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CASE NO.: Appeal (civil)  2990 of 2006

PETITIONER: M/s Larsen and Tubro Ltd

RESPONDENT: The Commissioner of Central Excise, Pune-II

DATE OF JUDGMENT: 02/05/2007

BENCH: S.B. SINHA & MARKANDEY KATJU

JUDGMENT: J U D G M E N T

S.B. Sinha, J : 1.      An order dated 16.2.2006 passed by the Customs, Excise and  Service Tax Appellate Tribunal (CESTAT) in Appeal No.E/3634/98-Mum.,  is in question before us. The appellant is a company incorporated under the  Companies Act. It undertook a contract for construction of bridges for M/s.  Konkan Railway Corporation Ltd. (’Konkan Railway’, for short), which is a  public sector undertaking. Appellant manufactured Pre Stressed Concrete  Girders (PSC Girders). It used to transport them to the site of construction  of bridges of the Railways. It did not register itself with the authorities of  the Central Excise.  

2.      Alleging that the appellant, for the period March 1993 and  December 1994, although was involved in the manufacturing activity, by  undertaking manufacture of 75 PSC Girders, but did not pay any excise  duty thereupon.  

3.      A notice was issued to the appellant directing it to show cause as to  why Central Excise duty to the tune of Rs.32,35,575/- should not be  demanded and recovered from them in terms of the proviso appended to  Rule 49(1) of the Central Excise Rules, 1944 (Rules) read with Section  11A of the Central Excise and Salt Act, 1944 (Act)  and as to why penalty  should not be imposed on them and the plant & machinery and the  manufactured goods should not be confiscated. Cause was shown by the  appellant inter alia stating that no excise duty was payable. The said  notice was withdrawn stating:  

"The said Show Cause Notice has been issued without  obtaining approval of the proper authority or by the  proper officer. Accordingly, Show Cause Notice dated  27.1.94 hereby withdrawn.                  The withdrawal of the Show Cause Notice is without  prejudice to any action including issue of fresh Show  Cause Notice which may be taken against M/s. Konkan  Railway Corporation Ltd., Ratnagiri (North), Lanjekar  Compound, Phansi Baug, Udyamnagar, Ratnagiri of  Central Excise Law or any other law of the time being is  force."   

4.      After a long time, namely, on 1.5.1996, another show cause notice  was issued on the same premise for the period March 1993 and December,  1994. The extended period of limitation was invoked alleging suppression  of fact on the part of the appellant. Appellant herein filed a show cause  wherein inter alia the question of applicability of the extended period of  limitation as contained in the proviso appended to Section 11A of the Act  was specifically raised. The Commissioner of Central Excise, Pune, in his  judgment opined that basically following four issues were involved:

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  "(i) Whether a process of ’manufacture’ is involved? (ii) Whether the girders can be considered as immovable          property or not?

(iii) Whether the girders can be considered as marketable          or not and whether exemption under Notification          No.59/90 can be extended?

(iv) Whether there was suppression of facts on the part of          the noticees so as to invoke extended period?"

5.      It was held that as construction of the bridges consists of many  things, including foundation and super structure, manufacture of PSC  Girders would come within the purview thereof; and the same would not be  immoveable property. It was further held that the longer period of  limitation has rightly been invoked as the appellant had suppressed the fact  from the department that the goods in question were excisable articles. It  was opined:     "12. As regards penalty on KRCL under Rule 209A, since  the manufacturing activity was undertaken by M/s. L & T  and there is no evidence of their mala fides in the matter,  further they have also alerted the contracting party about  discharge of central taxes etc. as seen from clause 47 of  contract, I refrain from imposing any penalty on them.  

13. As regards confiscation of 75 Nos. of PSC girders,  though M/s. L & T were given a notice in writing  informing them the grounds on which it is proposed to  confiscate the goods and they were also given an  opportunity of making a representation within reasonable  time against the said proposed confiscation and a  reasonable opportunity of being heard in the matter, they  only stated that these were not liable for confiscation  being permanently embedded in the earth, thus  immoveable property. As already held since girders at the  earth, they came into existence were not embedded to the  earth, they cannot be considered as immoveable property  and therefore I hold these 75 Nos. of PSC girders liable  for confiscation under Rule 173Q read with Rule 226 of  CER, 1944."    

6.      The appeal preferred thereagainst by the appellant, as noticed  hereinbefore, was dismissed by the Tribunal.

7.      Mr. Venkataraman, learned senior counsel appearing on behalf of  the appellant would raise two contentions in support of this appeal:          (i) That earlier notice having been withdrawn wherein no allegation  of suppression had been made, the same could not have been made in the  second notice dated 1.5.1996.

