M/S. UNIWORTH TEXTILES LTD.versusCOMMISSIONER OF CENTRAL EXCISE, RAIPUR

                      [2013] 3 S.C.R. 27


           M/S. UNIWORTH TEXTILES LTD.                           A
                           v.
     COMMISSIONER OF CENTRAL EXCISE, RAIPUR
        ·   (Civil Appeal No.6060 of 2003)
                     JANUARY 22, 2013
                                                                 B
         [D.K. JAIN AND MADAN B. LOKUR, JJ.]

        Customs Act, 1962 - s.28 r!w the proviso thereto and
  s. 112 - Levy of customs duty and penalty - Challenge to -
 Plea of assessee-appellant that the demand of duty along C
  with the penalty was barred by limitation turned down by
  Tribunal - Held: Conclusion of the Tribunal that mere non-
  payment of duties is equivalent to collusion or willful
 ·misstatement or suppression of facts is untenable - S.28
  contemplates two situations, viz. inadvertent non-payment and D
  deliberate default - The former is canvassed in the main body
  of s.28 and is met with a limitation period of six months,
  whereas the latter, finds abode in the proviso to the section
  and faces a limitation period of five years - For the operation
  of the proviso, tf]e intention to deliberately default is a E
  mandatory prerequisite - In the present case, from the
  evidence adduced by the appellant, an inference of bona fide
  conduct is drawn in favour of the appellant - Evidently the
  appellant made efforts in pursuit of adherence to the Jaw rather
  than its breach - Moreover, the proviso to s.28 finds F
  application only when specific and explicit averments
  challenging the fides of the conduct of the assessee are made
  in the show cause notice, a requirement that the show cause
· notice in the present case fails to meet - On account of the
  fact that the burden of proof of proving ma/a fide conduct under G
  the proviso to s.28 lies with the Revenue; that in furtherance
  of the same, no specific averments find a mention in the show
  cause ·notice which is a mandatory requirement for
  commencement of action under the said proviso; and that
                               27                                 H
    28       SUPREME COURT REPORTS               [2013) 3 S.C.R.


A   nothing on record displays a willful default on the part of the
    appellant, the extended period of limitation under the said
    provision could not be invoked against the appellant.
         Burden of proof - Lies on whom - Held: The burden of
    proving any form of ma/a fide lies on the shoulders of the one
8
    alleging it.

         The appellant, an Export Oriented Unit ("EOU"), is
    engaged in the manufacture of all wool and poly-wool
    worsted grey fabrics. The sister unit of appellant,
C   Uniworth Ltd., another EOU, engaged in the generation
    of power from a captive power plant, obtained permission
    for usage of electricity generated by the captive power
    plant by both, Uniworth Ltd. and the appellant. The
    appellant purchased electricity from Uniworth Ltd. under
D   an agreement which continued till 1999. Prior to January-
    February, 2000, the sister unit i.e. Uniworth Ltd. procured
    furnace oil required for running the captive power plant.
    This purchase of furnace oil was exempted from payment
    of customs duty under Notification No. 53/97-Cus. In
E   January-February, 2000, Uniworth Ltd. exhausted the
    limit of letter of credit opened by it for the duty-free import
    of furnace oil. Thereafter, Uniworth Ltd. informed the
    appellant that it would require the arrangement for
    running the captive power plant for its own -use, and
F   hence, would be compelled to stop the supply of
    electricity to the appellant. Consequently, as a temporary
    measure, for overcoming this difficulty, the appellant,
    while availing the benefit of Notification No. 53/97-Cus,
    procured furnace oil from Coastal Wartsila Petroleum
G   Ltd., a Foreign Trade Zone unit. It supplied the same to
    Uniworth Ltd. for generation of electricity, which it
    continued to receive as before.
      Subsequently, the appellant received a show cause
  notice from the Commissioner of Customs, demanding
H duty for the period during which the appellant imported
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF            29
         CENTRAL EXCISE, RAIPUR
furnace oil on behalf of Uniworth Ltd. The show cause A
notice was issued on 02.08.2001, more than six months
after the appellant had imported furnace oil on behalf of
Uniworth Ltd. in January, 2001.

    By the impugned order, the Tribunal upheld the levy 8
of customs duty on the import of furnace oil as also the
penalty under Section 112 of the Customs Act, 1962,
rejecting the plea of the appellant that demand of the duty
along with the penalty was barred by limitation.

    Allowing the appeal, the Court                         c
     HELD: 1.1. Section 28 of the Customs Act, 1962
imposes a limitation period of six months within which the
concerned authorities must commence action against an
importer/assessee in case of duties not levied, short- D
levied or erroneously refunded. It allows the said
limitation period to be read as five years only in some
specific circumstances, viz. collusion, willful misstatement
or suppression of facts. Since in the in.stant case, the said
show-cause notice was issued after lapse of six months, E
the revenue, for its action to be legal in the eyes of law,
can only take refuge under the proviso to the section.
[Para 1O] [39-D-E]

     1.2. The conclusion of the Tribunal that mere non-
payment of duties is equivalent to collusion or willful F
misstatement or suppression of facts is untenable.
Construing mere non-payment as any of the three
categories contemplated by the proviso would leave no
situation for which, a limitation period of six months may
apply. The main body of the Section, in fact, conteinplates G
ordinary default in payment of duties and leaves cases
of collusion or willful misstatement or suppression of
facts, a smaller, specific and more serious niche, to the
proviso. Therefore, something more must be shown to
construe the acts of the appellant as fit for the H
    30       SUPREME COURT REPORTS             [2013] 3 S.C.R.


