Holding

The reference was not maintainable as it did not involve a substantial question of law, and the extended limitation period under Section 11A could not be invoked because suppression of fact is a factual issue.

Summary

Kushal Fertilisers Ltd, a manufacturer of MS conduit pipes, claimed exemption from central excise duty under Notification No.202/88 but failed to obtain a licence or file a declaration under Rule 174. The Commissioner issued a show‑cause notice under Section 11A and Rule 209A alleging that the company suppressed the fact that its product was described as ‘bars’ in gate passes. The Tribunal remanded the matter, but the Commissioner reaffirmed his order; the Commissioner then made a reference to the High Court under Section 35‑G, which the High Court treated as a reference. The Supreme Court held that the reference was not maintainable because it did not raise a substantial question of law and that the issue of suppression of fact is a factual question, not a legal one. Consequently, the extended period of limitation under Section 11A could not be invoked and the show‑cause notice was barred by limitation. The Court set aside the High Court judgment and allowed the appeal with costs.

Issues considered

Whether the reference made by the Commissioner under Section 35‑G of the Central Excise Act, 1944 is maintainable after the statutory amendment.
Whether the question of suppression of material facts gives rise to a substantial question of law for the High Court.
Whether the extended period of limitation under Section 11A of the Central Excise Act, 1944 can be invoked in the present facts.

Legislation cited

Central Excise Act, 1944s. 11A, s. 35G
Central Excise Rules, 1944s. 174, s. 209A
Finance Act, 1996s. 70
Finance Act, 2003s. 144

Subjects

central exciseexemptionlicensingsuppression of factlimitation periodSection 11ASection 35Gappealreferencesubstantial question of lawModvat creditRule 174Rule 209A

Judgment

(2009] 8 S.C.R. 238
..
·A MIS KUS HAL FERTILISERS (P) LTD.
v.
THE COMMISSIONER OF CUSTOMS AND CENTRAL
EXCISE, MEERUT
(Civil Appeal No. 3277 of 2009)
B
MAY 6, 2009

[S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]

Central Excise Act, 1944/Central Excise Rules, 1944:
c Section 11 A/Rules 17 4, 209A - Company
manufacturing conduit pipes, was directed by the Central
Excise Authorities to file declaration under Rule 174 for the
purpose of claiming exemption from licensing control -
However, show cause notice also issued demanding Central
D Excise Duty and as to why penalty shall not be levied in terms
of Rule 209A stating that the Company was not entitled to
exemption as gate passes described the product as 'bars' and
thus the company intentionally suppressed the fact -
Commissioner holding that the company was not entitled to
E exemption but entitled to Modvat credit of duty paid on inputs
but restricted the credit to the extent of duty payable on bars
- On remand by Tribunal, the Commissioner reaffirmed his
earlier order - Reference to High Court - Maintainability of -
Held: Whether a party is guilty of suppression of fact or not is
F essentially a question of fact - It does not per se give rise to
substantial question of law - Impugned judgment of High
Court set aside.
Boodireddy Chandraiah vs. Arigela Laxmi (2007) 8 SCC
155; Commissioner of Central Excise, Chandigarh vs.
G Punjab Laminates (P) Ltd. (2006) 7 SCC 431 and Mis Larsen
and Toubro Ltd. vs. The Commissioner of Central Excise,
Pune-11 (2007) 6 SCALE, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
H 238
KUSHAL FERTILISERS (P) LTD. v. COMMNR OF 239
CUSTOMS AND CENTRAL EXCISE, MEERUT

3297 of 2009. A

From the Judgment & Order dated 16.06.2008 of the High
Court of Uttrakhand at Nainital in Central Excise Appeal No .
. 09 of 2005.

Aneesh Mittal, Sunil Kumra Jain and Jaya Tamar for the B
Appellants.

K. Amareshwari and Revathy Raghavan (for Anil Katiyar)
for the Respondents.

The Judgment of the Court was delivered by
c
S.B. SINHA, J. 1. Leave granted.

2. Appellant is a company incorporated and registered
under the Indian Companies Act, 1956. It is engaged in the o
manufacturing of M.S. conduit pipes with effect from 29th
March, 1990. It is registered as a Sm(311 Scale Industrial Unit
with the Directorate of Industries of the State of U.P.