       (ii) In any event, the question as to whether the activities of the  appellant would attract excise duty or not having been decided for the first  time by a larger Bench of the Tribunal in Asian Techs Ltd. vs.  Commissioner of Central Excise, Pune-II, [2005 (189) ELT 420] it was not  a case where the extended period of limitation should have been invoked.

8.      Mr. Gopal Subramanium, learned Additional Solicitor General  appearing on behalf of the Union of India, on the other hand, would  submit:  

       (i) For construction of the notice dated 27.1.1994, the allegations  made therein as a whole must be taken into consideration for the purpose  of arriving at a conclusion as to whether a case for suppression had been

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made out or not.           (ii) Withdrawal of the first notice per se would  not disentitle the  Department from issuing another notice as the same had been issued by an  officer who had no authority in relation thereto.

       (iii) As the appellant had been seeking exemption from payment of  excise duty, suppression of fact on its part must be inferred as it did not get  itself registered for the purpose of payment of  excise duty.

9.      Whether the activities carried out by the appellant would amount to  manufacture or not was a debatable issue. Our attention has been drawn to  several decisions of the Tribunal, namely, Asian Techs Ltd. (supra),  Rajeswari Enterprises (Constructions) Pvt. Ltd. vs. CCE, Madurai, [2005  (180) ELT 66 (Tri. - Chennai)],  Tecco vs. CCE, Madurai, [2002 (149)  ELT 133 (Tri.- Chennai)]; Delhi Tourism and Transportation Development  Corporation vs. C.C.E., [1999 (114) ELT 421 (Tri.-Delhi)]; M.  Ramachandra Rao vs. CCE, Guntur, [2005 (186) ELT 353 (Tr.- Bangalore)]; Raghunath Ramachandra Shanbag vs. CCE, Mumbai-VII,  [2004 (178) ELT 488 (Tr.-Mumbai)]; and Gammon India Ltd. vs. CCE,  Goa, [2002 (146) ELT 173], which held the field at the relevant point of  time.  

10.     Questions involving similar cases came for consideration before the  Tribunal at different points of time. They were answered differently by  different Benches.

11.     The Tribunal in its order dated 25.4.2003, in the case of M/s. B.E.  Billimoria & Co. Pvt. Ltd. opined that similar goods manufactured by  others do not attract the provisions of the Central Excise Act. It is stated  that the same bench of the Tribunal in its judgment dated 10.5.2004, in  Ragunath Ramchandra Shanbhag (supra), came to a similar conclusion.  

12.     During the period in question being 1993-94, no direct decision on  the point involved was available.  It was noticed that different benches of  the Tribunal in different cases had  rendering their  decisions differently. In  the case of Billimoria (supra), it was categorically held that manufacture of  PSC Girders would not attract the provisions of Central Excise Act, 1944.   13.     Correctness of Billimoria (supra) was questioned by another Bench  of the Tribunal and the matter was referred to a larger Bench. The larger  Bench in Asian Techs Ltd. (supra) relying upon or on the basis of a large  number of decisions of this Court opined that the excise duty was payable  and the principles of works contract would not be applicable in a  case of  this nature.  We, therefore, accept the contention of the learned counsel  that it was not a case where element of suppression extended to apply to   extended period of limitation. It is also  not a case where the appellant did  not plead bona fide. It is furthermore not a case where the Tribunal and  consequently this Court, could have arrived at a finding that the appellant  took recourse to suppressio veri.

14.     Acts of fraud or suppression, it is well settled,  must be specifically  pleaded. The allegations in regard to suppression of facts must be clear and  explicit so as to enable the noticee to reply thereto effectively.  It was not  the case of the revenue that the activities of the appellant were not known  to it.  

15.     Admittedly, when the first show cause notice was issued, the  extended period of limitation was not resorted to. A notice should  ordinarily be issued within a period of six months (as the law then stood)  i.e. within the prescribed period of limitation but only in exceptional cases,  the said period could be extended to 5 years. When in the original notice,  such an allegation had not been made, we are of the opinion that the same  could not have been made subsequently as the facts alleged to have been  suppressed by the appellant were known to them.

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16.     In P & B Pharmaceuticals (P) Ltd. vs. Collector of Central Excise,  [2003 (153) ELT 14 (SC)], this Court held as under:              

"19. However, Mr. Jaideep Gupta submits that the  Tribunal did not accept that here has been assignment of  logo in favour of the assessee. We are unable to accept  the contention of the learned counsel. The tenor of the  order, ’the assessee had produced certain documents such  as registration form, trade mark authorities assigning the  trade mark to them but the fact remains that there was  material evidence by way of seizure of goods  manufactured by M/s. P & B Laboratories bearing the  same logo much after the alleged transfer of trade mark  to the appellants" discloses that the Tribunal accepted  that there has been an assignment but proceeded to deal  with the case of inapplicability of the exemption under  the notification on the ground that the logo was being  used by M/s. P & B Laboratories also. We have already  indicated above that use of logo of the manufacturer by  third parties is alien for purposes of denial of exemption  on the strength of para 7 of the notification. In this view  of the matter, we are unable to uphold the order of the  Tribunal denying the exemption to the assessee.

