Holding

The demand for additional excise duty and penalty is barred by limitation as there was no suppression, mis‑declaration or fraud and the extended limitation period does not apply.

Summary

The appellant, Commissioner of Central Excise, Chandigarh, issued a show‑cause notice in 2000 alleging that Pepsi Foods Ltd had evaded excise duty on sales tax collected. Pepsi had earlier claimed a sales‑tax exemption which was rejected, paid excise duty on a reduced price, and later, while the exemption claim was pending before the Punjab and Haryana High Court, re‑assessed the clearance by including the sales‑tax amount and paid a differential duty of Rs 67.88 lakh in November 1996. Four years later the Commissioner demanded an additional duty of Rs 95 lakh and imposed a penalty, contending that the demand was permissible under the proviso to Section 11A of the Central Excise Act. The Tribunal held that the demand was barred by limitation, and the Commissioner appealed. The Supreme Court held that the extended limitation period could not be invoked because no information about the deposit or exemption claim had been furnished, and there was no evidence of suppression, mis‑declaration or fraud; consequently the demand was time‑barred. The appeal was allowed, setting aside the demand and penalty.

Issues considered

Whether the demand for additional excise duty and penalty is barred by the limitation period under Section 11A of the Central Excise Act, 1944
Whether the extended period of limitation can be invoked when no information regarding deposit or exemption claim was provided
Whether the assessee’s conduct amounts to suppression, mis‑declaration or fraud justifying a demand beyond the normal limitation period

Legislation cited

Central Excise Act, 1944s. 11A
Central Excise Act, 1994s. 4(4)(d)(ii)

Subjects

central excisesales tax exemptionlimitation periodSection 11Ashow‑cause noticedifferential dutypenaltytime‑barred demand

Judgment

-J
COMMISSIONER OF CENTRAL EXCISE,CHANDIGARH A
v.
MIS. PEPSI FOODS LTD.

MAY 29, 2007

B
[DR. ARIJIT PASAYAT AND LOKESHWAR SINGH PANTA, JJ.]

Central Excises Act, 1944 -s. I I-A-Dispute as to assessee 's claim for
sales tax exemption pending before High Court-Assessee re-assessed the
clearance by including sales tax element originally excluded from price and c
paid differential duty of Rs. 67 lakhs-lssuance of show cause notice after
four years on allegation that assessee evaded duty of Rs. 95 /akhs in regard
to Rs. 2 Crores collected towards sales tax-Extended period of limitation-
Invocation of-Held: Invocable as no information was given regarding deposit
and about the claim of exemption and calculation.
D
Respondent-assessee claimed sales tax exemption which was rejected.
Sales Tax Authorities and also the Tribunal rejected the same. Thereafter,
excise duty was assessed and paid on the value worked out after deducting
the sales tax payable from the price during July 1995 to March 1996. While
the dispute with the Authorities was pending before the High Court, assessee
E
re-assessed the clearance by including the sales tax element originally
excluded from the price and paid the differential duty of Rs. 67 lakhs in
November 1996. Show cause notice was issued after four years alleging that
assessee had evaded duty of Rs 95 lakhs in regard to Rs 2 crores collected
towards sales tax and demand duty was made; and was confirmed. Demand for
-, differeential ~uty was made after adjusting the payment inade and also penalty F
was imposed. Respondent challenged the order. Tribunal held that the demand
was time barred. Hence the present appeal.

Appellant contended that the exemption was claimed under the relevant
sales tax laws but there was collection of sales tax which was admitted by the
accountant on 26.10.1999 and also by the assessee; and that the assessee G
accepted that there was no intimation given about the sales tax exemption or
the deposit msde to the Ranve Officer or any other Authority.

Partly allowing the appeal, the Court
821 H
822 SUPREME COURT REPORTS [2007] 7 S.C.R.

A HELD: 1.1. The Commissioner found that there was no evidence ofany
intimation about sales tax exemption produced by the assessee. It was only
indicated in the reply to the show-cause notice that the matter was pending.
!Para 411824-AI

1.2. Assessee submitted that the sales tax authorities denied the
B exemption and the matter was pending before the High Court. T~e deposit
was made as there was a dispute. To a query made as to why the deposit was
made even there was nothing payable as claimed, the reply was that it was
paid due to pressure. There was no averment made at any stage taking such
a plea. tpara 511824-E, Fl
c 1.3. The extended period oflimitation is applicable as no information
c. ~Jr.~.s given regarding deposit and about the alleged claim of exemption and the
calculatiq_n. IPara 61 (824-GI

t4. Tribunal is to decide whether the benefit under section 4(4)(d)(ii)
D of the Central Excise Act, 1994 is available to be granted. It would take note
of the decision if any rendered if any rendered in writ petition pending before
the High Court. !Para 7] (824-G; 825-Al

CIVIL APPELlA TE JURlSDrCTION : Civil Appeal No. 5118 of2002.

E From the Judgment and Order No. 403/2001-A dated 27. 1 l.2001 of The
Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal
No. E/94812001-A.

Nagendra Rai, Sr. Adv., K.K. Senthilvaran, K. Subba Rao and B.K.
Prasad for the Appellant.
F
M.P. Devnath and V. Balachandrim 'for the Respondent.

