CX - there is no provision, which prohibits issuing more than one SCN - S 11A also does not stipulate any such thing - any number of SCN can be issued - first SCN was issued proposing confiscation and second was to demand duty by invoking extended period - penalty & interest correctly imposed: CESTAT
By TIOL News Service
MUMBAI, SEPT 09, 2013: THE Appellants are engaged in the manufacture of off-set printing machines. Based on an intelligence officers of DGCEI visited the official and residential premises of the appellants on 24.4.2002 and recovered various incriminating documents, computer etc. Investigations were further carried out in different parts of the country, covering about 70 customers as the off-set printing machines were being cleared on parallel set of invoices as also by not reflecting the correct value in the documents. Investigations were also extended to two other units viz. Shri Ganesh Engineering &Trimurti Enterprises, who were using the same brand "S.O.G." and were found to be connected to the appellant.
During the investigation, at the premises of three customers viz. M/s. Dhanalaxmi Off Set Printers, M/s. Balaji Off Set & Printers and M/s. Kohinoor Printers all situated in Kolhapur, local divisional Central Excise Officers seized the three offset printing machines purchased by them from the appellants as they could not produce the duty paying and other connected documents.
A show cause notice was issued on 14/01/2003 to the appellant (for penalty) as also earlier mentioned owners of the said machines for confiscation and penalties within a period of six months as per the law.
Further the said SCN in paragraph 15 also mentioned that Central Excise duty in respect of the detained goods is not being demanded in this show-cause notice, as separate show cause notice for the said duty evasion is being investigated and the same shall include the said duty involved on these three detained machines too.
The investigation culminated by issuance of SCN on 04/01/2005 to the appellant and the two other units Shri Ganesh Engineering &Trimurti Enterprises demanding CE dutyof Rs. 94,39,973/- and penalties/interest etc.
The CCE, Mumbai-V held that the three units are independent & duty in respect of clearance by other two units cannot be demanded from first appellant. In fine, he confirmed a duty amount of Rs. 50,01,900/-, imposed equivalent penalty and interest.
Before the CESTAT, the appellant submitted that they are not disputing the order on merits or quantification etc. but on the ground that the first SCN was issued on 14/01/2003 to the appellant and based upon the same intelligence and investigation the second SCN is issued on 04/01/2005 by invoking proviso to S. 11A and which is not permitted in law. Reliance is placed inter alia on the decisions in Nizam Sugar Factory vs. CCE A.P. - (2006-TIOL-56-SC-CX), ECE Industries Limited Vs. CCE, New Delhi - (2003-TIOL-89-SC-CX), Bharat Bijilee Ltd Vs. CCE &Cus, Belapur - (2008-TIOL-2834-CESTAT-MUM), CCE Vs. Chemphar Drugs & Liniments - (2002-TIOL-266-SC-CX), Larsen& Toubro Ltd. Vs. CCE, Pune - (2007-TIOL-75-SC-CX).
The Revenue representative submitted that the first SCN was for confiscation of goods seized at the premises of the customers and the second one relates to demand of duty allegedly evaded by the appellant; that the details had been collated after sustained investigation which went on till August 2004 and hence the demand was issued in January, 2005. Inasmuch as it could not be said that the department had full knowledge of the facts. Reliance is placed on the decision of the Gujarat High Court in the case of Commissioner of Central Excise, Surat vs. Neminath Fabrics Pvt. Ltd. - (2011-TIOL-10-HC-AHM-CX), holding that knowledge of department cannot make the suppression which stands established to disappear.
The Bench after considering the rival submissions extracted the content of paragraph 15 of the SCN dated 14/01/2003 and observed that the said SCN was issued for confiscation of the three machines seized from the three notices in Kolhapur and the second SCN demanded duty relating to clearances made during 1999-2000, 2000-01 and 2001-02.
After extracting the provisions of section 11A of the CEA, 1944, the Bench observed -
"10. First of all we note that there is no provision under the Central Excise Act, which prohibits issuing more than one show cause notice to an appellant. Section 11A also does not stipulate any such things. In our view any number of show cause notice can be issued under the said Section to an assessee. The extended time limit can be invoked only in situation where the short-levy or erroneous refund is by reasons of fraud, collusion or willful misstatement or suppression of facts or contravention of any provisions of this Act or of the Rules made thereunder with intend to evade payment of duty. What is required to be seen is whether the conditions stipulated under the said proviso are being met in a case. If so, the extended period of limitation can be invoked. Here again the proviso does not stipulate issuance of only one show cause notice, there can be any number of show cause notice's invoking the extended period. In the present case there is no doubt or it is not even disputed that the appellants were maintaining parallel set of invoices and undervaluing the goods. These acts are undoubtedly fraudulent act with intent to evade payment of duty. Thus the condition of proviso to Section 11A are undoubtedly satisfied. We also note that only one show cause notice has been issued invoking the said proviso i.e. the second show cause notice. First show cause notice did not demand any duty whatsoever and was limited to the confiscation of three machines seized in Kolhapur. We, therefore, hold that the two show cause notices are totally independent. The investigation, in the show cause notice demanding duty covers a period of three years and a large number of purchasers of the machines. The first show cause notice is limited to three purchasers and three machines that also for confiscation. The first show cause notice itself clearly indicated that the subsequent show cause notice will be issued demanding duty. We also note that the law provides the period of six months for issuance of show cause notice in case of seizure goods and five years period in case of duty short-paid due to fraud etc."
Further, after distinguishing the various case laws cited by the appellant, the Bench observed -
"12. There is no dispute that the appellants were maintaining parallel set of invoices and also mis-declaring value of the goods involved. It was only based upon the intelligence and subsequent investigation extending over a period of three years covering more than 60-70 customers and analysis of various incriminating records seized during the search operation that the show cause could be issued. The present case is undoubtedly a case of fraud with willful intention to evade duty. The facts and circumstances of the present case cannot be compared with the facts of the cases quoted by the appellants. Under the circumstances we reject the contention of the appellant and held that both the show cause notice have been correctly issued and the invocation of extended period is correct in the second show cause notice. Having come to this conclusion the second contention is automatically dismissed.
13. Duty, penalty and interest on first appellant is correctly imposed. As far as penalty on the second appellant is concerned, we find that all the evasion was being done under his active directions and is therefore liable to penalty."
In fine, the appeals were rejected.
In passing: Now, let's come to the department appeal, if at all, it has been filed.
(See 2013-TIOL-1330-CESTAT-MUM)
