Enhancing period of limitation to 2 years - Board's Views
IN a similar situation, Board had sought the opinion of the Additional Solicitor General, which was communicated in CBEC Circular No. , Dated : September 19, 2001 , as:
(1) Whether it is correct to hold that the amendments would only cover demands for a period of six months prior to issue of SCN?
A: In the "Negative" - in view of the fact that the word "One Year" has been substituted by the word "Six Months" by section 97-B of the Finance Act. Further, the amendment has been stated to be effective from 17th November, 1980.
(2) Whether demands for the extended period, where such demands were held as time barred on the ground that there was approved classification list/price list etc. would be covered by the amendments?
A: In the "Affirmative" - such demands which were earlier held to be time barred because of the approval of the classification list would also be covered by the amendment as the amendment has been made retrospective w.e.f. 17th November, 1980. The factum of approval after the date will not come in the way of recovering the amounts which would be covered by such an amendment.
(3) Whether these provisions would apply to proceedings that have attained finality and where appeal periods have expired?
A: Under Section 110 of the Finance Act, any notice issued after the 17th of November, 1980 will be protected by the validating Act. The necessity for the amendment arose to over-come the judgment of the Hon'ble Supreme Court in the Cotspun Ltd. Case - 2002-TIOL-187-SC-CX-CB. Further, the power to amend the law retrospectively has been recognised judicially in a number of pronouncements (for example, Prithvi Cotton Mills Ltd. vs. Broach - 2002-TIOL-479-SC-MISC-LB. The said judgment, in para 4, clearly provides "If the legislature has the power over the subject matter and competence to make a valid law, it can at any time, make such a valid law and make it retrospectively so as to bind even past transactions." Therefore, where notices have already been issued, the judgments rendered in the context of the earlier provision would cease to be of relevance. In fact, in the case of Cotspun itself, where the judgment of the Supreme Court was rendered, in view of the validating provisions, recovery could be made notwithstanding the Cotspun judgment. Under these circumstances, if the SCNs have been issued then even in respect of past proceedings where even judgments have been rendered, it will be open to the Department to make recoveries.
(4) Could recoveries be made in such cases, and what would be the period up to which such proceedings could be reopened and recoveries made?
A: Recoveries can be made in such cases for the period subsequent to 17th November, 1980 when the retrospective operation of the amended provision has come into play. However, this is subject to the SCNs having been issued in time. It is also worth noting that if SCNs have not been issued so far, now it will not be open to issue SCNs for the past period unless it is within the period of limitation as prescribed under the amended provisions.
(5) What would be the time limit, if any, for initiating proceedings under the amended provisions?
A: The time limit for initiating proceedings under the amended provisions would be One Year for issuance of fresh notices. However, as far as recoveries pursuant to notices already issued or subject matter of pending proceedings are concerned, the same are covered by answer to the previous queries.
(6) What is the kind of notice/order that should be issued for recoveries of dues in respect of proceedings which have attained finality?
A: In respect of matters which have received finality, the demand notices should be issued referring to the amendment carried out and pointing out that in view of the amended provision, it is necessary for the assessee to make the payment, as demanded. Reliance should be placed on the amendments for the purpose of making recoveries.
(7) How should the department proceed in respect of matters which are pending in appeal in Tribunal and Courts?
As far as the pending matters are concerned, the Department should file an affidavit indicating the amendment having been carried out and the request that the controversy be decided in the context of the amended provisions.
In Circular No. , dated August 8, 2000, CBEC Clarified:
(1) Where the show-cause notice period of Six Months under the erstwhile Section 11 A was applicable and had expired before 12-5-2000, the provision of amended section can not be invoked for issuing show-cause notice for recovering duty short levied / not levied.
(2) Where the said show-cause notice period of Six Months for recovery expires on or after 12-5-2000 i.e. the date of coming into force of the Finance Act, 2000, the Department can issue show-cause notices upto a period of 1 year from the relevant date.
And this seems to be the view of the Tribunal too.
Board should again clarify this position to avoid litigation and perhaps take a benign view and decide that the limitation of two years will not be applicable in cases where the one year limitation is already over .