Holding

The adjudication was beyond the normal limitation period and the extended period of limitation under Section 11A was not available, as suppression must be wilful.

Summary

Continental Foundation Joint Venture Holding and two other construction firms were alleged by the Commissioner of Central Excise, Chandigarh, to be manufacturing Ready Mix Concrete (RMC) instead of "mix concrete" and thus liable to excise duty under Chapter 3824.20 of the Central Excise Tariff Act, 1985. The Revenue issued a show‑cause notice, confirmed duty and imposed a penalty. The appellants contended that the demand was barred by limitation, that the extended period of limitation under Section 11A of the Central Excise Act, 1944 was not available, and that any alleged suppression of facts was not wilful. The CEGAT rejected these pleas and upheld the demand. On appeal, the Supreme Court held that the adjudication was beyond the normal limitation period and that the extended period of limitation could not be invoked because suppression must be wilful; mere omission does not satisfy the proviso to Section 11A. Consequently, the demand and penalty were set aside.

Issues considered

The adjudication was made beyond the normal period of limitation under the Central Excise Act, 1944.
Whether the extended period of limitation under Section 11A is available to the Revenue in the present case.
Whether the alleged suppression of facts by the appellants was wilful, satisfying the proviso to Section 11A.
Whether the concrete manufactured constitutes "Ready Mix Concrete" (dutiable) or "mix concrete" (exempt).
The allocation of the burden of proof when the Revenue invokes the extended period of limitation.

Legislation cited

Central Excise Act, 1944s. 11A
Central Excise Rules, 1944s. Rule 209A
Central Excise Tariff Act, 1985s. Chapter Heading 3824.20

Subjects

central exciselimitation periodSection 11Asuppressionready mix concreteduty evasionburden of proofpenaltyconstruction industry

Judgment

(

A MIS CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING,
NATHPA HIMACHAL PRADESH
v.
COMMNR. OF CENTRAL EXCISE, CHANDIGARH-I

AUGUST 29, 2007
B
(DR.ARIJIT?ASAYAT ANDS.fl. KAPADIA,JJ.I

Central Excise Act, 1944-s. JIA-Manufacture of Mix Concrete-
C Excis,e duty-Demand of-Alleging that the m~nufacture was of Ready Mix
Concrete (RMC)-Jn respect offinancial year 1997-1998-:-Penalty imposed-
Plea of manufacturer that extended period of limitation not available-
Demand confirmed by· Tribunal-On appeal, held: Duty not liable to be .
levied-Since the adjudication was beyond normal period of limitation and
extended period of limitation was not available to the Revenue- b; the facts
b of the case, there was scope of entertaining doubt about the view to be taken
regarding levy· on the good-When Revenue invokes extended period of
limitation, burden to prove. suppression of fact is cast upon it-Central
Excise Tariff Act, 1985-Schedule, Chapter Heading No.3824.20-Central
£,xcise Rules, 1944-r. 209A.

E Words and Phrases-'Suppresion'- Meaning of-:-ln the context of s.
11 A of Central Excise Act, 1944.

Appellants-constructions companies were manufacturing Mix Concrete
Revenue demanded excise duty on the concrete alleging that the companies
were manufacturing Ready Mix Concrete (RMC) and not Mix Concrete and
F the same fell under Chapter Heading No.3824.20 of the Schedule to the · -(
Central Excise Tariff Act, 1985. Revenue relied on Circulars dated 23.5.1997
and 19.12.1997. The duty was confirmed by the Revenue and penalty was also
imposed.

G. Appellants took the plea that extended period of limitation under Section
1lA of Central Excise Act was not available. But the adjudicating authority,
rejecting the plea, confirmed the demand.

In appeal CEGAT did not accept the plea of non-availability·of extended .-:;.,
period of limitation and confirmed the demand of duty.
H 554
CONTINENTALFOUNDATIONJOINTVENTURESHOLDING,NATHPA1·.C.C.E. 555
In appeal to this Court, appellants contended that there was no clarity A
or unanimity in the views expressed by the authorities; that there were various
Circulars operating at different points of time; and that order of CEGAT in
the case of one of the appellants was held to be not correct in a subsequent
larger Bench judgment.