3. An investigation was said to have been carried out by
the Preventive Unit of Saharanpur Division of the Central Excise E
Department in regard to the business activities of the appellant ·
in which it was observed that it had neither obtained any Central'
Excise licence for manufacture of conduit pipes nor filed any
declaration with the department for granting them exemption
from the licensing provisions. It is, however, now not disputed F
that the appellant on or about 22nd January, 1991 informed the
Section Officer of the Central Excise, Roorkee that it had been
manufacturing M.S. conduit pipes and its production is exempt
from payment of Excise Duty in terms of Notification No.202/
98-CE dated 20th May, 1988. It, furthermore, appears from the G
letters addressed by the appellant to the Superintendent,
Customs and Central Excise, Rishikesh dated 29th April, 1991
and the Superintendent, Preventive and Intelligence Branch,
Central Excise Division, Saharanpur dated 6th June, 1991 that
the officers of the Central Excise Department had been visiting H
240 SUPREME COURT REPORTS [2009] 8 S.C.R.

A the appellant's factory for inspection of their factory.

4. Indisputably again the appellant submitted its production
and raw material register for inspection. However, by a notice
dated 12th August, 1992 the appellant was directed to file a
declaration under Rule 174 of the Central Excise Rules, 1944
8
(for short 'the Rules') for the purpose of claiming exemption
from licensing control.

5. However, a show cause notice was issued on or about
28th March, 1994, proposing demand of Central Excise Duty
C of Rs.57,80,363/- under Section 11A of the Central Excise Act,
1944 (for short 'the Act') and also asking the appellant to show
cause as to why penalty shall not be levied in terms of Rule
209A of the Rules contending that the appellant was not entitled
for exemption as the gate passes covering the inputs described
D the product as 'bars' and it suppressed the said fact with an
intention to evade payment of duty.

6. Appellant filed his reply to the said show cause notice.

7. By reason of an order dated 21st July, 1994 the
E Commissioner of Central Excise, Merrut opined that the
appellant was not entitled for exemption under Notification
No.202/88 and that it suppressed the material facts with an
intention to evade payment of duty as a result whereof extended
period of limitation could be invoked. Appellant, however, was
F held to be entitled for Modvat credit of duty paid ·on inputs but
restricted the credit to the extent of duty payable on bars.

8. The appeal preferred by the appellant before the
Customs, Excise & Gold (Control) Appellate Tribunal was
G allowed by an order dated 23rd November, 2000 whereby the
matter was remanded bank to the Commissioner for his
consideration afresh. The Commissioner, however, reaffirmed
his earlier order by an order dated 19th March, 2004.

9. An appeal preferred by the appellant thereagainst was
H allowed by the Customs, Excise & Service Tax Appellate
KUSHAL FERTILISERS (P) LTD. v. COMMNR. OF CUSTOMS 241
AND CENTRAL EXCISE, MEERUT [S.B. SINHA, J.]

Tribunal by its order dated 3rd March, 2005, directing :- A

" .... However, we observe that in their letter dated 22.01.91
they had requested the department for certificate to the
effect that their product is exempt from the levy of duty. The
department had thus acquired knowledge, on receipt of the
B
said letter, that the Appellants are manufc~cturing tubes and
pipes and are availing the benefit of exemption under
~·
Notification No.202/88. Whether further details were
provided by the Appellants or not in the said letter, the
department cannot deny the fact that they had come to
know about the Appellants manufacturing tubes and pipes
c
and availing benefit of exemption and nothing prevented
the department from conducting investigation or seeking
further information from the Appellants. In view of this we
hold that the suppression of facts stopped from 22.01.91
and the extended period is applicable only prior to D
•
22.01.91."

10. Respondent preferred an appeal thereagainst in terms
of Section 35-G of the Act which by reason of the impugned
judgment was allowed treating the same to be a Reference in E
terms of old Section 35-G of the Act.

11. The short questions which arise for our consideration
are:-
,
<
"
(i) Whether the said Reference was maintainable; and F

(ii) Whether in the facts and circumstances of this case
the extended period of limitation was applicable.

12. Before, however, adverting to said questions, we may
G
notice that the Commissioner of Central Excise, Meerut sought
to make the reference to the High Court stating :-

" The order passed by the Hon'ble Tribunal does not
appear to be legal and correct in so far as it relates to
holding that the demand w.e.f. 22.01.1991 is time barred H
242 SUPREME COURT REPORTS (2009] 8 S.C.R.

