The Supreme Court dismissed the Department’s attempt to invoke the extended limitation under the proviso to Section 11A of the Central Excise Act, holding that without a specific allegation of wilful suppression the provision cannot be invoked, thereby reshaping the approach to excise assessments on job-work vehicles.
Background & Facts
The Dispute
The appellants, Audi Automobiles & Ors., are engaged in body-building of motor vehicles on a job-work basis. The manufacturers supply chassis on which the appellants build the vehicle body. Excise duty on the chassis is paid by the manufacturer on a valuation of 110 % of the cost of manufacture as per Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. After completion, the finished vehicle is returned to the manufacturer and duty is recomputed by the job-worker after availing CENVAT credit.
Key Facts
- The chassis is valued at 110 % of its cost of manufacture under Rule 8.
- The appellants argue that the additional 10 % profit margin of the manufacturer, which forms part of the chassis value, must be included in the assessable value of the completed vehicle.
- The Department issued a Show-Cause Notice (SCN) seeking duty and penalty for the period 01-11-2004 to 31-03-2007.
- The SCN was dated 30-04-2008, i.e., beyond the one-year limitation prescribed in the proviso to Section 11A(1).
- The Department relied on alleged wilful suppression of facts to invoke the extended limitation.
Procedural History
- 2017: Civil Appeal No s.10504-10506 of 2017 filed before the Supreme Court.
- 30-04-2008: SCN issued by the Department demanding duty and penalty.
- 01-11-2004 to 31-03-2007: Period for which the demand was made.
- 13 August 2026: Judgment delivered by Justice K. Vinod Chandra and Justice J. B. Pardiwala.
Parties' Positions
- Appellants: Contended that the SCN lacked a specific allegation of wilful suppression; that the 10 % profit component is part of the chassis value and must be included in the assessable value; and that the extended limitation cannot be invoked.
- Respondent (Department): Asserted that the extended period of limitation under the proviso to Section 11A was available because the Department alleged suppression of facts and sought penalty.
Relief Sought
The appellants prayed for the setting aside of the Tribunal’s order and the SCN, a declaration that the extended limitation is inapplicable, and that no duty or penalty be recovered for the disputed period.