Allowing the appeals, the Court B

HELD: l. The adjudication was beyond the normal period of limitation
and the extended period of limitation was not available to the Revenue.
[Para 14) [561-B)

2. The expression 'suppression' has been used in the provis() to Section C
llA of Central Excise Act, 1944 accompanied by very strong words· as 'fraud'
or 'collusion' and, therefore, has to be construed strictly. Mere omission to
give correct information is not suppression of facts unless it was deliberate
to stop the payment of duty. Suppression means failure to disclose full
information with the intent to evade payment of duty. When the facts are D
.known to bot the parties, omission by one party to do what he might have done
would not render it suppression. When the Revenue invokes the extended
period of limitation under Section 11-A the burden is cast upon it to prove
suppression of fact. An incorrect statement cannot be equated with a willful
mis-statement. The latter implies making of an incorrect statement with the
knowledge that tlie statement was not correct. (Para 10) (560-B-D] E
3. Factual position goes to show the Revenue relied on the Circular dated
23.5.1997 and 19.12.1997. The Circular dated 6.1.1998 is the one on which
appellant places reliance. Undisputedly, order of CEGAT in one of the
appellants' case was held to be not correct in a subsequent larger Bench
·judgment. It is, therefore, clear that there was scope for entertaining doubt F
about the view to be taken. The Tribunal apparen'tly has not considered these
aspects correctly. Contrary to the factual position, the CEGAT has held that
no plea was taken about there being no intention to evade payment of duty as
the same was to be reimbursed by the buyer. In fact such a plea was clearly
taken. The factual scenario clearly goes to show that there ~as scope for G
entertaining doubt, and taking a particular stand which rules out application
of Section llA of the Act. (Para 11) (560-D-F)

4. So far as fraud and collusion are concerned; it is evident that the
intent to ev~de duty is built into these very words. So far as mis-statement or
suppression of facts. are concerned, they are clearly qualified by the word H
556 SUPREME COURT REPORTS [2007] 9 S.C.R

A 'wilful', preceding the words 'mis-statement or suppression of facts' which
means with intent to evade duty. The next set Qfwords 'contravention of any
of the provisions of this Act or Rules' are again qualified by the immediately
following words 'with intent to evade payment of duty'. Therefore, there c,:annot
be suppression or mis-statement of fact, which is not wilful and yet constitute
a perJl!issible ground for the purpose of the proviso to Section 1 lA. Mis-
B statement of fact must be wilful. That being so, the adjudicating authorities
were not justified in raising the demand. (Paras 12 and 13) (560-H; 561-B)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3139 of2002.

From the final Order No. 20-23/02-C dated 22.01.2002 of the Customs,
C Excise & Gold (Control) Appellate· Tribunal, C Bench, New Delhi in Appeal
No. E/2631/2000-C.

WITH

C.A. No. 3336 and 3504 of2002.
D
Joseph Vellapally, Rahul Ray, Kamlendra Mishra, Rupesh Kumar, Neelam.
Sharna,- PAS.Rao, D.N.Mishra, P.K. Sahu, Prashant, Raghvesh Sing~ and )--
Radha Shayam Jena for the Appellant.

A.Subba Rao, K.Subba Rao, Naveen Prakash, Rahul Kaushik ;md
E B.Krishna Prasad for the Respondent.

The Judgment of the Court. was delivered by

DR. ARIJIT PASAY AT, J. I. These appeals involve identical question
of law and are, therefore, disposed of by this common judgment. The
F controversy relates to the financial year 1997-98. Post 1997-98 the tariff entry
provides that the rate is nil. The basic facts are noted in the appeal filed by ·
Continental Foundation Joint Venture-the appellant in Civil Appeal No.3139.
of2002.

G 2. The appellant Mis Nathpa Jhakri Power Corporation (in short 'NJPC')
is a Joint venture between the Government of India and Govt. of Himachal
Pradesh, set up for the purpose of construction of a power-project between
the towns of Nathpa-Jhakri in Himachal Pradesh known an Nathpa Jhakri
Power Corporation funded by the World Bank. The civil work relating to the
project was allotted to three construction companies viz. M/s Continental
H Foundation Joint Venture (in short 'CFJV'), Mis Nathpa Jhakri Joint Venture
CONTINENTALFOUNDATIONJOINTVENTURESHOLDING,NATHPAv.C.C.E.[PASAYAT,J.] 557

(in short 'NJJV') and Mis Jai Prakash Hyundai Consortium, (in short 'JPHC'). A
The agreement was entered into by Mis NJPC and the construction companies
to provide inter alia 'mix concrete' for execution of various items of work
under the contract.

