Supreme Court of India· 13 August 2026

What must be shown for the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944 to be validly invoked against an assessee?

Audi Automobiles & Ors v. Commissioner of Central Excise and Service Tax, Indore

2026 INSC 858 · Civil Appeal Nos.10504-10506 of 2017
Coram: J. B. Pardiwala; K. Vinod Chandran

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Answer

The suppression or misstatement of facts relied upon must be wilful and made with intent to evade duty; where the facts were already known to the Department, omission by the assessee to do what it might have done would not render its suppression, and the extended period cannot be invoked.

Headnote

Central Excise Act, 1944 — s.11A, proviso, s.11A(1), s.35L — Central Excise Valuation Rules, 2000 — r.8 — Job-work valuation — Extended period of limitation — Suppression — Wilful — Central Excise Valuation Rules, 2000 — r.8 — Job-work — 10% manufacturing cost includible — Held: The 10% additional cost built into the chassis's assessable value under Rule 8 forms part of the intermediate product's value and must also be included when the job-worker computes duty on the completed vehicle. The assessee's liability to include it is unassailable. (¶11, 12, 17) Central Excise Act, 1944 — s.11A proviso — Extended limitation — Suppression must be wilful — Held further: Suppression to invoke the extended period under the proviso to Section 11A must be wilful and made with intent to evade duty. When the facts are known to both parties, omission by one party to do what he might have done would not render its suppression. (¶15, 16) Central Excise Act, 1944 — s.11A(1) — Limitation — Demand time-barred — Held further: The Department already knew the manufacturer's chassis cleared at 110% of its cost of manufacture, so the extended period could not be invoked, and the show cause notice issued beyond the one-year period under Section 11A(1) was time-barred. The Tribunal's order was set aside and the appeals allowed. (¶16, 17, 18)

In the Court's own words

Paragraph 15Continental Foundation Joint Venture Holding[^10] explained the words employed in the proviso to Section 11-A. It was held that as far as ‘fraud’ and ‘collusion’ are concerned, the intent to evade duty is built into these words and ‘misstatement’ or ‘suppression’ of facts are clearly qualified by the word ‘wilful’, which also means with an intent to evade duty. Even ‘contravention of any of the provisions of this Act or Rules’ is also qualified by the immediately following words ‘with intent to evade payment of duty’. Therefore, there cannot be a suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for invocation of proviso to Section 11-A. Therein, on facts, it was found that there were circulars issued by the department, which were in favour of the assessee and the view expressed by the CEGAT in a case, was later held to be incorrect in a Larger Bench decision.

Paragraph 16More importantly, for our purpose, it was held that ‘when the facts are known to both the parties, omission by one party to do what he might have done would not render its suppression’. In the instant case, we already noticed that the manufacturer cleared the chassis at 110% of its cost of manufacture, which was known to the Department. Hence, if 10% was not added when computing the duty at the time of clearance by the job worker, the department ought to have taken immediate action under sub- section (1). The proviso cannot be invoked to extend the period of limitation.

Acts & Sections

Central Excise Act, 1944 — s.11ACentral Excise Act, 1944 — s.11A provisoCentral Excise Act, 1944 — s.11A(1)Central Excise Act, 1944 — s.35LCentral Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 — r.8

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Also decided in this judgment

Under Rule 8 of the Central Excise Valuation Rules, 2000, where a chassis is valued at 110% of its cost of manufacture and then sent for body-building on job-work, must the job-worker's assessable value of the completed vehicle also include that additional 10%?

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