A in view of the following submissions.
.
While arriving at above and observation, Hon'ble
CESTAT observed that when the party vide their letter
22.01.1991 requested the department for certificate to the
effect that their product is exempt from duty, the
B
department had thus acquired the knowledge on receipt
of this letter and accordingly charges of suppression of
facts stopped w.e.f. 22.01.1991 whereas the total period ·,
involved in the SCN is w.e.f. 26.03.1990 to 31.03.1991 and
the SCN was issued on 28.03.1994.
c
It is observed that though the party vide its letter
dated 22.01.1991 requested the department for certificate
to the effect that their product was exempt from duty, they
were directed by the Sector Officer through letter dated
D 25.01.1991 to provide complete information to the
jurisdictional Assistant Commissioner, for which the party
willfully abstained themselves. Further, one of the Director
of the party Shri Pankaj Gupta in his statement dated
26.05.1992 stated that as he considered their product
E exempt from excise duty they neither obtained a licence
nor filed proper declaration. This clearly showed
suppression on the part of party. This submission was also
found not enable in as much as even if the conduit pipes
(final product) manufactured by the party were considered
F as exempt, the party was under legal obligation to obtain
Central Excise licence under Rule 174 as these rules had
nothing to do with the dutiability of the product and it simply
laid down that any person engaged in the manufacture of
exciseable goods must obtain a Central Excise licence."
G 13. The High Court although initially treated the same to
be an appeal in terms of Section 35-G of the Act, a Division
Bench thereof was of the opinion that the same was a
reference in terms of Section 35-G of the Central Excise and
Salt Act, 1944, stating:-
H
KUSHAL FERTILISERS (P) LTD. v. COMMNR. OF CUSTOMS 243
AND CENTRAL EXCISE, MEERUT [S.B. SINHA, J.)
°'\
" This reference (wrongly registered as Appeal), made A
....~-j
under Section 35-G of the Central Excise and Salt Act,
.... 1944, by the Commissior;ier of Central Excise, Meerut-1,
Mangal Pandey Nagar, Meerut, is directed against the
order dated 21.03.2005, passed by the Customs Excise
and Service Tax Appellate Tribunal, New Delhi (hereinafter B
referred as CESTAT), in E/Appeal No.3154/2004-NB(B),
whereby the appeal of the revenue was partly allowed."
,.
14. Evidently the High Court did not notice the
amendments carried out in the said Act. The word 'and Salt'
was omitted with effect from 28th September, 1996 by Section
c
70 of the Finance Act, 1996 (Act No.33 of 1996).

- Section 35-G of the Act provided for a reference. However,
the said provision was also substituted by Section 144 of the
.. Finance Act, 2003 (Act No.32 of 2003), relevant provisions
whereof read as under:-
D

"35G. Appeal to High Court

( 1) An appeal shall lie to the High Court from every order
passed in appeal by the Appellate Tribunal on or after the E
1st day of July, 2003 (not being an order relating, among
other things, to the determination of any question having
a relation to the rate of duty of excise or to the value of
" goods for the purposes of assessment), if the High Court
is satisfied that the case involves a substantial question F
of law.

(2) The Commissioner of Central Excise or the other party
aggrieved by any order passed by the Appellate Tribunal
may file an appeal to the High Court and such appeal under G
this sub-section shall be- /

(a) filed within one hundred and eighty days from the date
on which the order appealed against is received by the
Commissioner of Central Excise or the other party;
H
244 SUPREME COURT REPORTS (2009] 8 S.C.R.

A (b) accompanied by a fee of two hundred rupees where
such appeal is filed by the other party;

(c) in the form of a memorandum of appeal precisely
stating therein the substantial question of law involved."
B 15. We may also notice the provisions of Section 35-G of
the Act, as it prior to its amendment :

"35G. Statement of case to High Court.-

(1) The Commissioner of Central Excise or the other party
c may, within sixty days of the date upon which he is served
with notice of an order under section 35C passed before
the 1st day of July, 1999 (not being an order relating,
among other things, to the determination of any question
having a relation to the rate of duty of excise or to the value
D of goods for purposes of assessment), by application in
the prescribed form, accompanied, where the application
is made by the other party, by a fee of two hundred rupees,
require the Appellate Tribunal to refer to the High Court any
·question of law arising out of such order and, subject to
E the other provisions contained in this section, the Appellate
Tribunal shall, within one hundred and twenty days of the
receipt of such application, draw up a statement of the case
and refer it to the High Court:

F Provided that the Appellate Tribunal may, if it is satisfied
that the applicant was prevented by sufficient cause from
presenting the application within the period herein before
specified, allow it to be presented within a further period
not exceeding thirty days.
G (2) On receipt of notice that an application has been made
under sub-section (1 ), the person against whom such
application has been made, may, notwithstanding that he
may not have filed such an application, file, within forty-five
days of the receipt of the notice, a memorandum of cross-
H
KUSHAL FERTILISERS (P) LTD. v. COMMNR. OF CUSTOMS 245
AND CENTRAL EXCISE, MEERUT [S.B. SINHA, J.)
..,;
objections verified in the prescribed manner against any A
part of the order in relation to which an application for
reference has been made and such memorandum shall be
disposed of by the Appellate Tribunal as if it were an
application presented within the time specified in sub-
section (1). B

(3) If, on an application made under sub-section (1 ), the
Appellate Tribunal refuses to state the case on the ground
that no question of law arises, the Commissioner of Central
Excise, or, as the case may be, the other party may, within
six months from the date on which he is served with notice
c
of such refusal, apply to the High Court and the High Court
may, if it is not satisfied with the correctness of the
decision of the Appellate Tribunal, require the Appellate
Tribunal to state the case and to refer it, and on receipt of
... any such requisition, the Appellate Tribunal, shall state the D
case and refer it accordingly.

