CENTRE FOR DEVELOPMENT OF ADVANCED COMPUTING, PUNEversusCOMMISSIONER OF CENTRAL EXCISE, PUNE
- Citation
- 2002 INSC 102
- Decided
- 27 February 2002
- Disposal
- Appeal(s) allowed
- Bench
- B N KIRPAL
Holding
The extended limitation period under Section 11‑A cannot be invoked where the assessee, though a research organization, manufactured goods not produced during experiments and there is no evidence of wilful evasion.
Summary
The Centre for Development of Advanced Computing (C‑DAC), a research and development unit, imported certain goods without paying customs duty based on its status as a research organization. It later manufactured and supplied equipment to customers, and the Central Excise Department sought to levy excise duty on those goods, invoking the five‑year extended limitation period under Section 11‑A of the Central Excises Act. The principal issue was whether the supplied equipment fell within the expression “goods produced during the carrying out of experiments or research” and whether the extended limitation could be applied. The Court held that the equipment, although produced by a research organization, was not a product of research but a manufactured item made to order, and therefore Section 11‑A did not apply to bar the levy. However, because the assessee had a bona‑fide belief, based on its recognized R&D status and customs duty exemption, that the goods were exempt from excise, there was no evidence of wilful suppression, and consequently the Department could not rely on the extended limitation period. The Court allowed the appeal, setting aside the demand for excise duty under the extended limitation.
Issues considered
- Whether goods manufactured by a research organization are covered by the expression “goods produced during the carrying out of experiments or research” in the first proviso of Section 11‑A, Central Excises Act, 1944.
- Whether the Central Excise Department can invoke the five‑year extended limitation period under Section 11‑A to recover duty where the assessee claims a bona‑fide belief of exemption.
Subjects
Judgment
CENTRE FOR DEVELOPMENT OF ADVANCED A
COMPUTING, PUNE
v.
COMMISSIONER OF CENTRAL EXCISE, PUNE
FEBRUARY 27, 2002
•I B
[B.N. KIRPAL, SHJVARAJ V. PATIL AND
BISHESHWAR PRASAD SINGH, JJ.]
Central Excises Act, 1944
c
S.11-A, first proviso-levy of duty within extended period-Research
organization-Import of goods-Getting exemption from payment of customs
duty-Goods emerged during research and experiments-Bona fide believed
by assessee as exempt from duty-Revenue imposing duty under the provisions
of s.11-A-Held, it can not be said that goods supplied by assessee come D
within the expression "that the goods are produced during the ·carrying out
of experiments or research"-However, since the assessee was treated as a
research and development unit and was entitled to import goods without
payment of customs duty, it cannot, be-ruled out that assessee might have
believed that the goods manufactured and supplied by it were not liable to
excise duty-There was no tangible basis for Revenue tq conclude that there E
was wilful suppression for evasion of duty by assessee-Thus, though duty
was leviable on the said goods, Revenue could not invoke the extended period
of limitation of five years u/s 11-A.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2749 of p
2001.
From the Judgment and Order dated 18.12.2000 of the Customs Excise
and Gold (Control) Appellate Tribunal, New Delhi in A. No. E/1790/96-B in
F.O. No. 1965 of 2000-B.
G
V. Lakshmikumaran, M.P. Devanath and V. Balachandran for the
Appellant.
N.K. Bajpai, Jaideep Gupta, Ms. Nisha Bagchi and B. Krishna Prasad
. for the Respondent.
103 H,
104 SUPREME COURT REPORTS [2002] 2 S.C.R.
A The following Order of the Court was delivered :
In the instant case, duty is sought to be levied by the respondent by
taking recourse to the extended period of limitation under Section 11 A of the
Central Excises Act.
B The plea of the appellant is that it was established as a research
organisation and had even been importing goods from abroad and getting
exemption from payment of customs duty on the basis that it was a research
organisation. In reply to the show cause notice in paragraph 2.3 it has been
specifically stated that the appellant was under a bona fide belief that the
C goods emerged during the research and experiments were fully exempt from
payment of duty and therefore, no further compliance with the provisions of
Excise Law was called for. Mr. Lakshmikumaran submits that in view of this
explanation, the provisions of Section 11 A proviso were not applicable and
he further submits that in actual fact the products supplied by the appellant
emerged out of their research activity and no excise duty was payable.
D
We are unable to agree with the learned counsel that what was supplied
by the appellant would come within the meaning of the expression "that the
goods are produced during the carrying out of experiments or research". It
is quite obvious that the appellant had a technical expertise to manufacture
E sophisticated equipment on the orders placed on it even though the appellant
is a Research & Development Organisation. As a result of its research it had
acquired sufficient acumen to be able to manufacture the equipment tailor-
made for the use of the purchaser. The equipment so manufactured in supply
cannot be regarded as being a product of research.
F We, however, agree with the learned counsel for the appellant that on
the facts of the present case, the extended period of limitation would not
apply. Our attention has been drawn to the fact that the main object as per
the Memorandum of ~s.~ociat\on ~hereby the appellant was established, was
to carry out research etc. Furthermore, by letter dated 12th July, 1988, the
G Department of Electronics had recognised the appellant as a research and
development unit. A similar recommendation was also made on 7th May,
1991 by the Ministry of Science and Technology, Government of India. Such.
recommendation entitled it to make imports from abroad without payment of
customs duty. Under the circumstance, there is no reason to conclude that the
appellant would not have believed that the goods manufactured by it and
H supplied were not liable for payment of excise duty. There does not appear
CENTRAL FOR DEVEL OF ADVANCED COMP. v. COMMR. OF CENTRAL EXCISE J05
to be any tangible basis for the Department to come to the conclusion that A
there was wilful suppression for evasion of duty by the appellant. This being
so, while duty was leviable on the goods manufactured by the appellant the
Department, however, could not invoke the extended period of limitation of
five year under Section I IA of the Act.
For. the aforesaid reasons, this appeal is allowed B
R.P. Appeal allowed ..
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