Holding

The Supreme Court held that the assessee’s declaration was a willful mis‑statement, the exemption under Notification No. 175/86‑CE did not apply, and the extended limitation period under s. 11A(1) was correctly invoked; consequently, both appeals were dismissed.

Summary

The assessee, Dugar Tetenal India Ltd., cleared photographic chemicals under the brand name “Tetenal” claiming exemption under Notification No. 175/86‑CE of the Central Excise Act. Investigation revealed that the brand belonged to a German collaborator, not the assessee, and that the assessee had willfully declared the brand as its own in classification lists, suppressing material facts to evade duty. The Tribunal held that the exemption was not available, the demand of duty was not time‑barred and the extended limitation period under the proviso to s. 11A(1) applied, but remanded the matter to re‑determine assessable value under s. 4(4)(d)(ii) on the basis that the selling price was a cum‑duty price. The Commissioner upheld the demand and imposed a penalty; both the Revenue and the assessee appealed. The Supreme Court affirmed that the declaration was a willful mis‑statement, the exemption did not apply, the extended limitation period was correctly invoked, and the Tribunal’s direction to re‑determine assessable value was proper, dismissing both appeals.

Issues considered

Whether the assessee was entitled to the exemption under Notification No. 175/86‑CE when using a foreign collaborator’s brand name.
Whether the assessee’s mis‑statement and suppression of facts trigger the extended limitation period under the proviso to s. 11A(1) of the Central Excise Act.
Whether the demand for excise duty is barred by the ordinary limitation period.
Whether the selling price of the goods can be treated as a cum‑duty price and the duty element deducted under s. 4(4)(d)(ii).
Whether the Tribunal’s order to remand for re‑determination of assessable value is legally sound.

Legislation cited

Central Excise Act, 1944s. 11A(1), s. 4(4)(d)(ii)
Central Excise Rules, 1944s. 1730

Subjects

central exciseexemptionbrand namemis‑statementsuppression of factsextended limitation periodassessable valuecum‑duty pricesmall scale exemptionfraud

Judgment

• [2008] 4 S.C.R. 481

) COMMISSIONER OF CENTRAL EXCISE, JAIPUR A
' v.
DUGAR TETENAL INDIA LIMITED
(Civil Appeal No. 4055 of 2002)
MARCH 7, 2008
B
[ASHOK BHAN AND DALVEER BHANDARI, JJ.]

' ~ Central Excise Act, 1944:
s.11A(1) - Notification No. 175186-CE dated 1.3.1986 -
Exemption under- Entitlement for, when brand name of foreign c
collaborator used by assessee on its product - Held: Not
entitled.
ss.11A(1) and 4(4)(d)(ii) - Demand - Limitation -
Suppression and mis-statement of facts - Brand name of
D
foreign collaborator used by assessee on its product for
availing benefit of exemption under Notification No. 175186-
CE -Assessing Officer imposed duty and penalty- Challenge
to -Assessee's plea that selling price of goods was cum-duty
price and they were entitled to deduct duty from sale price for
determination of assessable value of goods in terms of s. E
4(4)(d)(ii) - Tribunal holding that demand of duty not time
barred and extended period of limitation was invokable -
Direction to Adjudicating Authority to re-determine assessable
value of goods-:- Held: Order of tribunal correct since assessee
suppressed the material fact that brand name used by them F
was owned by foreign collaborator - Extended period of
limitation invokable for demanding duty.
Assessee cleared its product under the brand name
'Tetenal' without payment of duty, claiming the benefit of G
exemption under Notification No. 175/86-CE dated
1.3.1986. It was found that the assessee had cleared the
product affixed with brand name of another person; and
' thus, was not eligible for the benefit of exemption. The
481 H
482 SUPREME COURT REPORTS [2008] 4 S.C.R.

