Supreme Court of India· 24 March 2026

Can the extended period of limitation be invoked where the duty exercise is revenue neutral?

M/s. Rashtriya Chemicals and Fertilizers Limited v. Commissioner of Central Excise and Service Tax (LTU)

2026 INSC 285 · SLP (CIVIL) NO. 21441 OF 2013
Coram: Ujjal Bhuyan; Manoj Misra

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Answer

No. Where the entire exercise is revenue neutral the assessee could achieve no purpose by evading payment of excise duty. Nor can an intention to evade be attributed where availing the exemption depends on the interpretation of a statutory notification which the Court has upheld.

Headnote

Central Excise Act, 1944 - s.5A(1) - s.11A(1) proviso - s.11AC - Notification No. 4/1997-CE - Exemption for goods intended for use - Extended period of limitation - Revenue neutrality - Central Excise Act, 1944 - s.5A(1) - Notification No. 4/1997-CE - Intended use, not actual use - Held: An exemption conditioned on goods being intended for use in a specified manufacture requires proof of that intention, not proof that the goods were so used. That a fraction generated electricity partly consumed elsewhere is immaterial. (¶54) Central Excise Act, 1944 - s.11A(1) proviso - Two categories of extended limitation - Held further: Fraud, collusion, willful mis-statement or suppression of facts are deliberate acts sufficient in themselves to extend limitation to five years. Mere contravention of the Act or the Rules extends it only when accompanied by an intent to evade payment of duty. (¶50, 38) Central Excise Act, 1944 - s.11A(1) proviso - Exemption turning on interpretation of a notification - Held further: Where availing of an exemption depends on the interpretation of a statutory notification, and that interpretation is upheld, no intention to evade payment of duty can be attributed to the assessee. Particulars had been furnished and CT-2 certificates issued throughout. (¶58) Central Excise Act, 1944 - s.11A(1) proviso - Revenue neutrality bars extended limitation - Held further: Where the exercise is revenue neutral the assessee can achieve no purpose by evading duty, so the extended period cannot be invoked. Appeals allowed; the orders-in-original and the CESTAT order set aside. (¶57, 61)

In the Court's own words

Paragraph 57Similarly, in Nirlon Limited, this Court noted from the facts of the case that the entire exercise was revenue neutral and held that when the entire exercise was revenue neutral, the appellant (assessee) could not have achieved any purpose by evading payment of excise duty. Therefore, it was not permissible for the respondent (revenue) to invoke the proviso to Section 11A(1) of the Central Excise Act and apply the extended period of limitation.

Paragraph 58Reverting back to the facts of this case, it is evident that all along appellant had furnished the requisite particulars to the central excise authorities based on which the jurisdictional officer had issued CT-2 certificates. On the strength of such certificates, appellant had availed exemption from payment of excise duty on the procured Naphtha which was mostly used in the manufacture of fertilizer and ammonia. Applicability of the exemption notifications is dependent on interpretation of the expression intended for use used therein. When the availing of exemption is dependent on interpretation of a statutory notification, which interpretation we have upheld, it cannot be said that the assessee (appellant herein) had any intention to evade payment of excise duty. That apart, we need to keep in mind that appellant is after all a central government public sector undertaking. It is on record that appellant receives subsidy to maintain the regulated price. Whatever excise duty it would have had to pay had it not been for the exemption notifications, would have been reimbursed by the Central Government by way of subsidy. Therefore, it is a clear case of revenue neutrality. In such a case, as has been pointed out by this Court in Nirlon, question of invoking the extended period of limitation does not arise.

Acts & Sections

s.11A Central Excise Act, 1944s.5A(1) Central Excise Act, 1944s.11AC Central Excise Act, 1944Rule 25 Central Excise Rules, 2002Rule 173Q Central Excise Rules, 1944

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Also decided in this judgment

Does an excise exemption for goods intended for use require proof of actual use?When can the extended limitation of five years under the Central Excise Act be invoked?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections