New Limitation Plea Without Records Not Maintainable Before CESTAT: Madras High Court

The Madras High Court dismissed an appeal filed by M/s Modern Engineering & Plastics Pvt. Ltd., holding that a plea on limitation cannot be raised for the first time before the Tribunal without supporting factual material on record.

A Bench of Justice Anita Sumanth and Justice P. Dhanabal observed that limitation under Section 11A of the Central Excise Act, 1944 is a mixed question of law and fact, and cannot be examined by a court or tribunal in the absence of necessary evidence.

The Bench observed:

“Normally, limitation, if it were to be a pure question of law, may be raised at any stage of the proceeding. The only caveat is that all necessary facts to determine that question are available on record. In the present case, the necessary facts… are unavailable.”

The dispute arose from a show cause notice issued in 2000, alleging that Modern Engineering had cleared goods through two alleged shadow units—Modern Fabricators and Engineers (MFE) and Engineering Plastics Incorporation (EPI)—to wrongfully avail Small Scale Industry (SSI) exemption and evade excise duty.

Before the adjudicating authority, the appellant contested the demand only on merits and did not challenge the invocation of the extended period of limitation under Section 11A. The same position continued before the Commissioner (Appeals).

It was only during oral arguments before the CESTAT that the appellant raised a plea on limitation. The Tribunal declined to consider the argument, noting that no such ground had been raised at any earlier stage, including in the reply to the show cause notice.

A second appeal before the CESTAT also did not contain any specific ground on limitation, and the Tribunal proceeded to decide the matter purely on merits. The oral plea raised during arguments was therefore rejected as a new contention.

Upholding the Tribunal's approach, the High Court held that where the extended five-year limitation is invoked on grounds such as fraud, suppression of facts, or intent to evade duty, all relevant facts must be available on record before such a plea can be examined.

The Court noted that the appellant had failed to place certified documents to show that the alleged shadow units were independent entities or that the department had prior knowledge of their operations—facts crucial to deciding whether the extended limitation was validly invoked.

Emphasising that the issue involved factual determination, the Bench further stated:

“This becomes a very relevant question of fact, one which is critical to determine the question of limitation… In the absence of necessary facts, we find nothing untoward in the conclusion of the Tribunal rejecting the plea of limitation raised for the first time before it.”

Accordingly, the High Court dismissed the appeal, ruling in favour of the Department.

For Appellant: S. Murugappan

For Respondent: Senior Standing Counsel, Revathi Manivannan