A Department issued notice to assessee to pay excise duty
i ...
and to show cause why penalty be not imposed on them.
The tribunal held that the assessee was not entitled to
the benefit of Notification and remanded the matter to the
Adjudicating Authority for fresh decision. The
B Commissioner upheld the demand of duty raised
assessee by invoking extended period of limitation under
proviso to s. 11A(1) of the Central Excise Act, 1944 and
also imposed penalty. AggrievP.d, assessee filed appeal
against the Commissioner's order. It also contended that
c the selling price of the goods was the cum-duty price and
they were entitled to deduct the duty element from the
sale price for the purpose of determination of assessable
value of the goods in terms of Section 4(4) (d) (ii) of the
Act. Tribunal held that the demand of duty was not barred
by time; and that the extended period of limitation was
0
invokable. However, it set aside the quantum of duty and
the penalty imposed and directed the adjudicating
authority to re-determine the assessable value of the
goods after examining the assessee's claim under section
4(4) (d) (ii) of the Act. Hence the present appeal.
E
Appellant-Revenue contended that the assessee
was fully aware of the fact that during the material period,
the brand name 'Tetenal' did not belong to them but
belonged to their German collaborator; that the assessee
F deliberately suppressed this material fact before the
department with intent to evade payment of duty on the
branded goods by wrongly availing the benefit of
exemption under the Notification No. 176/86-CE; and that
there was no material on record to support the plea of
G bonafide belief.
Assessee contended that the assessee was under a
bonafide belief that they were entitled to the benefit of
exemption under the Notification in respect of the
products manufactured by the assessee and cleared
H under the brand name 'Tetenal' during the material period
~ v
COMMISSIONER OF CEN""."RAL EXCISE, JAIPUR v. 483
DlJGAR TETENAL INDIA LIMITED
4 t
and, therefore, they had no intent to evade payment of A
duty; that the brand name 'Tetenal' on the finished goods
was duly declared by the assessee in its classification
list which were accepted by the Revenue; that it was not
a case of mis-statement or suppression of the fact but
interpretation of Notification No. 175/86-CE; that they were B
eligible to the exemption treating the brand name 'Tetenal'
,. as their own product; that demand was clearly barred by
~
time; that the extended period of limitation could not be
invoked; and that the selling price of the goods was the
cum-duty price and they were entitled to deduct the duty
element from the sale price for the purpose of
c
determination of assessable value of the goods in terms
of Section 4(4) (d) (ii) of the Act.
Dismissing the appeals, the Court
HELD: 1.1 The declaration of the assessee in the D
" ~ classification list that the brand name 'Tetenal' was owned
by them was a willful mis-statement/suppression of facts
with the intent to evade payment of duty with ulterior
motive to avail benefit under Notification No. 175/86-CE.
The assessee was fully aware of the fact that the same E
was not owned by it and that the same belonged to their
foreign collaborator. Director of the unit in his statement
admitted that the brand name 'Tetenal' was owned by the
foreign collaborator and not by the assessee. Thus, the
conditions postulated in proviso to section 11 A(1) of the F
'* Central Excise Act, 1944 for invoking extended period of
limitation are fully satisfied. [Para 11] [489-A, B, CJ
1.2 Para 7 of the Notification No.175/86-CE stipulates
that the benefit of exemption will not be available to the
goods on which the brand name of another manufacturer G
is affixed and the said manufacturer is not entitled to the
C:>
1 small scale exemption, so that the benefit of small scale
exemption should not be misused by manufacturers
manufacturing goods for different persons. Admittedly, the
German collaborator was not entitled to avail the SSI H
484 SUPREME COURT REPORTS [2008) 4 S.C.R.

j ..
A exemption. ft is presumed that the assessee while fifing
the classification fist would be aware of Clause 7 of the
Notification. fnspite of clause 7 in the Notification, the
assessee made a mis-statement in the classification list
for claiming benefit of the exemption Notification No. 175/
B 86-CE. Thus, there is no merit in the appeal filed by the
assessee. [Para 12] [489-D, E, F]
1.3 The tribunal accepted the plea of the assessee ~ ..
that the selling price of the goods was the cum-duty price
and they were entitled to deduct the duty element from
C the sale price for the purpose of determination of
assessable value of the goods in terms of Section 4(4) (d)
(ii) of the Act. The Tribunal rightly remanded the case to
re-determine the duty payable keeping in mind the
provisions of section 4 (4) (ii) of the Act. [Paras 13 and 14]
D [489-F, G; 491-A]
Shri Chakra Tyres Ltd. V CCE, Madras, 1999 (32) RLT ~
1; Commissioner of Central Excise, Delhi V Maruti Udyog
Limited 2002 (3) SCC 547; Asstt. Collector of Central Excise
V Bata India Limited, 1996 (4) SCC 563 - referred to.
E
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4055
of 2002.
From the final Order No. 14/2002-C Dated 25.01.2002 of
the Central Excise Salt Act, 1944 CEGAT, New Delhi in Appeal
F No. E/303/2001-C. '
WITH
Civil Appeal No. 5608/2002.
G I Venkatanarayana, Binu Tamta (for B. Krishna Prasad)
for the Appellant.
V Lakshmikumaran, Alok Yadav (for M.P. Devanath) and
3jesh Kumm for the Respondent.
The J udqment of the Court was delivered by
H
~
'
COMMISSIONER OF CE\JTRA;_ EXCISE. JA:PUR v. 485
:JLGAR TETENAL NOIA L~MITED [BHAN, J.]

