evade duty and, therefore, invocation of extended period is sustainable in law.

The Bench observed -

++ It is settled law that bona fide belief is not a blind belief and bona fide belief has to be formed after consulting experts in the field or after seeking clarification from the department. In the present case, the department has clearly directed the appellant that the appellant's products are excisable and excise duty liability requires to be discharged. In spite of this direction, the appellant chose to dispute this and contended that they are not liable to pay duty as biscuits and other bakery products cannot be treated as excisable products. Thus, despite receipt of the directions from the department, the appellant failed to discharge excise duty liability. Further, the appellant did not submit details sought by the department and continued to drag the issue by prolonged correspondence. In view of the above, suppression of information on the part of the appellant is clearly established.

In addition, the CESTAT relied on the apex Court decision in the case of Commissioner of Central Excise vs. Mehta & Co. 2011-TIOL-17-SC-CX where it is held that the relevant date for computation of time limit is the date on which date the department acquired knowledge regarding the activities undertaken by the appellant.

Holding that in the present case, the SCN is issued well within the time period of five years, the demand as well as the interest and penalty confirmed by the lower appellate authority were held to be sustainable.

The appeal was dismissed.