THE COMMISSIONER OF CENTRAL EXCISE, VISAKHAPATNAMversusM/S. MEHTA & CO.

                       [2011] 2 S.C.R. 874


A         THE COMMISSIONER OF CENTRAL EXCISE,
                    VISAKHAPATNAM
                                 v.
                         M/S. MEHTA & CO.
                  (Civil Appeal No. 1090 of 2009)
B
                       FEBRUARY 10, 2011

    [DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.]

        Central Excise Act, 1944 - s. 11 A, proviso - Assessee
C engaged in business of interior decoration and providing
  composite services including woodwork, furniture items etc. at
  the premises of customer - Show cause notice issued
  alleging that the assessee manufactured articles of wood,
  furniture, etc. in the premises of a hotel and removed the same
D without payment of excise duty - Demand by Commissioner
  - Whether the demand for payment of duty was barred by
  limitation and whether the items like chairs, beds, tables,
  desks, etc., affixed to the ground could be said to be
  immoveable assets and not liable to excise duty - Held:
E S. 11 A of the Act empowers the Authority to demand excise
  duty - In the instant case, there was apparent intention on the
  part of respondent to evade excise duty and contravene
  provisions of the Act- Therefore, proviso of s.11A(i) of the Act '
  would get attracted - The cause of action, i.e., date of
F knowledge could be attributed to the appellant in the year 1997
  when in compliance of the memo issued by the appellant and
  also the summons issued, the hotel furnished its reply setting
  out the details of the work done by the assessee - Show cause
  notice having been issued in the year 2000, the demand
G made was clearly within the period of limitation as prescribed,
   which is five years - Ordinarily furniture refers to moveable
   items such as desk, tables, chairs required for use or
   ornamentation in a house or office - Therefore, the furniture I
   could not said to be immoveable property (as held by the

H                                874
     C.C.E., VISAKHAPATNAM v.. MEHTA & CO.                875


Tribunal) - The Commissioner had listed out various items         A
as furniture after proper scrutiny - Tribunal was not justified
in rejecting the said findings - Order passed by the
Commissioner accordingly restored - Central Excise Tariff
Act, 1985 - Chapter sub-heading Nos. 9401.00 & 9403.00,
4410.11, Bj02.00 and 7610.90.                                     B
    The respondents-assessees were engaged in the
business of interior decoration and provided composite
services including woodwork, furniture items etc. They
entered into contracts .with customers for doing these            C
works as per their requirement and also carry out these
works at their customer's premises.

     On gathering specific intelligence that the assesses
have undertaken the manufacture of articles of wood,
furniture, etc. in the premises of Hotel Grand Bay,               D
Vishakhapatnam and removed the same without payment
of duty of excise, the officers of Head Quarters Preventive
unit inquired _and investigated the matter. It was found
that the assessee, inter alia, manufactured and cleared
furniture, falling under chapter sub-heading Nos. 9401.00         E
& 9403.00, 4410.11, 8302.00 and 7610.90 respectively, of
the Schedule to the Central Excise Tariff Act, 1985
without payment of proper duty of excise with an
intention to evade payment of duty.
     A show cause notice under the Central Excise Act,            F
1944 was issued to the respondent - assessee. The
respondent-assessee and Mis. Grand Bay Hotel
submitted their respective replies. The Commissioner of
Central Excise confirmed the demand of Rs. 43,59,7101·
out of the proposed demand of Rs. 62,94,910/- under Rule          G
9(2) along with penalty of equal amount i.e. Rs. 43,59,710/
• and directed the redemption of the confiscated goods
after the payment of a fine of Rs. 1,00,0001- plus the duty
and penalty adjudged. Aggrieved, the respondent filed
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    876     SUPREME COURT REPORTS             [2011) 2 S.C.R.

A appeal before the CESTAT which allowed the appeal and
  remanded the matter to the adjudicating authority
  concerned to examine the matter afresh. Thereupon, the
  Commissioner,       Central     Excise &         Customs,
  Visakhapatnam confirmed the demand of Rs. 14,94,656/-
B with penalty of Rs. 7,47,328/- with interest as per Section
  11 AB of the Central Excise Act, 1944 and also imposed
  a penalty of Rs. 5,00,000/- under Rule 173Q.

