REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELALTE JURISDICTION

CIVIL APPEAL NO.  3297    OF 2009 (Arising out of Special Leave petition (C) No.17739 of 2008)

M/s. Kushal Fertilisers (P) Ltd. …. Appellant

Versus

The Commissioner of Customs and  Central Excise, Meerut …. Respondent

J U D G M E N T

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 manufacturing of M.S. conduit  

pipes with effect from 29th March, 1990.  It is registered as a Small 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 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 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 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 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  (for  short  ‘the  Rules’)  for  the  purpose  of  

claiming exemption from licensing control.   

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5. However,  a  show cause notice was issued on or about 28th March,  

1994,  proposing demand of  Central  Excise Duty 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 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  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  

held to be entitled for Modvat credit of duty paid on inputs but restricted the  

credit to the extent of duty payable on bars.  

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8. The appeal preferred by the appellant before the Customs, Excise &  

Gold  (Control)  Appellate  Tribunal  was  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 allowed by the  

Customs, Excise & Service Tax Appellate Tribunal by its order dated 3rd  

March, 2005, directing :-

“….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 said letter,  that  the  Appellants  are  manufacturing  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 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 22.01.91.”   

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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 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

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 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 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 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  

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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.

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 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 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  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.”  

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:-

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“ This  reference  (wrongly  registered  as  Appeal), made under Section 35-G of the Central  Excise and Salt Act, 1944, by the Commissioner of  Central  Excise,  Meerut-I,  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  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 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:-

“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 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 of law.

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(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 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;

(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.”

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 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  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 the other  provisions contained in this section, the Appellate  

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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:

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.

(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- objections  verified  in  the  prescribed  manner  against any 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).

(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 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 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  

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to state, the applicant 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 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 of law  

purported to have been referred to by the learned Commissioner of Central  

Excise would have been maintainable provided a substantial question of law  

arose for consideration of the High Court and not otherwise.   

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 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  

jurisdiction.   A  ‘substantial  question  of  law’  would  mean  -  of  having  

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substance, essential, real, of sound worth, important or considerable. It is to  

be  understood  as  something  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  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  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 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 basis that  

there had been a suppression on the part of the appellant.

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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 Commissioner to initiate a proceeding for  

imposition  of  penalty  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  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 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 Laminates (P) Ltd, [ (2006) 7 SCC 431 ] and M/s.  

Larsen and Toubro Ltd.  v.  The Commissioner of Central Excise, Pune-II,  

[ 2007 (6) SCALE 524 ].   

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21. For  the  reasons  aforementioned  the  impugned judgment  cannot  be  

sustained.  It  is set aside accordingly.  The appeal is allowed with costs.  

Counsel’s fee assessed at Rs.10,000/-.  

……………..………………J.   [ S.B. Sinha ]

……………..………………J.   [ Dr. Mukundakam Sharma ]

New Delhi May 06, 2009

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