- ~
BHAN, J. 1. These two appeals are directed against the
order of Customs Excise and Gold (Control) Appellate Tribunal.
A

De hi in appeal No. E/303/2001-C (F:nal Order No. 14/02-C)
dated 25 1.2002. C'vil Appeal No 4055 of 2002 has been filed
by tre Revenue whereas Civil Appeal No. 5608 of 2002 has
been filed by the assessee. B
2. The Assessee is engaged in the manufacture of
,. ~
photographc chemicals. Durng the period from March. 1988
to February. 1992 assessee cleared its products under the
brand na~e "Tetenal" without payment of duty, claiming the
benefit of exemption under Notification No. 175/86-CE dated c
1.3 86. From the result of investigation conducted by the officers
of Central Excise. it was found that the brand name 'Tetenal"
belonged to Mis Tetenal Vertribs GmBH. Germany and that the
assessee was not eligible for the benefit of exemption
Notification as they had cleared their product affixed with the D
" T
brand name of another person It further appeared to the
department that the assessee had mis-stated and suppressed
facts with intent to evade payment of duty on the goods. The
department, therefore, by show cause notice dated 24.6.1992
called upon the assessee to pay central excise duty of E
Rs.32,25,465/- on the goods cleared during the aforesaid
period and also to show cause V:1hy penalty should not be
imposed on them.

3. The Collector vide his order dated 5.11.1992 dropped
. the proceedings. The Revenue filed an appeal before the F
Tr!bunal. The Tribunal by its order dated 21.3.2000 held that the
assessee was not entitled to the be refit of the Notification and
consequently remanded the matter to the adjudicating authority
for fresh decision on the question whether the demand of duty
was within the time prescribed under the Act. G
,. 4. In pursuance to the order passed by the Customs Excise
• and Gold (Contrpl) Appeltate Tribunal, the Commissioner by its
order dated 6.11.2000 rejected the plea taken by the assessee
that the extended period of limitation could not be invoked. The
H
~ '
486 SUPREME COURT REPORTS [2008] 4 S.C.R.

A Commissioner confirmed the demand of duty of Rs.32,25,465/
j ..
- against the assessee by invoking the extended period of
limitation prescribed under the proviso to Section 11A(1) of the
Central Excise Act, 1944 (for short "the Act") and also imposed
a penalty of Rs. 3 lakhs under Rule 1730 of the Central Excise
8 Rules, 1944 (for short "the Rules").
5. The assessee being aggrieved filed an appeal against
the afdresaid order before the Tribunal. Apart from raising the .. ..
issue of applicability of the Notification and limitation, the
assessee further contended that the selling price of the goods
c was the cum-duty price and they were entitled to deduct the
duty element from the sale price for the purpose of determination
of assessable value of the goods in terms of Section 4(4) (d)
. (ii) of the Act. Tribunal by its impugned order held that the
demand of duty is not barred by time. That the extended period
D of limitation was invokable in the present case. Against this
portion of the order the assessee has filed the appeal. The .,. 4

Tribunal however set aside the quantum of duty and directed
the adjudicating authority to re-determine the assessable value
of the goods after examining the assessee's claim under section
E 4(4) (d) (ii) oftheAct on its merits and in the light of the Tribunal's
order in the case of Shri Chakra Tyres Ltd. V. CCE, Madras,
1999 (32) RLT-1. Against this portion of the order, the Revenue
is in appeal. Tribunal had set aside the order imposing penalty
but the same has not been challenged by the Revenue.
F Civil Aeeeal No. 5608 of 2002 ~