       Aggrieved thereby the respondent filed an appeal
  before the Customs, Excise & Service Tax Appellate
C Tribunal (CESTAT) which set aside the order of the
  Commissioner,        Central    Excise &        Customs,
  Visakhapatnam. The Tribunal held that the items
  fabricated by the respondent were permanently fixed to
  the walls and ground of the room and the same could not
D be removed from one place to another without causing
  much damage to them and without cannibalizations and
  consequently the said items cannot be considered as
  furniture in the light of the decision of this Court in the
  case of Craft lnteriors's case. It was further held that in
E any case the entire demand was also hit by time bar as
  there was no justification for invocation of the longer
  period.

       In the instant appeal, two primary issues fell for
F consideration- 1) whether or not the demand for payment
  of duty was barred by limitation and 2) whether the items
  like chairs, beds, tables, desks, etc., affixed to the ground
  could be said to be immoveable assets and not liable to
  excise duty.
G         Allowing the appeal, the Court
         HELD:1.1. Section 11A of the Central Excise Act, 1944
    empowers the Authority to demand excise duty in terms
    of the conditions laid down in the said provision as and
H
     C.C.E., VISAKHAPATNAM v. MEHTA & CO.               877


when the pre-conditions mentioned therein are satisfied.       A
[Para 16] [884-C]

       1.2. The issuance of a notice for invoking the
provisions of Section 11A of the Act is a condition
precedent for a demand to be made under Section 11A 8
of the Act. However, in the present case, a show cause
notice was issued to the respondent making it a specific
case that the respondent manufactured excisable goods
as mentioned in the notice and covered under different
chapter headings at the site of the customer and removed C
the same without payment of duty of excise with an
intention to evade payment of duty. It was also mentioned
that such conscious action on the part of the contractor
has clearly established the intention to evade payment of
duty of excise and consequently proviso to Section 11A
c;>f the Act could be invoked in the present case. The hotel D
furnished the details of work done by the respondent and
that the Central Excise Department was informed that the
work order was to carry out job on the turn key basis and
not for any furniture as such. [Paras 17, 18] [884-D-H; 885-
A]                                                             E
     1.3. After the order of remand was passed by the
Tribunal, the Commissioner considered the issue with
regard to the liability of payment of excise duty at length
and held that the respondent is liable to pay central excise   F
duty for the items as specifically mentioned in the said
order passed. A perusal of the said order would also
indicate that no issue with regard to the demand raised
by the appellant as time barred was either raised or
discussed by the Commissioner. [Paras 19, 20) [885-8-          G
CJ
    1.4. The specific case of the appellant is that the
respondent having manufactured the excisable goods
covered under different chapter headings, removed them
without payment of proper duty of excise and that from         H
    878     SUPREME COURT REPORTS               [2011] 2 S.C.R.


A the aforesaid action it is explicit that there was an intention
  on the part of the respondent to evade payment of duty.
  Although, the respondent has pleaded that it was done
  out of ignorance, but in the considered opinion of this
  Court, there appears to be an intention to evade excise
B duty and contravention of the provisions of the Act.
  Therefore, proviso of Section 11A (i) of the Act would get
  attracted to the facts and circumstances of the present
  case. [Paras 22, 23] (885-G-H; 886-A-B]

C      1.5. The cause of action, i.e., date of knowledge could
  be attributed to the appellant in the year 1997 when in
  compliance of the memo issued by the appellant and also
  the summons issued, the hotel furnished its reply setting
  out the details of the work done by the assessee. A bare
  perusal of the records shows that the aforesaid reply was ··
D sent on receipt of a letter issued by the Commissioner of
  Central Excise on 27.2.1997. If the period of limitation of
  five years is computed from the aforesaid date, the show
  cause notice having been issued on 15.5.2000, the
  demand made was clearly within the perlt>d of limitation
E as prescribed, which is five years. (Para 24] (886~C-D-E)

