1 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

? CIVIL APPEAL NO. 1090 OF 2009

The Commissioner of Central Excise       …Appellant Visakhapatnam                                      

Versus

M/s.  Mehta  &  Co.   …

Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

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1. Delay condoned.

2. The present appeal filed by the appellant – Commissioner of  

Central  Excise,  Visakhapatnam  arises  out  of  an  order  dated  

28.07.2008  passed  by  the  Customs,  Excise  &  Service  Tax  

Appellate Tribunal, South Zonal Bench at Bangalore (hereinafter  

referred  

to  as  ‘the  

Tribunal’)  

in  appeal  

No.  

E/132/2005.  

3. Two primary issues fall for consideration in this appeal.  The  

first issue is, as to whether or not the demand for payment of duty  

is barred by limitation, whereas the second issue is whether the  

items like chairs, beds, tables, desks, etc., affixed to the ground

3 could be  said to be  immoveable  assets  and not  liable  to excise  

duty. The aforesaid two issues have arisen in the light of the rival  

submissions  made  on  the  basic  facts  of  this  appeal  which  are  

hereinafter being set out.

4. M/s.  Mehta  &  Company,  Mumbai  (the  “assessee”)  are  

engaged  in  the  business  of  interior  decoration.  The  assessee  

provides  

composite  

services  

including  

woodwork,  furniture items etc.  They entered  into contracts with  

customers for doing these works as per their requirement and also  

carry out these works at their customer’s premises.   

5. On  gathering  specific  intelligence  that  the  assesses  have  

undertaken the manufacture of articles of wood, furniture, etc. in  

the premises of Hotel Grand Bay, Vishakhapatnam and removed

4 the same without payment of duty of excise, the officers of Head  

Quarters Preventive unit inquired and investigated the matter.

6. It  was  found  that  the  assessee  along  with  M/s  

Chandrasekhar  Architects  Pvt.  Ltd.,  Mumbai  entered  into  an  

agreement  with M/s.  Adyar Gate  Hotel  Ltd.,  Chennai  (now M/s  

Welcome Group) on 30.08.1995 for carrying out the renovation of  

the  existing  structure  in  their  hotel  at  Nowroji  Road,  

Maharanipeta, Visakhapatnam. The scope of this agreement was  

further modified by another agreement dated 18.10.1995.  As seen  

by the final bills dated 31.03.1997, raised by the assessee on Hotel

5 Grand  Bay,  it  was  observed  that  the  assessee,  inter  alia,  

manufactured and cleared  furniture,  falling  under  chapter  sub-

heading Nos. 9401.00 & 9403.00, 4410.11, 8302.00 and 7610.90  

respectively, of the Schedule to the Central Excise Tariff Act, 1985.  

As per the agreement the assessee quoted prices which included  

sales tax, excise duty, octroi etc.  

7. It  

appears  

that  the  

assessee  

manufactured goods covered under different chapter headings at  

the customer’s site and removed them without payment of proper  

duty of excise with an intention to evade payment of duty.  The  

contract  between  the  assessee  and M/s Adyar  Gate  Hotel  Ltd.,  

clearly mentions that the assessee has quoted rates which include  

the excise  duty and it  had been  made  in the  contract  that the

6 contractor would not have any claim subsequently after execution  

of the work for excise duty, sales tax etc. from M/s. Adyar Gate  

Hotels Limited.  

8. A show cause notice under the Central Excise Act, 1944 [for  

short “the Act”] dated 15.05.2000 was issued to the respondent -  

M/s. Mehta & Company to show cause as to why: -

1 (i)     Duty  of  excise  amounting  to  Rs.  62,94,910/- should not be demanded from  them  on  the  goods  manufactured  and  cleared under  Rule  9(2)  of  the Rules read  with the proviso to section 11A (1) of the Act;

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1 (ii)    The amount of Rs. 10,00,000/- already  paid  under  protest  towards  the  duty  of   excise should not be adjusted towards the  payment of duty demanded in (i) above;

7 1  (iii) Penalty should not be imposed on them  

under Rule 9(2), Rule 52A and Rule 173Q of   the Rules;

1 (iv) Penalty equal to the duty demanded in (i)   above should not be imposed on them under   Section 11AC of the Act;

1 (v)    Interest @ 24% p.a. from the first day of   the month succeeding  the  month in which  the duty ought to have been  paid, till  the  

date of payment of such duty should not be   demanded from them under section 11 AB  of the Act; and

1 (vi)  The  goods  involved  should  not  be  confiscated  under  Rule  173Q  (1)  of  the  Rules.

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9. M/s. Grand Bay Hotel, Beach Road, Visakhapatnam was also  

asked to show cause as to why penalty  should not be imposed  

under Rule 209A of the Rules for purchase and possession of the  

excisable goods on which duty of excise had not been paid.

10. The  respondent  -  M/s.  Mehta  & Co.  and M/s.  Grand Bay  

Hotel  

submitted  

their  

respective  

replies.  