6. Mr. V. Lakshmikumaran, learned counsel appearing for
the assessee strenuously contended that the assessee was
under a bonafide belief that they were entitled to the benefit of
exemption under the Notification in respect of the products
G
manufactured by the assessee and cleared under the brand
name "Tetenal" during the material period and, therefore, they
had no intent to evade payment of duty. It was also contended •
that the brand name "Tetenar on the finished goods was duly
declared by the assessee in its classification list which were
H
COMMISSIONER OF CENTRAL EXCISE, JAIPUR v. 487
DUGAR TETENAL INDIA LIMITED [BHAN, J )
_.. •
accepted by the Revenue. That they were eligible to the A
exemption treating the brand name ''Tetenal" as their own
product. That the classification list was being submitted right
from 1988 and approved by the department and that it was not
a case of mis-statement or suppression of the fact but
interpretation of Notification No. 175/86-CE. The period of B
dispute was from February, 1988 to March, 1992 and the show
,. • cause notice was issued on 26.6.1992, hence the demand prior
to 24.12.1992 was clearly barred by time.
7. As against this, Mr. I. Venkatanarayana, learned senior
counsel appearing for the Revenue submitted that the assessee c
was fully aware of the fact that during the material period, the
brand name "Tetenal" did not belong to them but belonged to
their German collaborator. The assessee suppressed this
material fact before the department with intent to evade payment
of duty on the branded goods by wrongly availing the benefit of. D
~
Notification No. 176/86-CE. It was contended that there was no
material on record to support the plea of bonafide belief. It was
further submitted that the assessee deliberately withheld from
the department the material information that the brand name
was that of their foreign collaborator and the same was done E
with the intention to avail the benefit of exemption under the
notification to which the assessee was not entitled.
8. Assessee's main contention is that use of brand name
"Tetenal" on finished goods was duly declared in their
,. classification list and they were under a bonafide belief that they F
were entitled to SSI benefit treating the brand name "Tetenal"
as their own property. That the belief of the assessee was
reinforced by the fact that classification lists which were being
submitted from 1988 onwards had been duly approved. It is
not disputed that the appellants had given the following G
declaration on various classification list filed by it from time to
1 time:-
"We shall affix our brand name on finished goods which
will be only our brand name viz. "Tetenal"
H
l
488 SUPREME COURT REPORTS (2008] 4 S.C.R.

1 ...._
A 9. This declaration gives an impression as if the brand
name 'Tetenal" was owned by them. On investigation the claim
of the assessee was found to be false. The excise officers
unearthed that the said brand name was in fact owned by one
Mis. Tetenal Vertriebs GmBH, Germany, their foreign
B collaborator and that they were paying royalty@ 4% of ex-factory
price minus the cost of imported inputs as per written agreement
between them. Thus it is established beyond reasonable doubt 4 ..
that the assessee had wrongly been giving declaration in various
classification lists that the brand name "Tetenal" was owned by
c them.
10. Proviso to Section 11 A(1) of the Act reads:
"Section 11 A- Recovery of duties not levied or not paid or
short-levied or short-paid or erroneously refunded
D (1) When any duty of excise has not been levied or paid
or has been short-levied or short-paid or erroneously
refunded, whether or not such non-levy or non-payment, "
short-levy or short payment or erroneous refund, as the
case may be, was on the basis of any approval,
E acceptance or assessment relating to the rate of duty on
or valuation of excisable goods under any other provisions
of this Act or the rules made thereunder, a Central Excise
Officer may, within one year from the relevant date, serve
notice on the person chargeable with the duty which has
F not been levied or paid or which has been short-levied or ~