      2.1. The decision in Craft Interiors has clearly laid
  down that ordinarily furniture refers to moveable items
  such as desk, tables, chairs required for use or
              •
F ornamentation in a house or office. So, therefore, the
  furniture could not have been held to be immoveable
  property. [Para 26) [886-G)

      2.2. A perusal of the records would also indicate that
  the Commissioner in his order has listed out various
G items which were held as furniture and while doing so,
  he has scrutinized the records to determine the
  immovability or movability of the items. A bare perusal of
  the said order would also indicate that he has given
  deductions for the items held as immovable. He has
H
     C.C.E., VISAKHAPATNAM v. MEHTA & CO.               879


prepared Annexures 1,2, 3 and 4 and the items mentioned A
in Annexures 1 and 2 have been held as 'furniture' after
proper examination of the records whereas he has held
items in Annexures 3 and 4 as immovable and has
allowed deduction. So far as the items such as chairs,
tables etc. listed in Annexure 5 is concerned, the same B
admitted to be furniture by the assessee himself. The
Commissioner having considered the aforesaid issue
carefully and after proper scrutiny, the Tribunal was not
justified in rejecting the said findings by mere conclusion
and without trying to meet the findings recorded by the c
Commissioner. [Paras 27, 28] 887-A-B-C-D]

    Craft Interiors Pvt. Ltd. v. CCE, Bangalore, 2006 (203)
ELT 529 (SC) - relied on.
    3. The order passed by the Tribunal is accordingly D
set aside and the order passed by the Commissioner is
restored. [Para 29]
                    Case Law Reference:
    2006 (203) Elj ,529 (SC) relied on              Para 21   E
                /


    CIVIL.J-PPELLATE JURISDICTION : Civil Appeal No.
1090 of/<J09.
    From the Judgment & Order dated 28.7.2008 of the
Customs, Excise and Service Tax Appellate Tribunal, South     F
Zonal Bench, FKCCl-WTC Building, K.G. Road, Bangalore in
Appeal No. E/132/2005.
    Rohit Sharma, Anil Katiyar for the Appellant.
                                                              G
    S. Sukumaran, R. Dakshina Murthy, Anand Sukumar,
Bhupesh Kumar Pathak, Meera Mathur for the Respondent. ·
    The Judgment of the Court was delivered by

                                                              H
    880     SUPREME COURT REPORTS                  [2011] 2 S.C.R.


A         DR. MUKUNDAKAM SHARMA, J. 1. Delay condoned.

        2. The present appeal filed by the appellant Commissioner
    of Central Excise, Visakhapatnam arises out of an order dated
    28.07.2008 passed by the Customs, Excise & Service Tax
8   Appellate Tribunal, South Zonal Bench at Bangalore
    (hereinafter referred to as 'the Tribunal') in appeal No. El1321
    2005.

        3. Two primary issues fall for consideration in this appeal.
  The first issue is, as to whether or not the demand for payment
C of duty is barred by limitation, whereas the second issue is
  whether the items like chairs, beds, tables, desks, etc., affixed
  to the ground could be said to be immoveable assets and not
  liable to excise duty. The aforesaid two issues have arisen in
  the light of the rival submissions made on the basic facts of this
D appeal which are hereinafter being set out.

        4. Mis. Mehta & Company, Mumbai (the "assessee") are
    engaged in the business of interior decoration. The assessee
    provides composite services including woodwork, furniture
E   items etc. They entered into contracts with customers for doing
    these works as per their requirement and also carry out these
    works at their customer's premises.

          5. On gathering specific intelligence that the assesses
    have undertaken the manufacture of articles of wood, furniture,
F   etc. in the premises of Hotel Grand Bay, Vishakhapatnam and
    removed the same without payment of duty of excise, the
    officers of Head Quarters Preventive unit inquired and·
    investigated the matter.

G        6. It was found that the assessee along with Mis
    Chandrasekhar Architects Pvt. Ltd., Mumbai entered into an
    agreement with Mis. Adyar Gate Hotel Ltd., Chennai (now Mis
    Welcome Group) on 30.08.1995 for carrying out the renovation
    of the existing structure in their hotel at Nowroji Road,
H   Maharanipeta, Visakhapatnam. The scope of this agreement
     C.C.E., VISAKHAPATNAM v. MEHTA & CO.                   881
         [DR. MUKUNDAKAM SHARMA, J.]

was further modified by another agreement dated 18.10.1995.         A
As seen by the final bills dated 31.03.1997, raised by the
assessee on Hotel Grand Bay, it was observ_?d that the
assesses, inter alia, manufactured and cleared furniture, falling
under chapter sub- heading Nos. 9401.00 & 9403.00, 4410.11,
8302.00 and 7610.90 respectively, of the Schedule to the            B
Central Excise Tariff Act, 1985. As per the agreement the
assesses quoted prices which included sales tax, excise duty,
octroi etc.

     7. It appears that· the assesses manufactured goods
covered under different chapter headings at the customer's site C
and removed them without payment of proper duty of excise
with an intention to evade payment of duty. The contract
between the assesses and M/s Adyar Gate Hotel Ltd., clearly
mentions that the assesses has quoted rates which include the
excise duty and it had been made in the contract that the D
contractor would. not have any claim subsequently after
execution of the work for excise duty, sales tax etc. from M/s.
Adyar Gate Hotels Limited.

    8. A show cause notice under the Central Excise Act,            E
1944 [for short "the Act"] dated 15.05.2000 was issued to the
respondent - Mis. Mehta & Company to show cause as to why:


      (i)    Duty of excise amounting to Rs. 62,94,910/- should     F
             not be demanded from them on the goods
             manufactured and cleared under Rule 9(2) of the
             Rules read with the proviso to section 11A (1) of
             the Act;

      (ii)   The amount of Rs. 10,00,000/- already paid under G
             protest towards the duty of excise should not be
             adjusted towards the payment of duty demanded in
             (i) above;                        ·

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    882       SUPREME COURT REPORTS                 [2011] 2 S.C.R.


A         (iii)   Penalty should not be imposed on them under Rule
                  9(2), Rule 52A and Rule 1730 of the Rules;

          (iv)    Penalty equal to the duty demanded in (i) above
                  should not be imposed on them under Section
B                 11AC of the Act;

          (v) Interest @ 24% p.a. from the first day of the month
                 succeeding the month in which the duty ought to
                 have been paid, till the date of payment of such duty
                 should not be demanded from them under section
c                11 AB of the Act; and

          (vi)    The goods involved should not be confiscated under
                  Rule 1730 (1) of the Rules.

         9. M/s. Grand Bay Hotel, Beach Road, Visakhapatnam
0
    was also asked to show cause as to why penalty should not
    be imposed under Rule 209A of the Rules for purchase and
    possession of the excisable goods on which duty of excise had
    not been paid.

E        10. The respondent - Mis. Mehta & Co. and M/s. Grand
    Bay Hotel submitted their respective replies. The
    Commissioner of Central.Excise vide order dated 31.12.2002
    confirmed the demand of Rs. 43,59,710/- out of the proposed
    demand of Rs. 62,94,910/- under Rule 9(2) along with penalty
F   of equal amount i.e. Rs. 43,59,710/- and directed the
    redemption of the confiscated goods after the payment of a fine
    of Rs. 1,00,000/- plus the duty and penalty adjudged.

       11. Aggrieved thereby, the respondent filed an appeal
  before the CESTAT, Bangalore, which allowed the appeal and
G remanded the matter to the concerned adjudicating authority
  to examine the matter afresh and to pass an appropriate order
  in accordance with law by providing an effective hearing to the
  parties. Thereupon, the Commissioner, Central Excise &
  Customs, Visakhapatnam vide order dated 22.10.2003
H
     C.C.E., VISAKHAPATNAM v. MEHTA & CO.                   883
         [DR. MUKUNDAKAM SHARMA, J.]

confirmed the demand of Rs. 14,94,656/- with penalty of Rs.        A
7,47,328/- with interest as per Section 11 AB of the Central
Excise Act, 1944 (for short "the Act") and also imposed a
penalty of Rs. 5,00,000/- under Rule 173Q. Aggrieved thereby
the respondent filed an appeal before the Tribunal and vide
order dt. 28.7.2008 the Tribunal allowed the appeal and set        B
aside the order of the Commissioner, Central Excise &
Customs, Visakhapatnam under the impugned judgment and
order as against which the present appeal was filed.

