Extended Limitation Under Central Excise Can’t Be Invoked Without Proof of Intent to Evade Duty: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT)has dismissed appeals filed by the Revenue challenging the dropping of demands raised by invoking the extended period of limitation in a long-running central excise dispute involving marble job work operations. The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that the essential ingredients required to invoke the extended limitation period under Section 11A(4) of the Central Excise Act, 1944 were not established by the department. The case arose from investigations against two Udaipur-based entities engaged in sawing marble blocks into slabs and tiles on a job work basis. The principals supplied marble blocks, which were processed and returned after cutting. During the disputed period from January 2013 to March 2016, no central excise duty was paid on these activities. The department initiated proceedings after receiving information from the Income Tax Department, alleging that the activity amounted to “manufacture” under the Central Excise law. It was further alleged that the assessees failed to obtain excise registration, did not file statutory returns, and deliberately avoided payment of duty to wrongly avail Small Scale Industry (SSI) exemption benefits. Show cause notices were issued invoking the extended period of limitation, proposing recovery of duty along with interest and penalties under Section 11AC of the Act. In the first round of litigation, the adjudicating authority confirmed the demands. However, the Commissioner (Appeals) set aside the orders. On Revenue appeal, CESTAT in May 2023 remanded the matter to the adjudicating authority for recalculation of duty, valuation, and SSI exemption eligibility. Following remand, the Additional Commissioner again confirmed the demands. The Commissioner (Appeals), while upholding the findings on merits, dropped the demands pertaining to the extended period of limitation and consequential penalties, holding that the statutory conditions for invoking extended limitation were not satisfied. Aggrieved, the Revenue approached CESTAT once again, limited to the issue of limitation. The department argued that the assessees deliberately suppressed material facts by failing to register, pay duty, or file returns for several years. It was contended that the non-disclosure of job work turnover enabled the assessees to remain below the SSI exemption threshold and that such conduct amounted to wilful suppression with intent to evade duty. The department also emphasized that the case came to light only after information was received from another department, which, according to it, clearly established positive acts of suppression. The assessees countered that there was no evidence of fraud, wilful misstatement, or suppression with intent to evade duty. They maintained that they were under a bona fide belief that excise duty, if any, was payable by the principal manufacturers and not by job workers. It was argued that mere non-registration or non-filing of returns, without proof of intent, could not justify invocation of extended limitation. The Tribunal reiterated the settled legal principle that for invoking extended limitation, the department must prove fraud, collusion, wilful misstatement, or suppression of facts with intent to evade duty. Mere omission or failure to comply with procedural requirements does not automatically amount to suppression. Notably, the Bench observed that even in the earlier round of litigation, the Commissioner (Appeals) had fully dropped the demands, which indicated that the issue itself was capable of divergent interpretation. In such circumstances, the Tribunal held that it was plausible for the assessees to have entertained a bona fide belief regarding non-liability to duty. The Tribunal concluded that the department failed to discharge the burden of proving deliberate intent to evade duty. Consequently, the dropping of the extended period demand and penalties by the Commissioner (Appeals) was upheld. CESTAT dismissed both Revenue appeals and upheld the impugned appellate orders. As a result, no duty liability survived against one assessee, while only a limited demand within the normal period remained payable by the other. The cross-objections filed by the assessees were also disposed of accordingly. Case Details Case Title: Commissioner Of Central Excise & CGST-Udaipur Versus M/S. Sonex Marble Pvt. Ltd. Case No.: Excise Appeal No. 52299 Of 2024 Date: 27/01/2026 Counsel For Appellant: S.K. Ray, Authorised Representative Counsel For Respondent: Jitin Singhal, Advocate Click Here To Read Order Read More: CESTAT Quashes Cenvat Credit Demand for Breach of Remand Directions, Travel Beyond SCN

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