A applicability of the proviso. If non- disclosure of certain
  items assessable to duty does not invite the wrath of the
  proviso, one fails to understand how the non-payment of
  duty on disclosed items, after inquiry from the concerned
  department meets, with that fate. [Paras 12, 16] [40-E-G;
B 44-F-G]

        1.3. Section 28 of the Customs Act, 1962 clearly
   contemplates two situations, viz. inadvertent non-
   payment and deliberate default. The former is canvassed
   in the main body of Section 28 of the Act and is met with
C a limitation period of six months, whereas the latter, finds
  abode in the proviso to the section and faces a limitation
   period of five years. For the operation of the proviso, the
   intention to deliberately default is a mandatory
   prerequisite. [Para 19] [47-G]
D
        1.4. In the present case, from the evidence adduced
  by the appellant, one will draw an inference ·of bona fide
  conduct in favour of the appellant. The appellant laboured
  under the very doubt which forms the basis of the issue
E before this Court and hence, decided to address it to the
  concerned authority, the D.evelopment Commissioner,
  thus, in a sense offering its activities to assessment. The
  Development Commissioner answered in favour of the
  appellant and in its reply, even quoted a letter by the
F Ministry of Commerce in favour of an exemption the
  appellant was seeking, which anybody would have found
  satisfactory. Only on receiving this satisfactory reply did
  the appellant decide to claim exemption. Even if one were
  to accept the argument that the Development
G Commissioner was perhaps not the most suitable
  repository of the answers to the queries that the appellant
  laboured under, it does not take away from the bona fide
  conduct of the appellant. It still reflects the fact that the
  appellant made efforts in pursuit of adherence to the law
H rather than its breach. [Para 23] [49-B-E]
UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                 31
        CENTRAL EXCISE, RAIPUR
    Pushpam Pharmaceuticals Company Vs. Collector of A
Centra/Excise, Bombay 1995 Supp(3) SCC 462; Sarabhai
M. Chemicals Vs. Commissioner of Central Excise,
Vadodara (2005) 2 SCC 168: 2004 (6) Suppl. SCR 1010
Anand Nishikawa Co. Ltd. Vs. Commissioner of Central
Excise, Meerut (2005) 7 SCC 749: 2005 (3) Suppl. SCR B
413; Collector of Central Excise Vs. H.M.M. Ltd. 1995 Supp
(3) SCC 322; Easland Combines, Coimbatore Vs. The
Collector of Central Excise, Coimbatore (2003) 3 SCC 410:
2003 (1) SCR 98; Associated Cement Companies Ltd. Vs.
Commissioner of Customs (2001) 4 SCC 593: 2001 (1) SCR         c
608; Aban Loyd Chiles Offshore Limited and Ors. Vs.
Commissioner of Customs, Maharashtra (2006) 6 SCC 482:
2006 (4) Suppl. SCR 290 - referred to.

    Black'slaw Dictionary, Sixth Edition - referred to.
                                                             D
     2. Further, this Court is not convinced with the
finding of the Tribunal which placed the onus of providing
evidence in support of bona fide conduct, by observing
that "the appellants had not brought anything on record"
to prove their claim of bona fide conduct, on the E
appellant. It is a cardinal postulate of law that the burden
of proving any form of ma/a fide lies on the shoulders of
the one alleging it. [Para 24) [49-E-F]

    Union of India Vs. Ashok Kumar & Ors. (2005) 8 SCC         F
760: 2005 (4) Suppl. SCR 317 - referred to.
    3. Moreover, the proviso to Section 28 of the Act
finds application only when specific and explicit
averments challenging the fides of the conduct of the
assessee are made in the show cause notice, a G
requirement that the show cause notice in the present
case fails to meet. (Para 25] [49-H; 50-A]
    4. On account of the fact that the burden of proof of
proving mala fide conduct under the proviso to Section H
    32       SUPREME COURT REPORTS              [2013] 3 S.C.R.


A   28 of the Act lies with the Revenue; that in furtherance
    of the same, no specific averments find a mention in the
    show cause notice which is a mandatory requirement for
    commencement of action under the said proviso; and
    that nothing on record displays a willful default on the
B   part of the appellant, it is held that the extended period
    of limitation under the said provision could not be invoked
    against the appellant. [Para 26] [51-E-F]

                         Case Law Reference:
c        1995 Supp(3) sec 462        referred to ·Para 13, 15

         2004 (6) Suppl. SCR 1010 referred to      Para 14

         2005 (3) Suppl. SCR 413 referred to       Para 15

         1995 Supp (3) sec 322       referred to   Para 16
D
         2003 (1) SCR 98             referred to   Para 17
         2001 (1) SCR 608            referred to   Para18

         2006 (4) Suppl. SCR 290 referred to       Para 20, 25
E
         2005 (4) Suppl. SCR 317 referred to       Para 24

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    6060 of 2003.

F        From the Judgment & Order dated 18.02.2003 of the
    Customs, Excise & Gold (Control) Appellate Tribunal at New
    Del~i in Appeal No. C/482/2002-D.

        R.P. Bhatt, Rupesh Kumar, Tara Chandra Sharma,
G   Narendra M. Sharma for the Appellant.