(4) Where in the exercise of its powers under sub-section
(3), the Appellate Tribunal refuses to state a case which it
has been required by an applicant to state, the appli9ant E
may, within thirty days from the date on which he receives
notice of such refusal, withdraw his application and, if he
does so, the fee, if any, paid by him, shall be refunded"

16. The order of the Tribunal having been passed on 3rd
F
March, 2005 an appeal was maintainable to the High Court in
terms of the substituted provision and not a reference. Whereas
a reference could be made on a question of law, Section 35G
of the Act, as it stands, provides for an appeal on a substantial
question of law. Such a question of law is required to be
formulated by the High Court itself. Even otherwise the question G

- of law purported to have been referred to by the learned
-I

Commissioner of Central Excise would have been maintainable
provided a substantial question of law arose for consideration
of the High Court and not otherwise.
H
246 SUPREME COURT REPORTS [2009] 8 S.C.R. 0

A 17. Whether non furnishing of information was willful and
would amount to suppression of material fact in terms whereof
the extended period of limitation as provided for in Section 11-
A of the Customs Act, 1944 could be invoked or not, in our
opinion, was not a substantial question of law. The finding of
B fact arrived at by the Tribunal should have been treated to be
final. It would be binding on the High Court while exercising its
appellate juris~iction. A 'substantial question of law' would
mean - of having substance, essential, real, of sound worth,
important or considerable. It is to be understood as something
c in contradistinction with - technical, of no substance or
consequence, or academic merely. ( See Boodireddy
Chandraiah v. Arigela Laxmi, [ (2007) 8 SCC 155 ] ).

18. The High Court has not said that the finding of fact
arrived at by the High Court was perverse and/or was based
D on applying wrong legal principles etc. The High Court
proceeded on the basis that the failure on the part of the
appellant to submit required declaration or application for
licence for establishment. would amount to concealment of
facts·from the department. We will assume to be so. But, as
E we have noticed earlier, requisite information was not only
furnished on 22nd January, 1991, indisputably the officers of
the Central Excise Department made inspection of the factory
and the books maintained by the appellant. including the
production register, which must have disclosed the nature of
F the products from the factory in question. If the requisite
information had been given to the authorities on 22nd January,
1991, the question which should have been posed and
answered was as to whether despite such knowledge, the
Commissioner of Central Excise could have proceeded on the
G basis that there had been a suppression on the part of the
appellant.

19. Section 11-A of the Central Excise Act, 1944 provides ··
for penalty. It, therefore, requires strict consideration. Period of
limitation provided for in the Act bars the jurisdiction of the
H
KUSHAL F,ERTl,l::ISERS (P) LTD. v. COMMNR OF CUSTOMS 247
..... AND CENTRAL EXCISE, MEERUT [S.B. SINHA, J.]
/
Commissioner to initiate a proceeding for imposition of penalty A
on the expiry thereof. The proviso appended to Section 11-A(1)
of the Act makes an exception to the said Rule, the ingredients
whereof are thus required to be established for invoking the
extended period of limitation. If on the materials produced by
· the parties, the Tribunal had arrived at a finding of fact that there .B
had been no suppression on the part of the appellant after 22nd /
January, 1991, the question of invoking the extended period of
jurisdiction did not arise. The show cause notice dated 28th
March, 1994 thus having been issued after the expiry of the
period prescribed under Section 11A of the Act, was clearly c
barred by limitation.

20. In any view of the matter, whether a party is guilty of
suppression of fact or not is essentially a question of fact. It
does not per se give rise to substantial question of law per se.
[See Commissioner of Central Excise, Chandigarh v. Punjab D
Laminates (P) Ltd, [ (2006) 7 SCC 431 ] and Mis. Larsen and
Toubro Ltd. v. The Commissioner of Central Excise, Pune-11,
[ 2007 (6) SCALE 524 ].

21. For the reasons aforementioned the impugned E
judgment cannot be sustained. It is set aside accordingly. The
appeal is allowed with costs. Counsel's fee assessed at
,., · Rs.10,000/-.

G.N. Appeal allowed.

·I