20. In any event, the ground that the assessee has  suppressed the fact that M/s. P & B Laboratories was  also using the logo for availing the benefit under the  notification cannot be a valid reason to invoke the proviso  to Section 11A of the Act. There is no obligation on the  owner of a logo to make a roving enquiry to ascertain  whether any other person is also using his logo and  disclose it to the authorities to avert a possible allegation  of suppression of fact for purposes of invoking the  proviso."

17.     Yet again in Nizam Sugar Factory vs. Collector of Central Excise,  A.P., [2006 (197) ELT 465 (SC)] the ratio rendered in P & B  Pharmaceuticals Ltd. (supra) has been reiterated stating:

"Allegation of suppression of facts against the appellant  cannot be sustained. When the first SCN was issued all  the relevant facts were in the knowledge of the  authorities. Later on, while issuing the second and third  show cause notices the same/similar facts could not be  taken as suppression of facts on the part of the assessee  as these facts were already in the knowledge of the  authorities. We agree with the view taken in the aforesaid  judgments and respectfully following the same, hold that  there was no suppression of facts on the part of the  assessee/appellant."

18.     In the said decision, this Court followed the earlier judgment of the  Division Bench of this Court in ECE Industries Limited  v. Commissioner  of Central Excise  (2004) 13 SCC 719 = 2004 (164) ELT 236, wherein it  was categorically stated:  

"6. Appellant was served with a second SCN by the  Collector on 16.7.1987 alleging that the appellant was  supplying carbon dioxide to another unit as per  agreement dated 19.3.1983; that they had not taken  necessary licence; had not followed    the procedure  prescribed under the rules; and had not discharged duty  liability. The said SCN covered the period of assessment  years 1982-83 to 1986-87. Appellant responded to the  second SCN and took the plea that the SCN under

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consideration was practically a repetition of the  allegations contained in the SCN dated 28.2.1984 and for  the period April, 1982 to September, 1982 the  department had raised demands under two different  SCNs. It was pointed out that carbon dioxide in the  impure form was not marketable as it also contained  carbon monoxide in lethal proportions. It was contended  that they were under bona fide belief that since such  impure carbon dioxide was not exigible to payment of  duty, they were not required to file either Classification  List or the Price List or take out licence. It was submitted  that resorting to extended period of limitation under  Section 11A(1) was not justified in the circumstances of  the case. Appellant was served with the third SCN on  12.9.1988 for the period 16.3.1988 to 27.6.1988 on the  same allegations. Assessee filed its reply in terms of the  earlier replies i.e. reply to SCN dated 16.7.1987. The  adjudicating authority did not accept the appellant’s  contention and the  demands raised in the SCN were  confirmed.                 xxx                     xxx                        xxx 8.      Without going into the question regarding  Classification and marketability and leaving the same  open, we intend to dispose of the appeals on the point of  limitation only. This Court in the case of P & B  Pharmaceuticals (P) Ltd. v. Collector of Central Excise  reported in (2003) 3 SCC 599 = 2003 (153) ELT 14  (SC) has taken the view that in a case in which a show  cause notice has been issued for the earlier period on  certain set of facts, then, on the same set of facts another  SCN based on the same/similar set of facts invoking the  extended period of limitation on the plea of suppression  of facts by the assessee cannot be issued as the facts were  already in the knowledge of the department\005"

19.     Furthermore, extension of the period of limitation entails both civil  and criminal consequences and, therefore, must be specifically stated in the  show cause notice,  in absence whereof the Court would be entitled to raise  an inference that the case was not one where the extended period of  limitation could be invoked.  [See Commissioner of Central Excise, Chandigarh vs. M/s. Punjab  Laminates Pvt. Ltd., (2006 (7) SCC 431)]

20.     Another aspect of the matter cannot also be lost sight of. Appellant  as also the Konkan Railawy raised a definite plea of bona fide. Such a plea  had not been rejected. As a matter of fact, while considering imposition of  penalty under Section 11A of the Act, the Commissioner has refused to  impose any penalty upon the appellant on the premise that it was  not  guilty of any act of mala fide. We, therefore, keeping in view the facts and  circumstances of this case, are of the considered view that the impugned  judgment cannot be sustained. It is set aside accordingly. We hold that the  Revenue was not justified in invoking the extended period of limitation in  the instant case.  

21.     For the reasons aforementioned, the impugned judgment cannot be  sustained and it is set aside accordingly. The appeal is allowed. However,  in the facts and circumstances of the case, there shall be no order as to  costs.