         Mukul Gupta, Vikas Malhotra, N.K. Karhail, Nishant Patil
    (For B. Krishna Prasad) for the Respondent.

         The Judgment of the Court was delivered by
H
  UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                       33
          CENTRAL EXCISE, RAIPUR

     D.K. JAIN, J. 1. This appeal under Section 130-E of the            A
Customs Act, 1962 (for short "the Act") arises from the final
Order No. 142/03-B dated 18.02.2003, passed by the Customs,
Excise & Gold (Control) Appellate Tribunal, New Delhi (for short
"the Tribunal"). By the impugned order, the Tribunal has upheld
the levy of customs duty on the import of furnace oil as also the       B
penalty under Section 112 of the Act, rejecting the plea of the
appellant that demand of the duty along with the penalty was
barred by limitation.

      2. The appellant, an Export Oriented Unit (for short "EOU"),      C
 is engaged in the manufacture of all wool and poly-wool
 worsted grey fabrics. It was granted the status of EOU by the
 Government of India, Ministry of Industry, Department of
 Industrial Development by way of a Letter of Permission (for
 short "the LOP") dated 31.08.1992 as amended by letter dated
 4.5.1993. The appellant applied for a license for private bonded       D
 warehouse, which was granted to it under C. No. V (Ch.51)
 13-01/92/100%EOU dated 30.09.1992 by the Assistant
 Collector, Central Excise Division- Raipur for storing inputs, raw
 materials, etc. either imported duty-free by availing concessions
 available for 100% EOU or procured locally without payment             E
 of duty for use in manufacture of all wool, poly-wool and other
 fabrics.

     3. For interaction with the appellant, its sister unit, Uniworth
Ltd., another EOU, engaged in the generation of power from a            F
captive power plant, obtained another LOP dated 1.11.1994.
The said LOP, dated 1.11.1994, permitted usage of electricity
generated by the captive power plant by both, Uniworth Ltd. and
the appellant Uniworth Textiles Ltd. The appellant purchased
electricity from Uniworth Ltd. under an agreement which                 G
continued till 1999.

       4. Prior to January-February, 2000, the sister unit i.e.
  Uniworth Ltd. procured furnace oil required for ~unning the
· captive power plant. This purchase of furnace oil was exempted
  from payment of customs duty under Notification No. 53/97-            H
    34        SUPREME COURT REPORTS                 [2013] 3 S.C.R.


A   Cus., the relevant portion of which reads as follows: -

         "Notification No. 53/97 -Cus., dated 3-6-1997

         Exemption to specified goods imported for production of
         goods for export or for use in 100% Export-Oriented
B        Undertakings - New Scheme - Notification No. 13/81-
         Cus. rescinded

         In exercise of the powers conferred by sub-section (1) of
         section 25 of the Customs Act, 1962 (52 of 1962), the
c        Central Government being satisfied that it is necessary in
         the public interest so to do, hereby exempts goods
         specified in the Table below (hereinafter referred to as the
         goods), when imported into India, for the purpose of
         manufacture of articles for export out of India, or for being
D        used in connection with the production or packaging or job
         work for export of goods or services out of India by
         hundred per cent Export Oriented units approved by the
         Board of Approvals for hundred per cent Export Oriented
         Units appointed by the notification of Government of India
E        in the Ministry of Industry, Department of Industrial Policy
         and Promotion for this purpose, (hereinafter referred to as
         the said Board), from the whole of duty of customs leviable
         thereon under the First Schedule to the Customs Tariff Act,
         1975 (51 of 1975) and the additional duty, if any, leviable
         thereon under section 3 of the said Customs Tariff Act..."
F
         Entry 11 of the said notification at the relevant time read
         as follows: -
         "11. Captive power plants including captive generating
G        sets and their spares for such plants and sets as
         recommended by the said Board of Approvals."
          5. In January-February, 2000, Uniworth Ltd. exhausted the
    limit of letter of credit opened by it for the duty-free import of
    furnace oil. It made an alternative arrangement of procuring
H
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                 35
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]

duty free furnace oil under Notification No. 01/95 titled         A
"Specified goods meant for manufacture and packaging of
articles in 100% EOU or manufacture or development of
electronic hardware and software in EHTP or STP" dated
04.01.1995. The said notification reads as follows :-
                                                                  B
    "Notification No. 1/95-Central Excise

    In exercise of the powers conferred by sub-section (1) of
    section SA of the Central Excises and Salt Act/ 1944 (1
    of 1944), read with sub-section (3) of section 3 of the
    Additional Duties of Excise (Goods of Special C
    Importance) Act, 1957 (58 of 1957), the Central
    Government being satisfied that it is necessary in the
    public interest so to do, hereby exempts excisable goods,
    specified in Annexure I to this notification (hereinafter
    referred to as the said goods}, when brought in connection D
    with -

     (a}   the manufacture and packaging of articles, or for
           production or packaging or job work for export of
           goods or services out of India into hundred percent
           export oriented undertaking (hereinafter referred to   E
           as the user industry}; or;

            xxx          xxx             xxx
           from the whole of,                                     F
    (i} the duty of excise leviable thereon under section 3 of
    the Central Excise Act, 1944 (1 of 1944), and

    (ii} the additional duty of excise leviable thereon under
    sub-section (1) of section 3 of the Additional Duties of G
    Excise (Goods of Special Importance} Act, 1957 (58 of
    1957),

    xxx                         xxx               xxx
                                                                  H
    36        SUPREME COURT REPORTS                [2013) 3 S.C.R.