The  

Commissioner  of  Central  Excise  vide  order  dated  31.12.2002  

confirmed  the  demand  of  Rs.  43,59,710/-  out  of  the  proposed  

demand of Rs. 62,94,910/- under Rule 9(2) along with penalty of  

equal amount i.e. Rs. 43,59,710/- and directed the redemption of  

the confiscated goods after the payment of a fine of Rs. 1,00,000/-  

plus the duty and penalty adjudged.

9 11. Aggrieved thereby, the respondent filed an appeal before the  

CESTAT, Bangalore, which allowed the appeal and remanded the  

matter  to  the  concerned  adjudicating  authority  to  examine  the  

matter afresh and to pass an appropriate order in accordance with  

law by providing an effective hearing to the parties. Thereupon, the  

Commissioner,  Central  Excise  &  Customs,  Visakhapatnam vide  

order  

dated  

22.10.2003 confirmed the demand of Rs. 14,94,656/- with penalty  

of Rs. 7,47,328/- with interest as per Section 11 AB of the Central  

Excise Act, 1944 (for short “the Act”) and also imposed a penalty of  

Rs.  5,00,000/-  under  Rule  173Q.   Aggrieved  thereby  the  

respondent filed an appeal before the Tribunal and vide order dt.  

28.7.2008 the Tribunal allowed the appeal and set aside the order

10 of the Commissioner, Central Excise & Customs, Visakhapatnam  

under  the  impugned  judgment  and  order  as  against  which  the  

present appeal was filed.    

12. We heard  the learned  counsel  appearing  for  the  parties  at  

length who had taken us through all the orders which gave rise to  

the  aforesaid  two issues  which fall  for  our consideration in the  

present  

appeal.

13. The  

learned  

counsel  

appearing  

for  the  

appellant  

submitted  before  us that so far as the issue with regard to the  

limitation  is  concerned,  the  same  was  not  urged  before  the  

Commissioner when he was hearing the matter after the order of  

remand  by  the  Tribunal  and  in  that  view  of  the  matter,  the  

Tribunal  could  not  have  decided  the  said  issue  against  the  

appellant.  It  was further  submitted  that in any case  proviso  to

11 Section 11A of the Act is attracted to the facts and circumstances  

of  the  present  case,  and  therefore,  the  show  cause  notice  was  

issued  by  the  appellant  within  the  period  of  limitation  as  

prescribed under the proviso to Section 11A of the Act and that  

the Tribunal was wrong in holding that the demand was beyond  

the period of limitation. It was further submitted that the Tribunal  

erred  in  

holding  

that  all  

the  items  

manufactured  by  the  assessee  are  exempted  from  demand  of  

excise duty.

14. Per contra, the learned counsel appearing for the respondent,  

however,  refuted  the  aforesaid  submissions  and submitted  that  

the appellant never had any intention to evade excise  duty and  

there  is  no finding to that effect  and therefore  no such duty is

12 leviable  particularly  when it  is  barred  by limitation.  It  was also  

submitted that the pre-conditions for attracting the provisions of  

proviso is not satisfied in the present case, and therefore, it cannot  

be submitted that the demand is not barred by limitation.

15. We have considered the aforesaid submissions of the learned  

counsel appearing for the parties in the light of the records placed  

before  us.  

So  far  as  

the  issue  

with  

regard  to  

limitation  

is  

concerned, since that goes to the root of the demand made, it is  

appropriate to deal  with the same before  we go into the second  

issue.

16. Section 11A of the Act empowers the Authority to demand  

excise  duty  in  terms  of  the  conditions  laid  down  in  the  said  

provision as and when the pre-conditions mentioned therein are

13 satisfied.

17. There is no dispute with regard to the fact that issuance of a  

notice for invoking the provisions of Section 11A of the Act is a  

condition precedent for a demand to be made under Section 11A of  

the Act.   However, in the present case, a show cause notice was  

issued to the respondent herein making it a specific case that the  

respondent  manufactured  excisable  goods  as  mentioned  in  the  

notice and covered under different chapter headings at the site of  

the customer and removed the same without payment of duty of  

excise  with  an  intention  to  evade  payment  of  duty  when  the  

contract  clause  between  the  respondent  and  M/s.  Adyar  Gate  

Hotel Ltd. clearly mentioned that the contractors quoted rate shall

14 also include the excise duty.   It  was also mentioned that such  

conscious  action  on  the  part  of  the  contractor  has  clearly  

established the intention to evade payment of duty of excise and  

consequently proviso to Section 11A of the Act could be invoked in  

the present case.

18. In the reply submitted by the respondent, it was stated that a  

proforma  

was  

enclosed  

to  the  

show  

cause  

notice  

and  also  

the summons.  The hotel furnished the details of work done by the  

respondent and that the Central Excise Department was informed  

that the work order was to carry out job on the turn key basis and  

not for any furniture as such.

