When can the extended period of limitation be invoked for demanding duty?
1. When the normal period is over
2. When AG’s Audit raises an objection and a Show Cause Notice has to be invariably given
Is it not when there is suppression, fraud etc? They are the grounds to be invoked, not the reasons for demand! The general standard is, if the normal period of limitation is over, simply invoke the larger period and allege all that is mentioned in the proviso to Section 11A. The magic words that are to be faithfully reproduced in the Show Cause Notice are
++ fraud
++ collusion
++ wilful mis-statement
++ suppression of facts
++ contravention of any of the provisions of the Act or the rules made with intent to evade payment of duty
It is not necessary that all or any of the ingredients are satisfied, it is enough you mention some of them or to be safe, all of them.
For a commodity covered under Section 4A, the AG pointed out that the abatement given was excessive and thereby the Government lost crores of rupees. Promptly a Show Cause Notice was given to the assessee alleging that he had suppressed vital information and followed the Notification issued by the Government with intention to evade duty!
Board was aware of the tendency to invoke the extended period at the slightest pretext as can be seen from this extract from a letter from Mr. A. M. Sinha, Member, CBEC, written in 1991.
Indiscriminate use of such restricted powers even at high levels leads to fruitless adjudications with the gamut of appeals and reviews, inflates the figures of outstanding, confirmed and unconfirmed demands and above all, avoidable harassment of the assessees.
I have taken a serious note of such casualness in issuance of show cause notices and desire that the Collectors should be more circumspect in applying the provisions of Section 11A for the extended period and should not resort to these provisions as a matter of routine. Henceforth, such instances would be viewed seriously. ( from CBEC Circular No. 5/92, dated 13-10-1992)
Things haven’t changed much since then. The Member warned the Commissioners that such instances would be viewed seriously. May be that member retired after a few months of issuing this letter and had no time left to view things seriously. He did not have the extended time! But has the Board ever viewed such instances(for that matter any instance, including faulty notifications) seriously. No wonder, the Board is not viewed seriously!
DDT has this marvellous extract from a recent Tribunal decision - Tata Engineering & Locomotive Company Ltd v Commissioner of Central Excise, Pune-I where a Commissioner had given very convincing reasons for invoking the extended period.
assessee have indeed mis-represented the matter and created confusion by taking a dichotomous stand and to that extent the Department was misled and prevented from coming to a clear understanding quickly and thus the longer period is rightly invokable.
Will somebody ask the Commissioner :-
++ Is creating confusion a ground for invoking larger period?
++ If the assessee created confusion, should the department be confused?
++ Is there any law against an assessee taking a dichotomous stand and will that lead to an extended period of demand?
++ If the department could not come to a clear understanding quickly, who is to blame?