A        ANNEXURE I

         3. Captive power plants including captive generating sets
         and transformers as recommended by the Development
         Commissioner/Designated Officer.

B        38. Spares, fuel, lubricants, consumables and accessories
         for captive power plants including captive generating sets
         and spares, consumables and accessories for
         transformers as approved by the Assistant Commissioner
         or Deputy Commissioner of Central Excise.
c
         3C. Furnace oil required for the boilers as approved by the
         Assistant Commissioner of Customs or Central Excise on
         the recommendation of the Development Commissioner."

       6. Therefore, Uniworth Ltd. informed the appellant that it
D would require the arrangement for running the captive power
  plant for its own use, and hence, would be compelled to stop
  the supply of electricity to the appellant. Consequently, as a
  temporary measure, for overcoming this difficulty, the appellant,
  while availing the benefit of Notification No. 53/97-Cus,
E procured furnace oil from Coastal Wartsila Petroleum Ltd., a
  Foreign Trade Zone unit. It supplied the same to Uniworth Ltd.
  for generation of electricity, which it continued to receive as
  before.

F      7. Since the appellant was procuring furnace oil for captive
  power plant of another unit, it wrote to the Development
  Commissioner seeking clarification that whether duty on the
  supply and receipt of furnace oil and electricity respectively was
  required to be paid. The Developrpent Commissioner, referring
G to a circular dated 12.10.1999 of the Ministry of Commerce,
  said as follows: -
         "They are procuring surplus power from their sister concern
         Mis. Uniworth Ltd. (Unit- 1, LOP dated 31.01.1989) under
         Permission No. 248(93) dated 01.11.1994 and the unit
H
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                    37
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
    transferred 2590.30 KL of furnace oil to M/s. Uniworth Ltd. A
    (Unit- 1) for their captive power consumption. No
    permission is required from this office for duty free import/
    procurement of POL products for captive power
    consumption. It is further to clarify as per the Exim Policy
    provision, one EOU may sell/ transfer surplus power to B
    another EOU duty free in terms of Ministry of
    Commerce Letter No. 111198-EP dated 12.10.1999 (sic)"

                                           [Emphasis supplied]

    The relevant portion of the Ministry of Commerce Letter C
No.1/98-EP is extracted below:

    "2. No duty is required to paid (sic) on sale of surplus
    power from an EOU/EPZ unit to another EOU/EPZ unit.
    Development Commissioner of EPZ concerned would be               D
    informed in writing for such supply and proper account of
    consumption of raw material would be maintained by the
    supplying unit for calculation of NFEP."

     8. Yet, the appellant received a show cause notice from
the Commissioner of Customs, Raipur, demanding duty for the          E
period during which the appellant imported furnace oil on behalf
of Uniworth Ltd. It gave the following reason for the same: -

    "1.1. M/s. Uniworth Ltd. (Power Division), Raipur, is
    engaged in the generation of power. M/s. Uniworth Textiles       F
    Ltd. and M/s. Uniworth Ltd. both are distinct companies
    having different LOP Central Excise Registration No. and
    different board of directors. They are different companies
    as per Companies Act and they prepare separate balance
    sheet...                                                         G
    4.2. Therefore it appears that the noticees had not
    received 742.5 KL of furnace oil ... from M/s. Coastal
    Wartsila Petroleum Ltd ... in their factory at all as neither
    they had storing facility to store the furnace oil so procured
                                                                     H
    . 38        SUPREME COURT REPORTS                   (2013] 3 S.C.R.

A          nor they had any power plant to utilize the said furnace oil
           to generate electricity. They also did not have LOP from
           Government of India ... to procure and use furnace oil to
           generate electricity as they did not have any power plant
           in their factory ... Considering the above fact it is clear that
B          the procurement of 742.5 KL of furnace oil under shipping
           bill, without payment of customs duty, is against the
           provisions of Customs Act, 1962 and rules made
           hereunder (sic)."

           9. The show cause notice was issued on 02.08.2001,
c    more than six months after the appellant had imported furnace
     oil on behalf of Uniworth Ltd. in January, 2001. This time period
     of more than six months is significant due to the proviso to
     Section 28 of the Act. The Section, at the relevant time, read
     as follows: -
D
           "28. Notice for payment of duties, interest, etc.

           (1) When any duty has not been levied or has been short-
           levied or erroneously refunded, or when any interest
           payable has not been paid, part paid or erroneously
E          refunded, the proper officer may,-
           (a) in the case of any import made by any individual for
           his personal use or by Government or by any educational,
           research or charitable institution or hospital, within one
F          year;
           (b) in any other case, within six months, from the relevant
           date, serve notice on the person chargeable with the duty
           or interest which has not been levied or charged or which
G          has been so short-levied or part 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 has not been levied or has
           been short-levied or the interest has not been charged
H          or has been part paid or the duty or interest has been
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                      39
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
     erroneously refunded by reason of collusion or any wilful       A
     misstatement or suppression of facts by the importer or
     the exporter or the agent or employee of the importer or
     exporter, the provisions of this sub-section shall have
     effect as if for the words "one year" and "six Months': the
     words "five years" were substituted.                            B

     Explanation.- Where the service of the notice is stayed
     by an order of a court, the period of such stay shall be
     excluded in computing the aforesaid period of one year
     or six months or five years, as the case may be."
                                                                     c
                                           · [Emphasis supplied]

     10. The Section imposes a limitation period of six months
within which the concerned authorities must commence action
against an importerlassessee in case of duties not levied, short-    0
levied or erroneously refunded; It allows the said limitation
period to be read as five years only in some specific
circumstances, viz. collusion, willful misstatement or
suppression of facts. Since the said show-cause notice was
issued after the elapse of six months, the revenue, for its action    E
to be legal in the eyes of law, can only take refuge under the
proviso to the section.