19. As stated hereinbefore, after the order of remand was passed

15 by  the  Tribunal,  the  Commissioner  considered  the  issue  with  

regard to the liability of payment of excise duty at length and held  

that  the  respondent  is  liable  to  pay  central  excise  duty  for  the  

items as specifically mentioned in the said order passed.

20. A perusal of the said order would also indicate that no issue  

with regard to the demand raised by the appellant as time barred  

was either  

raised  or  

discussed  

by  the  

Commissioner.

21. Being  aggrieved  by  the  aforesaid  order  passed  by  the  

Commissioner,  an  appeal  was  filed  before  the  Tribunal.   The  

Tribunal,  however,  held  that  the  items  fabricated  by  the  

respondent herein are permanently fixed to the walls and ground  

of the room and the same could not be removed from one place to

16 another  without  causing  much  damage  to  them  and  without  

cannibalizations  and  consequently  the  said  items  cannot  be  

considered as furniture in the light of the decision of this Court in  

the case of Craft Interiors Pvt. Ltd. vs. CCE, Bangalore reported  

in  (2006 (203) ELT 529 (SC)].    It was, however,  held that the  

case of the appellant is weak not only on merits, but also in any  

case  the  

entire  

demand  

is also hit  

by  time  

bar  as  

there  is  

no  

justification for invocation of the longer period.   Thus, findings  

which are recorded appear to be abrupt and without recording any  

reasons.

22. Consequently, we propose to look into the first issue in the  

light of the background facts as stated hereinbefore. The specific  

case of the appellant is that the respondent having manufactured

17 the  excisable  goods  covered  under  different  chapter  headings,  

removed them without payment of proper duty of excise and that  

from the aforesaid action it is explicit that there was an intention  

on  the  part  of  the  respondent  to  evade  payment  of  duty  

particularly when the contract clause between the respondent and  

M/s. Adyar Gate Hotel Ltd. clearly mentioned that the contractors  

quoted  

rate  

would  

also  

include  

excise  

duty.    

23.

Although, the respondent has pleaded that it was done out of  

ignorance, but in our considered opinion there appears to be an  

intention to evade excise duty and contravention of the provisions  

of the Act.  Therefore, proviso of Section 11A (i) of the Act would  

get attracted to the facts and circumstances of the present case.

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24. The  cause  of  action,  i.e.,  date  of  knowledge  could  be  

attributed to the appellant in the year 1997 when in compliance of  

the memo issued by the appellant and also the summons issued,  

the hotel  furnished its reply  setting out the details  of  the work  

done by the appellant amounting to Rs. 991.66 lakhs and at that  

stage only  

the  

department came to know that the work order was to carry out the  

job for furniture also. A bare perusal of the records shows that the  

aforesaid reply was sent by the respondent on receipt of a letter  

issued by the Commissioner of Central Excise on 27.2.1997.   If  

the period of limitation of five years is computed from the aforesaid  

date, the show cause notice having been issued on 15.5.2000, the

19 demand  made  was  clearly  within  the  period  of  limitation  as  

prescribed, which is five years.

25. So far as the second issue is concerned, we fail to appreciate  

as to how the Tribunal could come to a finding, as recorded in the  

impugned judgment  and order  in view of  the proposition of law  

already  settled  by this  Court  in the  decision of  Craft  Interiors  

(supra).   

26. The  

decision  

in  Craft  

Interiors  

(supra)  

has  

clearly  

laid down that ordinarily furniture refers to moveable items such  

as  desk,  tables,  chairs  required  for  use  or  ornamentation  in  a  

house or office.  So, therefore, the furniture could not have been  

held to be immoveable property.

27. A  perusal  of  the  records  would  also  indicate  that  the

20 Commissioner in his order has listed out various items which were  

held  as  furniture  and  while  doing  so,  he  has  scrutinized  the  

records to determine the immovability or movability of the items.  

A bare perusal of the said order would also indicate that he has  

given  deductions  for  the  items  held  as  immovable.     He  has  

prepared  Annexures  1,2,  3  and  4  and  the  items  mentioned  in  

Annexures  1  and  2  have  been  held  as  ‘furniture’  after  proper  

examination  of  the  records  whereas  he  has  held  items  in  

Annexures 3 and 4 as immovable and has allowed deduction.

28. So  far  as  the  items  such  as  chairs,  tables  etc.  listed  in  

Annexure 5 is concerned, the same admitted to be furniture by the  

assessee  himself.    The  Commissioner  having  considered  the

21 aforesaid issue carefully  and after proper scrutiny,  the Tribunal  

was not justified in rejecting the said findings by mere conclusion  

and  without  trying  to  meet  the  findings  recorded  by  the  

Commissioner.

29.

Accordingly, we allow this appeal and set aside the order passed  

by  the  Tribunal  and  restore  the  order  passed  by  the  

Commissioner.  However, there shall be no order as to costs.  

                                                   .....….……………………………,  J

   (DR. MUKUNDAKAM SHARMA)

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....…..……………………….……,J     (ANIL R. DAVE)   NEW DELHI; FEBRUARY 10, 2011.