The Supreme Court held that the extended limitation under Section 11A cannot be invoked where facts were already known to the Excise Department, as an omission is not wilful suppression.
New Delhi: The Supreme Court has held that the Central Excise Department cannot invoke the extended period of limitation to raise a duty demand where the relevant facts were already known to it, ruling that a mere omission by the assessee to do something, in circumstances where both sides were aware of the facts, does not amount to the “wilful suppression” required to extend the limitation period [Audi Automobiles and Others v. Commissioner of Central Excise and Service Tax, Indore].
A Bench of Justices J.B. Pardiwala and K. Vinod Chandran allowed the appeal of a motor-vehicle body-builder, setting aside a duty demand not because the underlying liability was wrong — the Court held that liability to be “unassailable” — but because the show-cause notice raising it was time-barred.
The core holding: knowledge defeats ‘suppression’
The decisive question was whether the Department could rely on the proviso to Section 11A of the Central Excise Act, 1944, which permits a demand to be raised beyond the ordinary one-year limitation period in cases of fraud, collusion, or wilful misstatement or suppression of facts with intent to evade duty.
The Court held it could not, on a simple but important footing: the Department already knew the relevant facts. The manufacturer had cleared the chassis at 110% of its cost of manufacture — a figure known to the Department — and if the additional 10% ought to have been included when the job-worker computed duty on the finished vehicle, the Department could and should have acted within the ordinary limitation period. Drawing on the settled position in Continental Foundation Joint Venture Holding v. CCE, the Court reiterated the principle 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.” An omission, in other words, is not the same as concealment; and only wilful suppression — suppression carrying an intent to evade duty — opens the door to the extended limitation period.
Applying that principle, the Court held that the proviso could not be invoked to enlarge the limitation period on these facts, and that the demand was accordingly barred by time.
Liability upheld, demand struck down
The judgment is notable for separating two questions that are easily conflated — whether the tax is owed, and whether it can still be recovered.
On the merits of the valuation dispute, the Court ruled against the assessee. The appellants build bodies on chassis supplied to them by manufacturers as job work; duty is paid by the manufacturer on the chassis at 110% of its cost of manufacture under Rule 8 of the Central Excise Valuation Rules, 2000, and the appellants had computed duty on the finished vehicle using only the actual cost of the chassis, leaving out that additional 10%, which they argued represented the manufacturer’s profit margin. Relying on the Constitution Bench rulings in the Ujagar Prints line of cases, the Court held that the additional 10% forms part of the statutorily fixed value of the chassis and must be included when the job-worker clears the completed vehicle, since that value has gone into the cost of the vehicle on which duty was already paid and credit availed. What was not includable, the Court clarified, was only the manufacturer’s anticipated profit on the eventual sale of the finished vehicle and post-manufacture expenses.
The assessee’s liability to include the full value, the Court said, was therefore “unassailable.” But that liability, for the year in question, was “not leviable for reason of limitation having run to the peril of the revenue.” The demand covered the period November 1, 2004 to March 31, 2007; the show-cause notice was issued on April 30, 2008 — beyond the one-year period under Section 11A(1). The Department, having known the facts throughout, could not resort to the extended period to cure its own delay.
Why the reasoning matters
The judgment consolidates a line of authority on when the revenue may reach back beyond the normal limitation window, and it does so in a way that disciplines the routine invocation of the extended period.
The Court’s reliance on Continental Foundation underscored that every limb of the proviso to Section 11A is tied to an intent to evade: “fraud” and “collusion” carry that intent inherently, while “misstatement” and “suppression” are qualified by the word “wilful,” and even a contravention of the Act or Rules must be “with intent to evade payment of duty.” There can therefore be no suppression that is not wilful and yet still justifies extending limitation. The Court also drew on Larsen & Toubro Ltd. v. CCE, which held that because extending the limitation period carries both civil and criminal consequences, the grounds for doing so must be specifically stated in the show-cause notice, failing which a court may infer that the extended period was not available.
The practical effect for the revenue is a caution: the extended limitation period is not a fallback for demands the Department could have raised in time. Where the facts were on the record and known to the authorities, a later characterisation of the assessee’s omission as “suppression” will not hold.
A preliminary hurdle cleared
The Court also dealt with a threshold objection by the Department that the appeal did not lie before the Supreme Court under Section 35L of the Central Excise Act, since it did not involve a question relating to the rate of excise duty or the valuation of goods. Rejecting that objection, the Bench held that the issue had an “inextricable link” with the valuation of goods for assessment, and declined to relegate the assessee to the High Court after the matter had been pending before the Supreme Court for almost a decade.
Case Title: Audi Automobiles and Others v. Commissioner of Central Excise and Service Tax, Indore [Civil Appeal Nos. 10504-10506 of 2017]
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran
Citation: 2026 INSC 858
Date of Judgment: August 13, 2026