      11. Both the appellate authorities, viz. the Commissioner
of Customs and Central Excise (Appeals) and the Tribunal,
rejected the claims of the appellant and affirmed payment of F
duty and penalty. They reasoned that since the appellant
procured the furnace oil not for its own captive power plant, but
for that of another, it could not claim exemption from payment
of duty; entitlement of duty free import of fuel for its captive power
plant lies with the owner of the captive power plant, and not the G
consumer of electricity generated from that power plant. Little
or no attention was paid to the issue of limitation, which in our
opinion, is the primary question for consideration in this case.
The Tribunal only made the following observations in this regard:
                                                                       H
     40         SUPREME COURT REPORTS              [2013] 3 S.C.R.

A         "2 .... He however, submitted that the demand of duty is
          barred by limitation as the show cause notice was issued
          on 02.08.2001 by demanding the duty for the period
          January/February 2001; that the Department was aware
          that the appellants do not have power plant and as such
B         furnace oil could not have been used by them captively;
          that this is evident from letter dated 17.07 .2001 ...

          4... The appellants have also not brought on record any
          material in support of their contention that the Department
          was aware of the fact that the appellants did not have
c         captive power plant. In view of this the demand cannot be
          held to be hit by the time limit."
          Hence, the appellant is before us in this appeal.

D        12. We have heard both sides, Mr. R.P. Bhatt, learned
  senior counsel, appearing on behalf of the appellant, and Mr.
  Mukul Gupta, learned senior counsel appearing on behalf of the
  Revenue. We are not convinced by the reasoning of the
  Tribunal. The conclusion that mere non-payment of duties is
E equivalent to collusion or willful misstatement or suppression
  of facts is, in our opinion, untenable. If that were to be true, we
  fail to understand which form of non-payment would amount to
  ordinary default? Construing mere non-payment as any of the
  three categories contemplated by the proviso would leave no
F situation for which, a limitation period of six months may apply.
  In our opinion, the main body of the Section, in fact;
  contemplates ordinary default in payment of duties and leaves
  cases of collusion or willful misstatement or suppression of
  facts, a smaller, specific and more serious niche, to the proviso.
  Therefore, something more must be shown to construe the acts
G of the appellant as fit for the applicability of the proviso.
         13. This Court, in Pushpam Pharmaceuticals Company
    Vs. Collector of Central Excise, Bombay1, while interpreting the

H   1.   1995 Supp (3) sec 462.
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                   41
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
proviso of an analogous provision in Section 11 A of The Central    A
Excise Act, 1944, which is pari materia to the proviso to
Section 28 discussed above, made the following observations:

    "4. Section 11A empowers the Department to re-open
    proceedings if the levy has been short-levied or not levied 8
    within six months from the relevant date. But the proviso
    carves out an exception and permits the authority to
    exercise this power within five years from the relevant date
    in the circumstances mentioned in the proviso, one of it
    being suppression of facts. The meaning of the word both C
    in law and even otherwise is well known. In normal
    understanding it is not different that what is explained in
    various dictionaries unless of course the context in which
    it has been used indicates otherwise. A perusal of the
    proviso indicates that it has been used in company of
    such strong words as fraud, collusion or wilful default. In     D
    fact it is the mildest expression used in the proviso. Yet
    the surroundings in which it has been used it has to be
    construed strictly. It does not mean any omission. The
    act must be deliberate. In taxation, it can have only one
    meaning that the correct information was not disclosed          E
    deliberately to escape from payment of duty. Where facts
    are known to both the parties the omission by one to do
    what he might have done and not that he must have
    done, does not render it suppression."
                                                                    F
                                           [Emphasis supplied]

    14. In Sarabhai M. Chemicals Vs. Commissioner of
Central Excise, Vadodara 2, a three- judge bench of this Court,
while referring to the observations extracted above, echoed the
following views:                                                G
    "23. Now coming to the question of limitation, at the outset,
    we wish to clarify that there are two concepts which are

2. c2oos) 2 sec 1sa.                                                H
    42       SUPREME COURT REPORTS                 [2013] 3 S.C.R.