short-paid or to whom the refund has erroneously been
made, requiring him to show cause why he should not pay
the amount specified in the notice :
Provided that where any duty of excise has not been levied
G or paid or has been short-levied or short-paid or
erroneously refunded by reason of fraud, collusion or any
wilful mis-statement or suppression of facts, or t
contravention of any of the provisions of this Act or of the
rules made thereunder with intent to evade payment of
H duty, by sucti person or his agent, the provisions of this
COMMISSIONER OF CENTRA.. EXCISE, JA:PUR v 489
DUGAR TETENAL 'NOIA LIMITED '.BHAN, J.]
~ ~
sub-section shall have effect as if, for the words "one A
year". the words "five years" were substituted"
11. The declaration of the assessee in the classification
list that the brand name "Tetenal" was owned by them was a
...,.. willful mis-statemenUsuppression of facts with the intent to evade
payment of duty with ulterior motive to avail benefit under B
Notification No. 175/86-CE dated 1.3.86. The assessee was
" ~ fully aware of the fact that the same was not owned by it and that
the same belonged to their foreign collaborator. Shri Vijay
Prakash Katta, Director of the unit in his statement dated
11.3.1992 admitted that the brand name "Tetenal" was owned c
by the foreign collaborator and not by the assessee. Thus the
conditions postulated in proviso to Section 11 A(1) for invoking
extended period of limitation are fuily satisfied
12. Para 7 of the Notification No. 175/86-CE stipulates
D
that the benefit of exemption will not be available to the goods
.. on which the brand name of another manufacturer is affixed and
the said manufacturer is not entitled to the small scale exemption,
so that the benefit of small scale exemption should not be
misused by manufacturers manufacturing goods for different
persons. Admittedly the German collaborator was not entitled E
to avail the SSI exemption. We presume that the assessee white
filing the classification list would be aware of Clause 7 of the
Notification. In spite of clause 7 in the Notification, the assessee
made a mis-statement in the classification list for claiming
A
benefit of the exemption Notification No. 175/86-CE For the F
reasons stated above, we do not find any merit in the appeal
filed by the assessee.
13. The assessee in addition to the submission that the
extended period of limitation could not be invoked had
G
contended that the selling price of the goods was the cum-duty
. price and they were entitled to deduct the duty element from the
• sale price for the purpose of determination of assessable value
of the goods :n terms of Section 4(4) (d) (ii) of the Act. The
Tribunal accepted this plea of the assessee relying upon the
H
490 SUPREME COURT REPORTS [2008] 4 S.C.R.

A decision of the Tribunal in the case of Shri Chakra Tyres Ltd 1 ....,__
(supra). The view taken in Shri Chakra Tyres Ltd (supra) was
affirmed by this Court in Commissioner of Central Excise,
Delhi V. Maruti Udyog Limited, 2002 (3) SCC 547. Learned
counsel for the Revenue has relied upon the judgment of this
B Court in Asl)tt. Collector of Central Excise V. Bata India
Limited , 1996 (4) SCC 563. This judgment was duly
• ..
considered in Maruti Udyog Limited (supra). After considering
the case in Bata India Limited (supra) this Court observed in
para 5 as under:-
c "5. A reading of the aforesaid Section clearly indicates
that the wholesale price which is charged is deemed to
be the value for the purpose of levy of excise duty, but the
element of excise duty, sales tax, or other taxes which is
included in the wholesale price is to be excluded in arriving
D at the excisable value. This Section has been so construed
by this Court in Asstt. Collector of Central Excise and Ors .,
v. Bata India Ltd., 1996 (4) SCC 563, and it is thus clear
that when cum-duty price is charged, then in arriving at the
excisable value of the goods the element of duty which is
E payable has to be excluded. The Tribunal has, therefore,
rightly proceeded on the basis that the amount realised by
the respondent from the sale of scrap has to be regarded
as a normal wholesale price and in determining the value
on which excise duty is payable the element of excise duty
F which must be regarded as having been incorporated in ..
the sale price, must be excluded. There is nothing to show
that once the demand was raised by the Department, the
respondent sought to recover the same from the purchaser
of scrap. The facts indicate that after the sale transaction
was completed, the purchaser was under no obligation to
G
pay any extra amount to the seller, namely, the respondent.
In such a transaction, it is the seller who takes on the
obligation of paying all taxes on the goods sold and in
,
such a case the said taxes on the goods sold are to be
deducted under Section 4(4) (d) (ii) and this is precisely
l:i
COMMISSIONER OF CENTRAL EXCISE, JAIPUR v. 491
DUGAR TETENAL INDIA LIMITED [BHAN, J.]

what has been directed by the Tribunal. There is also A
nothing to show that the sale price was not cum-duty. "
14. In our view. the Tribunal has rightly remanded the case
to re-determine the duty payable keeping in mind the provisions
of Section 4(4) (d) (ii). ·
8
15. For the reasons stated above, we do not find any merit
in either of the appeals and accordingly dismiss the same
leaving the parties to bear their own costs.
N.J. Appeals dismissed.
c