     12. We heard the learned counsel appearing for the
parties at length who had taken us through all the orders which    C
gave rise to the aforesaid two issues which fall for our
consideration in the present appeal.

      13. The learned counsel appearing for the appellant
submitted before us that so far as the issue with regard to the    D
limitation is concerned, the same was not urged before the
Commissioner when he was hearing the matter after the order
of remand by the Tribunal and in that view of the matter, the
Tribu~al could not have decided the said issue against the
appel!ant. It was further submitted that in any case proviso to    E
Section 11 A of the Act is attracted to the facts and
circumstances of the present case, and therefore, the show
cause notice was issued by the appellant within the period of
limitation as prescribed under the proviso to Section 11A of
the Act and that the Tribunal was wrong in holding that the        F
demand was beyond the period of limitation. It was furth,er
submitted that the Tribunal erred in holding that all the items
manufactured by the assessee are exempted from demand of
excise duty.

     14. Per contra, the learned counsel appearing for the         G
respondent, however, refuted the aforesaid submissions and
submitted that the appellant never had any intention to evade
excise duty and there is no finding to that effect and therefore
no such duty is leviable particularly when it is barred by
limitation. It was also submitted that the pre-conditions for      H
    884      SUPREME COURT REPORTS                  [2011] 2 S.C.R.


A attracting the provisions of proviso is not satisfied in the present
  case, and therefore, it cannot be submitted that the demand is
  not barred by limitation.

         15. We have considered the aforesaid submissions of the
    learned counsel appearing for the parties in the light of the
8
    records placed before us. So far as the issue with regard to
    limitation is concerned, since that goes to the root of the
    demand made, it is appropriate to deal with the same before
    we go into the second issue.

C        16. Section 11A of the Act empowers the Authority to
    demand excise duty in terms of the conditions laid down in the
    said provision as and when the pre-conditions mentioned
    therein are satisfied.

0      17. There is no dispute with regard to the fact that issuance
  of a notice for invoking the provisions of Section 11A of the Act
  is a condition precedent for a demand to be made under
  Section 11A of the Act. However, in the present case, a show
  cause notice was issued to the respondent herein making it a
E specific case that the respondent manufactured excisable
  goods as mentioned in the notice and covered under different
  chapter headings at the site of the customer and removed the
  same without payment of duty of excise with an int~ntion to,
  evade payment of duty when the contract clause between the
  respondent and Mis. Adyar Gate Hotel Ltd. clearly mentioned
F that the contractors quoted rate shall also include the excise
  duty. It was also mentioned that such conscious action on the
  part of the contractor has clearly established the intention to
  evade payment of duty of excise and consequently proviso to
  Section 11A of the Act could be invoked in the present case.
G
       18. In the reply submitted by the respondent, it was stated
  that a proforma was enclosed to the show cause notice and
  also the summons. The hotel furnished the details of work done
  by the respondent and that the Central Excise Department was
H
       C.C.E., VISAKHAPATNAM v. MEHTA & CO.                   885
           [DR. MUKUNDAKAM SHARMA, J.)

 informed that the work order was to carry out job on the turn        A
 key basis and not for any furniture as such.

      19. As stated hereinbefore, after the order of remand was
 passed by the Tribunal, the Commissioner considered the issue
 with regard to the liability of payment of excise duty at length     8
 and held that the respondent is liable to pay central excise duty
 for the items as specifically mentioned in the said order
 passed.

      20. A perusal of the said order would also indicate that no
 issue with regard to the demand raised by the appellant as time      C
 barred was either raised or discussed by the Commissioner.