A        required to be kept in mind for the purposes of deciding
         this case. Reopening of approvals/assessments is different
         from raising of demand in relation to the extended period
         of limitation. Under section 11A(1) of the Central Excise
         Act, 1944, a proper officer can reopen the approvals/
B        assessments in cases of escapement of duty on account
         of non-levy, non-payment, short-levy, short- payment or
         erroneous refund, subject to it being done within one year
         from the relevant date. On the other hand, the demand for
         duty in relation to extended period is mentioned in the
c        proviso to section 11A(1). Under that proviso, in cases
         where excise duty has not been levied or paid or has been
         short-levied or short-paid or erroneously refunded on
         account of fraud, collusion or wilful mis-statement or
         suppression of facts, or in contravention of any provision
         of the Act or Rules with the intent to evade payment of duty,
D
         demand can be made within five years from the relevant
         date. In the present case, we are concerned with the
         proviso to section 11A(1 ).
         24. In the case of Cosmic Dye Chemical v. Collector of
E        Central Excise, Bombay (1995) 6 sec 117 this Court
                                                         I


         held that intention to evade duty must be proved for
         invoking the proviso to section 11A(1) for extended period
         of limitation. It has been further held that intent to evade
         duty is built into the expression "fraud and collusion" but
F        mis-statement and suppression is qualified by the
         preceding word "wilful". Therefore, it is not correct to say
         that there can be suppression or misstatement of fact,
         which is not wilful and yet constitutes a permissible ground
         for invoking the proviso to section 11A.
G        25. In case of Pushpam Pharmaceuticals Company v.
         C.C.E. [1995 (78) ELT 401(SC)], this Court has held that
         the extended period of five years under the proviso to
         section 11A(1) is not applicable just for any omission on
         the part of the assessee, unless it is a deliberate attempt
H        to escape from payment of duty. Where facts are known
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                   43
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]

     to both the parties, the omission by one to do what he A
     might have done and not that he must have done does not
     constitute suppression of fact."

     15. In Anand Nishikawa Co. Ltd. Vs. Commissioner of
Central Excise, Meerut3 , while again referring· to the B
observations made in Pushpam Pharmaceuticals Company
(supra), this Court clarified the requirements of the proviso to
Section 11- A, as follows:-

     "26 ... This Court in the case of Pushpam Pharmaceuticals
     Company v. Collector of Central Excise, Bombay (supra), C
     while dealing with the meaning of the expression
     "suppression of facts" in proviso to Section 11A of the Act
     held that the term must be construed strictly, it does not
     mean any omission and the act must be deliberate and
     willful to evade payment of dutv. The Court, further, held :- D

            'In taxation, it ("suppression of facts") can have only
            one meaning that the correct information was not
            disclosed deliberately to escape payment of dutv.
            Where facts are known to both the parties the E
            omission by one to do what he might have done and
            not that he must have done. does not render it
            suppression.'

    27. Relying on the aforesaid observations of this Court in
    the case of Pushpam Pharmaceutical Co. v. Collector of F
    Central Excise, Bombay [1995 Suppl. (3) SCC 462], we
    find that "suppression of facts" can have only one meaning
    that the correct information was_ not disclosed deliberately
    to evade payment of duty. When facts were known to both
    the parties, the omission by one to do what he might have G
    done and not that he must have done, would not render it
    suppression. It is settled law that mere failure to declare
    does not amount to willful suppression. There must be

3. c2oos> 1 sec 749.                                              H
    44        SUPREME CG>URT REPORTS               [2013) 3 S.C.R.


A        some positive act from the side of the assessee to find
         willful suppression. Therefore, in view of our findings made
         herein above that there was no deliberate intention on the
         part of the appellant not to disclose the correct information
         or to evade payment of duty, it was not open to the
B        Central Excise Officer to proceed to recover duties in the
         manner indicated in the proviso to Section 11A of the Act."

       16. In Collector of Central Excise Vs. H.M.M. Ltd. 4, this
  Court held that mere non- disclosure of certain items
  assessable to duty does not tantamount to the ma/a tides
C elucidated in the proviso to Section 11 A(1) of the Central
  Excise Act, 1944. It enunciated the principle in the following
  way:-

         "The mere non-declaration of the waste/by-product in theit
D        classification list cannot establish any wilful withholding
         of vital information for the purpose of evasion of excise
         duty due on the said product. There could be, counsel
         contended, bonafide belief on the part of the assessee
         that the said waste or by-product did not attract excise
E        duty and hence it may not have been included in their
         classification list. But that per se cannot go to prove that
         there was the intention to evade payment of duty or that
         the assessee was guilty of fraud, collusion, mis-conduct
         or suppression to attract the proviso to Section 11A(1) of
F        the Act. There is considerable force in this contention.

    Therefore, if non- disclosure of certain items assessable to duty
    does not invite the wrath of the proviso, we fail to understand
    how the non-payment of duty on disclosed items, after inquiry
    from the concerned department meets, with that fate.
G
         17. In fact, the Act contemplates a positive action which
    betrays a negative intention of willful default. The same was


H   4.   1995 Supp (3) sec 322
     UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                 45
        CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]

held by Easland Combines, Coimbatore Vs. The Collector of            A
Central Excise, Coimbatore5 wherein this Court held:-

       "31.lt is settled law that for invoking the extended period
       of limitation duty should not have been paid, shoct Jevied
       or short paid or erroneously refunded because of either       8
       fraud, collusion, wilful misstatement, suppression of facts
       or contravention of any provision or rules. This Court has
       held that these ingredients postulate a positive act and,
       therefore, mere failure to pay duty and/or take out a
       licence which is not due to any fraud, collusion or willful   C
       misstatement or suppression of fact or contravention of
       any provision is not sufficient to attract the extended
       period of limitation."