~- The Commissioner of Central Excise, Chandigarh issued a show cause
notice dated 20.1.1999 to all the above parties alleging that the construction B
companies employed by Mis NJPC were manufacturing Ready Mix Concrete
(in short 'RMC') on which no centr.al excise duty is being paid. Since the said
RMC falls under Chapter Heading No.3824.20 of the Schedule tc the Central
Excise TariffAct, 1985 (in short 'Tariff Act') and is subject to Central Excise
duty under Central Excise Act, 1944 (in short the 'Act'), duty is payable. All C
the three parties are adopting the same method of manufacture of RMC for
which the rock is blasted from the designated quarry of Mis NJPC. It is
transported to the crusher and crushed to the specified sizes and specific
quantity at the project site. Some aggregate, cement and sand are also produced
from the crushing plant set up at the site. Some natural sand is also used.
The aggregate and sand are transported and stored in bins adjacent to the D
automatic batching plant. The cement purchased from the market is stored in
-1( · the cement silons at the site. The batching plant is an automatic plant which
regulates and delivers the specif!ed sizes and quantities of aggregate, sand
and cement into the mixing drums through the built- in-conveyor. The admixture
for water reduction or air entraining is incorporated in the concrete as per the E
approved mix design given by the NJPC. The whole process is fully automatic
and is electronically controlled. The concrete of approved mix design and the
specified quantity is manufactured in the batching plant strictly in accordance
with IS: 456-1978 as stipulated in the contract with Mis NJPC. The concrete
so produced is transported by transit mixers upto the location of placement
~- and is placed at the spe"Cified location by concrete pumps or placers before F
the setting time of concrete, which varies depending upon the type of cement
used. Noticee companies are manufacturing RMC but with some motive, they
are naming it as mixed concrete to evade the central excise duty. There is a
difference between the process and method of manufacture of RMC provided
in the Bureau oflndian Standards (in short 'BIS') literature under IS: 492611976 G
and the Board's letter No.36811/98-CX dated 6.1.1998. In this Circular of the
Board, the process of manufacture of RMC is spelt out and it is clarified that
RMC is a dutiable product. The matter was referred to the BIS who vide their
letter dated 23. I 0 .1998 reported that the query raised by the department vi de
their letter dated 9.7.1998 was considered by the Concrete Sub Committee and
its views are as follows: H
558 SUPREME COURT REPORTS (2007] 9 S.C.R.

A "It is agreed that in so far as the process of manufacturing the
concrete is involved, the process described in the letter of Central ·
Excise is similar to the process given in IS;4926 specification for
"Ready Mix Concrete".

4. Considering the reply of the notices, the Commissioner of Central
B Excise, Chandigarh-I confirmed the amounts of duty and also imposed penalty
in terms of Rµle 209A of the Central Excise Rules, 1944 (in short the 'Rules')~
One of the stands taken by· the appellant was that the extended period of
limitation under Section I lA of the Act was not available. There were doubts
raised and, in fact, at different points of time, circulars have been issued. This
C plea was .turned down by the adjudicating authority with the following
observations:

"Based on above discussions, it is evident that Mix Concrete
manufactured and used at the site of construction is in fact Ready Mix
Concrete and Mis NJPC alongwith three construction companies have
D concealed its nomenclature with an obvious intention to escape the
duty on the said Ready Mix Concrete. Mis NJPC have apparently
abetted the contravention of non payment of Duty, they are therefore,
liable for penal action the said abetment."

5. In appeal, apart from the other challenges the plea relating to non-
E iipplicability of the extended period of limitation was also urged. The Tribunal
did not accept the contention with the following qbservations:

"I 6. Another argument is about the time bar of demands. It is contended
that; in view of the Board Circular dated 6. I. I 998, since they were "'
J?aking the concrete at site and as per the standards prescribed in IS:.
F 456-1978, they were under a bonafide belief that what they were
manufacturing was mix concrete and not the RMC. The contention of
bonafide belief is also advanced on their eligibility to the exemption
under Notification No.4/97-CE dated I .3.97. We find litt)e force in this
submission. A specific entry was made in the Central Excise Tarifffor
RMC under Heading 3824.20 with effect.from 1.3.1997. ~e exemption
G under the notification was provided to mix concrete made. at site and
not to the RMC. None of the appellants sought any clarification from
their jurisdictional central excise authorities or obtained any lea I
opinion as to the exigibility of their product, or its eligibility to the '>4
exemption under this notification. The Board Circular dated 6.1.1998
H was issued much after the RMC was brought under the excise net. In
.
CONTJNENTALFOUNDATIONJOINTVENTURESHOLDING,NATIIPA1"C.C.E.[PASAYAT,J.] 559

