KALYAN JEWELLERS INDIA LTD. Vs. COMMISSIONER

JUDGEMENT

(1.) The petitioner, who is engaged in the business of manufacture and sale of gold, diamond, silver and other articles of jewellery, has filed the present writ petition challenging Ext.P19 show cause notice which, has been issued alleging contravention of certain provisions of the Central Excise Act, 1944, the Central Excise Rules, 2002, the Articles of Jewellery (Collection of Duty) Rules, 2016 and the CENVAT Credit Rules, 2004.

(2.) The principal contention of the petitioner is that Ext.P19 show cause notice is issued without jurisdiction and beyond the normal period of limitation provided in Sec. 11A(1)(a) of the Central Excise Act, 1944 and in the complete absence of circumstances which would enable the respondent department from invoking the extended period of limitation under Sec. 11A (4) of the Central Excise Act, 1944. It is also submitted that the activity of 'hedging' engaged in by the petitioner and which forms a subject matter of the show cause notice (at least in part) is clearly a trading activity and is clearly outside the scope of the provisions in the Finance Act, 1994 relating to levy of service tax.

(3.) Ms. Aparna Nandakumar, the learned Counsel appearing for the petitioner would contend that the show cause notice was issued beyond the normal period of limitation and there is absolutely no basis for the suggestion in Ext.P.19 that there was suppression or misstatement of facts by the petitioner with an intent to avoid the payment of duty, to invoke the extended period of limitation under Sec. 11A (4) of the Central Excise Act, 1944. It is submitted that in the absence of mens rea and suppression or misstatement with an intention to evade the payment of duty, the extended period of limitation cannot be invoked. It is submitted that all the materials which form the basis of show cause notice were matters clearly within the knowledge of the Department since 2018 and going by the law laid down by the Supreme Court, in such situations, the extended period of limitation cannot be invoked. The learned counsel appearing for the petitioner placed considerable reliance on the judgment of the Supreme Court in Continental Foundation Joint Venture, Sholding v. Commissioner of Central Excise, Chandigarh; I 2007 (216) ELT 177 (S.C.), to contend that suppression means failure to disclose full information with the intent to evade payment of duty and when facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. It is submitted that there is no 'wilful' suppression of facts and therefore, there cannot be suppression or misstatement of fact, for the purpose of applying the extended period of limitation. She cites the judgment of the Supreme Court in Nizam Sugar Factory v. Collector of Central Excise, A.P.; 2006(197) ELT 465 (S.C.), to contend that when relevant facts were within the knowledge of authorities, the allegation of suppression of facts and invocation of the extended period of limitation is not sustainable. The learned counsel placed reliance on the judgments of the Supreme Court in Padmini Products v. Collector of Central Excise, Bangalore; 1989 (43) ELT 195 (S.C.) and Jaiprakash Industries Ltd. v. Commissioner of Central Excise, Chandigarh; 2002 (146) ELT 481 (S.C.) and submitted that it is clear from the law laid down in the aforesaid judgments that for invoking the extended period of limitation, duty which is the subject matter of the notice should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision in the act or the rules. It is submitted that mere failure to pay the duty which is not due to any fraud, collusion, wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation. It is submitted that the noncompliance of the conditional notification (introduced in February 2017) with regard to the manufacture of articles of silver jewellery and silver coins cannot be regarded as a suppression for invocation of the extended period of limitation. She also relied on the judgments of this Court in Commissioner of Customs v. Cochin Minerals and Rutiles Ltd; 2010 (259) ELT 182(Ker.) and K.T. Murukan v. Commissioner (Appeals-I), Cochin ; 2017 (5) G.S.T.L 248, to contend that it is only in those cases where there is the willful and deliberate suppression of facts that such extended period of limitation is available to the department. It is submitted that an element of deception or malpractice is a necessary concomitant of wilful and deliberate suppression of fact. It is submitted that the petitioner herein had not deceptively suppressed any material facts. Reference is also placed on the judgment of Division Bench of the High Court of Calcutta in Commissioner of Service Tax-1, Kolkata v. Surya Vistacom Private Limited; Manu/WB/1037/2022 to reiterate the contention that there is no suppression of facts with an intent to evade tax and that no material is available with the department to make out a case of wilful misstatement or wilful suppression in order to invoke the extended period of limitation. It is argued that the impugned show cause notice also proposes to levy Service Tax on the activity of 'hedging' [an activity of trading where the dealer takes advance positions / enters into forward contracts on a commodity to prevent loss due to price fluctuations]. It is submitted that it is well settled that 'hedging' is a trading activity and is outside the ambit of the Finance Act, 1994. It is submitted that the question of application of the extended period of limitation and the proposal to levy service tax on 'hedging' activity are both issues touching upon the jurisdiction to issue the impugned show cause notice and therefore these issues ought to be adjudicated at this stage under Article 226 of the Constitution of India.