Supreme Court of India· 24 March 2026
When can the extended limitation of five years under the Central Excise Act be invoked?
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
Answer
Fraud, collusion, willful mis-statement or suppression of facts stand in one category, each deliberate and egregious enough by itself to extend limitation. Contravention of the Act or the Rules falls in a second category and extends limitation only where an intent to evade payment of duty is discernible.
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 38This brings us to the proviso to sub-section (1) of Section 11A, as it stood at the relevant point of time, which is relevant and is therefore extracted hereunder: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words one years, the words “five years” were substituted. 38.1. Thus, the proviso to sub-section (1) of Section 11A provides that where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Central Excise Act or of the rules made thereunder with the intent to evade payment of duty, by such person or his agent, the limitation period of one year would stand extended to 5 years. In the aforesaid circumstances as enumerated hereinabove, the normal period of limitation of one year would stand extended to five years. However, the non-levy or non-payment or short levy etc., in which event, the limitation period of issuing show cause notice would stand extended to five years, is dependent upon fulfilment of two conditions. The first condition is that it should be by reason of fraud, collusion or any willful mis-statement or suppression of facts; secondly, it can also be for contravention of any of the provisions of the Central Excise Act and the Central Excise Rules but with the intention to evade payment of duty. In the second case, the intention to evade payment of duty is crucial and, therefore, must be discernible.
Paragraph 50Thus, fraud, collusion, willful mis-statement or suppression of facts stand in one category and contravention of any of the provisions of the Central Excise Act or the rules made thereunder is another category. In the first category, the act is deliberate and is so egregious that such omission or infraction would by itself be sufficient to attract the extended period of limitation. However, in the later category, the contravention of the statute would have to be accompanied by an intent to evade payment of duty to attract the extended period of limitation.
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, 1944One judgment a day. That's the whole habit.
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