the face of these facts, the plea of bonafide belief by the appellants A
is not supported by the evidence on record.· Another contention ·
raised is that the appellants could not have had any intention to
evade payment of duty, since the contract between the applicants and
the Power Corporation specifically provided that any additional cost
that was incurred as a result of any change in legislature or States B.
statutes, regulations or by laws would be paid by_ the Power
Corporation. It is contended that, where the excise duty is reimbursed
by the buyer, there could not be any intention to evade payment of
duty. It is observed that no such plea is raised before the adjudicating
authority. The Power Corporation is also an appellant tn this case and
there is no plea of any such commitment on their behalf in their ~
appeal. There is no evidence that the stated clause in the contract
would bind the Power Corporation to reimburse the appellants even
for the duty liability fastened on to the appellants on the ground of
suppression and misrepresentation etc. and not on account of any
change. in legislati<;m, regulation or by laws. The plea of bonafide
belief is, therefore, rejected. The appellants are also claiming the D
benefit of modvat credit on the input material but this plea is also not
-( raised before the original authority. However, in the interest of justice,
they could be given an opportunity to establish their case before the
original authority for eligibility to the modvat credit in respect of the
duty paid on the input material used in the manufacture of RMC with· E
the documentary proof."

6. Similar view was expressed by the CEGAT in other appeals which is
the subject-matter in the other appeals.

7. Mr. Joseph Vellapally, learned senior counsel for the appellant F
submitted that there were various circulars operating at different points of
time. There was no clarity or unanimity in the views expressed by the
authorities themselves .. In fact, correctness of the judgment by CEGAT in
Continental Foundation Joint Venture's case (supra) was doubted and the
matter was referred to larger bench. In Chief Engineer Ranjt Sagar Dam v.
CommissionerofC.Ex., Jalandhar, (2006) 198 E.L.T. 503 (Tri.-LB) larger bench G
of the Tribunal has held that the view expressed in Continental Foundation
Joint Venture's case (supra) was not the correct view.

8. In response, learned counsel for the respondents submitted that the
circulars dated 1.2.1996, 23 .6.1997 and 6. I.I 998 have no relevance and the
H
560 SUPREME COURT REPORTS [2007] 9 S.C.R

A judgment in. Chief Engineer Ranjt's case (supra) does not reflect the correct
position.

9. We are not really concerned with .the other issues as according to us
on the challenge to the extended period of limitation ground alone the
appellants are bound to succeed. Section l lA of the Act postulates
B suppression and, therefore, involves in essence mens rea.

IO. The expression 'suppression" has been used in the proviso to
Section l IA of the Act accompanied by very strong words as 'fraud' or·
"collusion" and, therefore, has to be construed strictly. Mere omission to
C give correct information is pot suppression of facts unless it was deliberate
to stop the payment of duty. Suppres~lon means failure to disclose full
information. with the intent to evade payment of duty. When the facts are
known to both the parties, omission by one party to do what he might have
done would not render it suppression. When t~e Revenue invokes the
extended period of limitation under Section 11-A ..t!ie burden is cast upon it
D ·to prove suppression of fact. An incorrect statement"' cannot be equated with
a willful misstatement. The latter implies mlking·of an incorrect statement with
the knowledge that the statement was not correct.

· 11. Factual position goes to show the Revenue relied on the cir~ular
dated 23.5.1997 and dated 19.12.1997. The circular dated 6.l.1998 is the one
E on which appellant places reliance. Undisputedly, CEGA T in Continental
Foundation Joint Venture. case (supra) was held to be not correct in a
subsequent larger Bench judgment. It is, therefore, clear that there was scope
for entertaining doubt about the view to be taken. The Tribunal apparently
'·has not considered these aspects correctly. Contrary to the factual positfon,
F the CEGA T has held that no plea was taken about there being no intention
to evade pay~ent of duty as the same was to be reimbursed by the buyer.
In fact such a plea was clearly taken. The factual scenario clearly goes to
show that there was scope for entertaining doubt, and tiiking a particular
stand which rules out application of Section l IA of the Act.

G 12. As far as fraud and collusion are concerned, it is evident that the
intent to evade duty is built into these very words. So far as mis-statement
or suppression of facts are concerned, they are clearly qualif!ed by the word
'wilful', preceding the words "mis-statement or suppression of facts" which
means with intent to evade duty. The next set of words 'contravention of any
of th.e provisions. of this Act or Rules' are again qualified by the immediately
H
CONTINENTALFOUNDATIONJOINTVENTURESHOLDING,NATHPAv.C.C.E.[PASAYAT,J.]· 561

following words 'with intent to evade payment of duty.' Therefore, there A
cannot be suppression or mis-statement of fact, which is not wilful and yet
constitute a permissible ground for the purpose of the proviso to Section
I IA. Mis-statement of fact must be wilful.

13. That being so, the adjudicating authorities were not justified in
raising the demand and CEGA T was not justified in dismissing the appeals. ~

14. On the ground of adjudication beyond the normal period of limitation
and. non-availability of the extended period of limitation, the appeals are
allowed. No costs.

KKT. Appeal allowed. C