                                            [Emphasis supplied]
                                                                     D
     18. We are in complete agreement with the principle
enunciated in the above decisions, in light of the proviso to
Section 11 A of the Central Excise Act, 1944. However, before
extending it to the Act, we would like to point out the niceties
that separate the analogous provisions of the two, an issue          E
which received the indulgence of this Court in Associated
Cement Companies Ltd. Vs. Commissioner of Customs6 in
the following words:-

       "53 ... Our attention was drawn to the cases
       of CCE v. Chemphar Drugs and Liniments (1989) 2 SCC           F
       127, Cosmic Dye Chemical v. CCE (1995) 6 SCC
       117, Padmini Products v. CCE (1989) 4 SCC 275, T.N.
       Housing Board v. CCE 1995 Supp (1) SCC 50 and CCE
       v. H. M. M. Ltd. (supra). In all these cases the Court was
       concerned with the applicability of the proviso to Section    G
       11-A of the Central Excise Act which, like in the case of
       the Customs Act, contemplated the increase in the period

5.    c2003) 3 sec 410.
6.    (2001) 4 sec 593, at page 619.                                 H
    46        SUPREME COURT REPORTS                  [2013] 3 S.C.R.

A        of limitation for issuing a show-cause notice in the case
         of non-levy or short-levy to five years from a normal period
         of six months ...

         54. While interpreting the said provision in each of the
B        aforesaid cases, it was observed by this Court that for
         proviso to Section 11-A to be invoked, the intention to
         evade payment of duty must be shown. This has been
         clearly brought out in Cosmic Dye Chemical case where
         the Tribunal had held that so far as fraud, suppression or
         misstatement of facts was concerned the question of intent
c        was immaterial. While disagreeing with the aforesaid
         interpretation this Court at p. 119 observed as follows:
         (SCC para 6)

                '6. Now so far as fraud and collusion are concerned,
D               it is evident that the requisite intent, i.e., intent to
                evade duty is built into these very words. So far as
                misstatement or suppression of facts are
                concerned, they are clearly qualified by the word
                'wilful' preceding the words 'misstatement or
E               suppression of facts' which means with intent to
                evade duty. The next set of words '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'. It is, therefore, not
F               correct to say that there can be a suppression or
                misstatement of fact, which is not wilful and yet
                constitutes a permissible ground for the purpose of
                the proviso to Section 11-A. Misstatement or
                suppression of fact must be wilful.'
G        The aforesaid observations show that the words ''with intent
         to evade payment of duty" were of utmost relevance while
         construing the earlier expression regarding the
         misstatement or suppression of facts contained in the
         proviso. Reading the proviso as a whole the Court held that
H        intent to evade duty was essentially before the proviso
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                 47
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
    could be invoked.                                           A

    55. Though it was sought to be contended that Section 28
    of the Customs Act is in pari materia with Section 11-A of
    the Excise Act, we find there is one material difference in
    the language of the two provisions and that is the words
                                                                8
    "with intent to evade payment of duty" occurring in proviso
    to Section 11-A of the Excise Act which are missing in
    Section 28(1) of the Customs Act and the proviso in
    particular. ..

    56. The proviso to Section 28 can inter alia be invoked C
    when any duty has not been levied or has been short-levied
    by reason of collusion or any wilful misstatement or
    suppression of facts by the importer or the exporter, his
    agent or employee. Even if both the expressions
    "misstatement" and "suppression of facts" are to be D
    qualified by the word "wilful", as was done in the Cosmic
    Dye Chemical case while construing the proviso to Section
    11-A, the making of such a wilful misstatement or
    suppression of facts would attract the provisions of Section
    28 of the Customs Act. In each of these appeals it will have E
    to be seen as a fact whether there has been a non-levy or
    short-levy and whether that has been by reason of collusion
    or any wilful misstatement or suppression of facts by the
    importer or his agent or employee."

                                         [Emphasis supplied]    F

      19. Thus, Section 28 of the Act clearly contemplates two
situations, viz. inadvertent non-payment and deliberate default.
The former is canvassed in the main body of Section 28 of the
Act and is met with a limitation period of six months, whereas G
the latter, finds abode in the proviso to the section and faces a
limitation period of five years. For the operation of the proviso,
the intention to deliberately default is a mandatory prerequisite.

    20. This Court in Aban Loyd Chiles Offshore Limited and H
    48         SUPREME COURT REPORTS                 [2013] 3 S.C.R.


A   Ors. Vs. Commissioner of Customs, Maharashtra 7 observed:-

          'The proviso to Section 28(1 )can be invoked where the
          payment of duty has escaped by reason of collusion or any
          willful misstatement or suppression of facts. So far as
          "misstatement or suppression of facts" are concerned, they
B
          are qualified by the word "willful". The word "willful"
          preceding the words "misstatement or suppression of facts"
          clearly spells out that there has to be an intention on the
          part of the assessee to evade the duty."

c       21. The Revenue contended that of the three categories,
    the conduct of the appellant falls under the case of "willful
    misstatement" and pointed to the use of the word "misutilizing"
    in the following statement found in the order of the
    Commissioner of Customs, Raipur in furtherance of its claim:
D
          "The noticee procured 742.51 kl of furnace oil valued at
          Rs. 54,57,357/- without payment of customs duty by
          misutilizing the facility available to them under Notification
          No. 53/97-Cus. dt. 3.6.1997"