      21. Being aggrieved by the aforesaid order passed by the
 Commissioner, an appeal was filed before the Tribunal. The
 Tribunal, however, held that the items fabricated by the             o
 respondent herein are permanently fixed to the walls and
 ground of the room and the same could not be removed from
 one place to another without causing much damage to them
 and without cannibalizations and consequently the said items
 cannot be considered as furniture in the light of the decision of    E
 this Court in the case of Craft Interiors Pvt. Ltd. vs. CCE,
 Bangalore reported in (2006 (203) ELT 529 (SC)). It was,
 however, held th.at the case of the appellant is weak not only
 on merits, but also in any case the entire demand is also hit by
 time bar as there is no justification for invocation of the longer   F
 period. Thus, findings which are recorded appear to be abrupt
 and without recording any reasons.

       22. Consequently, we propose to look into the first issue
. in the light of the background facts as stated hereinbefore. The
  specific case of the appellant is that the respondent having        G
  manufactured the excisable goods covered under different
  chapter headings, removed them without payment of proper
  duty of excise and that from the aforesaid action it is explicit
  that there was an intention on the part of the respondent to
  evade P.ayment of duty particularly when the contract clause        H
    886     SUPREME COURT REPORTS                   [2011] 2 S.C.R.


A between the respondent and M/s. Adyar Gate Hotel Ltd. clearly
  mentioned that the contractors quoted rate would also include
  excise duty.

       23. Although, the respondent has pleaded that it was done
8 out of ignorance, but in our considered opinion there appears
  to be an intention to evade excise duty and contravention of the
  provisions of the Act. Therefore, proviso of Section 11A (i) of
  the Act would get attracted to the facts and circumstances of
  the present case.

C       24. The cause of action, i.e., date of knowledge could be
  attributed to the appellant in the year 1997 When in compliance
  of the rpemo issued by the appellant and also the summons
  issued, the hotel furnished its reply setting out the details of the
  work done by the appellant amounting to Rs. 991.66 lakhs and
D at that stage only the department came to know that the work
  order was to carry out the job for furniture also. A bare perusal
  of the records shows that the aforesaid reply was sent by the
  respondent on receipt of a letter issued by the Commissioner
  of Central Excise on 27 .2.1997. If the period of limitation of five
E years is computed from the aforesaid date, the show cause
  notice having been issued on 15.5.2000, the demand made was
  clearly within the period of limitation as prescribed, which is five
  years.

F        25. So far as the second issue is concerned, we fail to
    appreciate as to how the Tribunal could come to a finding, as
    recorded in the impugned judgment and order in view of the
    proposition of law already settled by this Court in the decision
    of Craft Interiors (supra).
G        26. The decision in Craft Interiors (supra) has clearly laid
    down that ordinarily furniture refers to moveable items such as
    desk, tables, chairs required for use or ornamentation in a
    house or office. So, therefore, the furniture could not have been
    held to be immoveable property.
H
     C.C.E., VISAKHAPATNAM v. MEHTA & CO.               887
         [DR. MUKUNDAKAM SHARMA, J.]

     27. A perusal of the records would also indicate that the A
Commissioner in his order has listed out various items which
were held as furniture and while doing so, he has scrutinized
the records to determine the immovability or movability of the
items. A bare perusal of the said order would also indicate that
he has given deductions for the items held as immovable. He . B
has prepared Annexures 1,2, 3 and 4 and the items mentioned
in Annexures 1 and 2 have been held as 'furniture' after proper
examination of the records whereas he has held items in
Annexures 3 and 4 as immovable and has allowed deduction.

     28. So far as the items such as chairs, tables etc. listed C
in Annexure 5 is concerned, the same admitted to be furniture
by the assessee himself. The Commissioner having considered
the aforesaid issue carefully and after proper scrutiny, the
Tribunal was not justified in rejecting the said findings by mere
conclusion and without trying to meet the findings recorded by D
the Commissioner.
     29. Accordingly, we allow this appeal and set aside the
order passed by the Tribunal and restore the order passed by
the Commissioner. However, there shall be no order as to       E
costs.

B.B.B.                                      Appeal allowed.