The Judgment of the Court was delivered by

DR. ARIJIT PASAYAT, J. I. Challenge in this appeal is to the order
G passed by the Customs Excise and Gold (Control) Appellate Tribunal, West
Block, New Delhi (i11 short 'CEGA T') allowing the appeal of the respondent
(hereinafter referred to as the 'assessee'). By the impugned order, the CEGAT
also held that the removal of goods and payment of duty took place between (
July 1995 to March 1996. The assessee had paid differential duty as worked
out by them also in November 1996. In these circumstances, there is no
H
COMMNR. OF CENTRAL EXCISE.CHANDIGARH v. PEPSI FOODS LTD. [PASAYAT, J.) 823

factual basis to the allegation that the assessee suppressed any material facts. A
Show-cause notice dated 1.6.2000 was issued almost four years after the
payment of the differential duty by the assessee, well beyond the nonnal
period allowed for duty demands under Section 11 A of the Central Excise Act,
1944 (in short 'the Act'). Demand of duty for longer period upto 5 years is
pennissible only if the short levy of duty is on account of suppression, mis-
declaration of facts, fraud etc. as provided in the proviso to Section 11 A of B
the Act. These elements constituting contumacious conduct by the assessee
are entirely lacking in the present case. Therefore, the appeal was allowed
on the ground of time bar without going into the merits of the case. It was
held that assessee was entitled to return of amount paid by them over and
above the differential duty of Rs.67,88,027 /- paid on 28.11.1996 C
2. Background facts in a nutshell are as follows:-

Assessee claimed certain deductions from the price towards sales tax
as their claim for exemption from the sales tax was turn down by the sales
tax authorities including the Tribunal in 1995. Duty was accordingly assessed D
and paid on the value worked out after deducting the sales tax payable from
the price. While the dispute with sales tax authorities was pending before the
Punjab and Haryana High Court assessee re-assessed the clearance by
including the sales tax element originally excluded from the price. Assessee
paid the differential duty of Rs.67 ,88,027 /- on 28.11.1996. On l.6.2000
Commissioner of Central Excise issued show cause notice alleging that assessee E
had evaded duty of Rs.95,03,238/- in regard to Rs.2,37,58,095/- collected
towards sales tax. The demand was confinned by the order in original passed
by the Commissioner of Central Excise, Chandigarh II. A demand for differential
duty of Rs.27, 15,211/- was made after adjusting the payment made. Penalty
of Rs. I 0 Iakhs was also :mposed. Said order was challenged before the F
CEGA T who held that the demand was barred by time as the period of
assessment was between July 1995 to March 1996 and payment of differential
duty was made on 28.11.1996 of Rs.67,88,027/-.

3. In support of the appeal, learned counsel for the appellant submitted
that the exemption was claimed under the relevant sales tax laws but there was G
collection of sales tax as was admitted by the accountant on 26.10.1999. The
assessee also admitted about the collection on 10.11.1999. The amount
collected was Rs.2,37,58,095/-. It has been fairly accepted by the assessee
that there was no intimation given about the sales tax exemption or the
deposit made to the range officer or any other authority.
H
824 SUPREME CO!JRT REPORTS (2007) 7 S.C.R.

A 4. It has been categorically found by the Commissioner that there was
no evidence of any intimation produced by the assessee. It was only indicated
in the reply to the show-cause notice that the matter was pending. The
Commissioner recorded the following finding:

"3.6 In their reply dated 8.2.2001 to the show cause notice, the Noticee
B accepted that the amount collected by them towards sales tax and not
deposited with the sales tax department would form part of the price
of soft drink concentrate. They have further contended that in such
an event the duty payable has to be deducted to arrive at the assessable .· j
value in terms of Section 4(4)(dXii) i.e. the total amount of duty
c payable has to be deducted from cum-duty price to arrive at the
assessable value in order to calculate the total duty payable. In other
words, the Noticee has calculated Excise duty by considering the total
amount of sales tax collected as cum-duty price and after taking into
consideration the provisions of Section 4(4XdXii) calculated the amount
of duty payable and subsequently deposited the Central Excise duty
D amounting to Rs.67,88,027/-. The Noticee has relied upon the Hon'ble
Tribunal's judgment in the case of Sri Chakra Tyres ltd v. Collector
a/Central Excise, Madras (1999) 108 ELT 361 (Tribunal).

The quoted judgment is not relevant in this case as the. Noticee
has not collected the disputed amount as wholesale price of the
E goods, but has collected the same as amount of sales tax payable. In
case sales tax had been paid to the concerned department no Central
Excise duty would have been leviable thereon."

5. It is to be noted that the assessee submitted that the sales tax
F authorities denied the exemption and the matter was pending before the High
Court. The ·deposit was made as there was a dispute. To a query made as
to why the deposit was made even there was nothing payable as claimed, the
reply was that it was paid due to pressure. There was no averment made at
any stage taking such a plea.

G 6. The extended period of limitation is applicable as (a) no information·
was given regarding deposit and (b) no information was given about the
alleged claim of exemption and the calculation.

7. In the aforesaid background, the CEGAT presently known as Customs,
Excise and Service Tax Tribunal has to decide whether the benefit under
H
\
\ ..
COMMNR. OF CENTRAL EXCISE.CHANDIGARH v. PEPSI FOODS LTD. [PASAYAT, J.] 825

• Section 4(4Xd)(ii) is available to be granted. In that regard, we express no A
opinion. It is stated that the writ petition No.17685/94 is pending before the
Punjab and Haryana High Court. It is for the Tribunal to take note of the
-"(_ decision if any rendered in that petition. The appeal is allowed to that extent.
There will be no order as to costs.

N.J. Appeal partly allowed. B