E        22. We are not persuaded to agree that this observation
    by the Commissioner, unfounded on any material fact or
    evidence, points to a finding of collusion or suppression or
    misstatement. The use of the word "willful" introduces a mental
    element and hence, requires looking into the mind of the
F   appellant by gauging its actions, which is an indication of one's
    state of mind. Black's Law Dictionary, Sixth Edition (pp 1599)
    defines "willful" in the following manner: -
          Willful. Proceeding from a conscious motion of the will;
G
          voluntary; knowingly; deliberate. Intending the result which
          actually comes to pass ...
          An act or omission is "willfully" done, if done voluntarily and
          intentionally and with the specific intent to do something

H   7.   c2ooe) a sec 482.
  UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                     49
     CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
     the law forbids, or with the specific intent to fail to do       A
     something the law requires to be done ... "

      23. In the present case, from the evidence adduced by the
appellant, one will draw an inference of bona fide conduct in
favour of the appellant. The appellant laboured under the very        B
doubt which forms the basis of the issue before us and hence,
decided to address it to the concerned authority, the
Development Commissioner, thus, in a sense offering its
activities to assessment. The Development Commissioner
answered in favour of the appellant and in its reply, even quoted
a letter by the Ministry of Commerce in favour of an exemption
                                                                      c
the appellant was seeking, which anybody would have found
satisfactory. Only on receiving this satisfactory reply did the
appellant decide to claim exemption. ·Even if one were to
accept the argument that the Development Commissioner was
perhaps not the most suitable repository of the answers to the        D
queries that the appellant laboured under, it does not take
away from the bona fide conduct of the appellant. It still reflects
the fact that the appellant made efforts in pursuit of adherence
to the law rather than its breach.
                                                                      E
     24. Further, we are not convinced with the finding of the
Tribunal which placed the onus of providing evidence in support
of bona fide conduct, by observing that "the appellants had not
brought anything on record" to prove their claim of bona fide
conduct, on the appellant. It is a cardinal postulate of law that     F
the burden of proving any form of ma/a fide lies on the shoulders
of the one alleging it. This Court observed in Union of India
Vs. Ashok Kumar & Ors. 8 that "it cannot be overlooked that
burden of establishing ma/a fides is very heavy on the person
who alleges it. The allegations of ma/a fides are often more          G
easily made than proved, and the very seriousness of such
allegations demand proof of a high order of credibility."
    25. Moreover, this Court, through a catena of decisions,
has held that the proviso to Section 28 of the Act finds
application only when specific and explicit averments                 H
    50        SUPREME COURT REPORTS                 [2013] 3 S.C.R.


A   challenging the tides of the conduct of the assessee are made
    in the show cause notice, a requirement that the show cause
    notice in the present case fails to meet. In Aban Loyd Chiles
    Offshore Limited and Ors. (supra), this Court made the following
    observations:
B
         "21. This Court while interpreting Section 11-A of the
         Central Excise Act in Collector of Central
         Excise v. H.M.M. Ltd. (supra) has observed that in order
         to attract the proviso to Section 11-A(1) it must be shown
         that the excise duty escaped by reason of fraud, collusion
c        or willful misstatement of suppression of fact with intent to
         evade the payment of duty. It has been observed:

                '... Therefore, in order to attract the proviso to
                Section 11-A(1) it must be alleged in the show-
D               cause notice that the duty of excise had not been
                levied or paid by reason of fraud, collusion or
                willful misstatement or suppression of fact on the
                part of the assessee or by reason of contravention
                of any of the provisions of the Act or of the Rules
E               made thereunder with intent to evade payment of
                duties by such person or his agent. There is no
                such averment to be found in the show cause
                notice. There is no averment that the duty of
                excise had been intentionally evaded or that fraud
F               or collusion had been practiced or that the
                assessee was guilty of wilful misstatement or
                suppression of fact. In the absence of any such
                averments in the show-cause notice it is difficult
                to understand how the Revenue could sustain the
                notice under the proviso to Section 11-A(1) of the
G               Act.'

         It was held that the show cause notice must put the
         assessee to notice which of the various omissions or
         commissions stated in the proviso is committed to extend
H        the period from six months to five years. That unless the
 UNIWORTH TEXTILES LTD. v. COMMISSIONER OF                     51
    CENTRAL EXCISE, RAIPUR [D.K. JAIN, J.]
    assessee is put to notice the assessee would have no             A
    opportunity to meet the case of the Department. It was
    held:

    ... There is considerable force in this contention. If the
    department proposes to invoke the proviso to Section 11-
                                                                     8
    A(1), the show-cause notice must put the assessee to
    notice which of the various commissions or omissions
    stated in the proviso is committed to extend the period
    from six months to 5 years. Unless the assessee is put
    to notice, the assessee would have no opportunity to
    meet the case of the department. The defaults                    C
    enumerated in the proviso to the said sub-section are
    more than one and if the Excise Department places
    reliance on the proviso it must be specifically stated in
    the show-cause notice which is the a/legation against the
    assessee falling within the four corners of the said             D
    proviso.... n

                                           (Emphasis supplied)

      26. Hence, on account of the fact that the burden of proof     E
of proving ma/a fide conduct under the proviso to Section 28
of the Act lies with the Revenue; that in furtherance of the same,
no specific averments find a mention in the show cause notice
which is a mandatory requirement for commencement of action
under the said proviso; and that nothing on record displays a
willful default on the part of the appellant, we hold that the       F
extended period of limitation under the said provision could not
be invoked against the appellant.

     27. In view of the afore-going discussion, the appeal is
allowed and the decisions of the authorities below are set           G
aside, leaving the parties to bear their own costs.

B.B.B.                                           Appeal allowed.