CESTAT Overrules Extended Limitation Period for Misclassification and Undervaluation
The Allahabad Bench of CESTAT has set aside the extended limitation period invoked against Mishrambu Beverages Pvt. Ltd. for misclassification and undervaluation of dry fruit sharbats, syrups, and squashes. The tribunal found that the assessee had fully disclosed the nature, classification, and ingredients of its goods.
CestatMisclassificationUndervaluationExcise DutyDry Fruit SharbatsReal EstateMay 26, 2025
The tribunal held that paying duty under the wrong section or not submitting a price list did not justify extending the limitation period. The bench, comprising P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member), examined the case in detail and found that the assessee had fully disclosed the nature, classification, and ingredients of its goods at registration and in quarterly returns accepted during the initial audit.
Mishrambu Beverages Pvt. Ltd. manufactured and cleared dry fruit sharbats, drinks, syrups, and squashes. They paid duty at 2% under Section 4 of the Central Excise Act by classifying the goods under tariff item 2106 9011 and claimed SSI exemption. The assessee obtained central excise registration in January 2015 and filed quarterly returns showing details of manufacture, clearances, and exemptions. An initial audit found no issues with classification or exemption claims.
However, a subsequent audit by Central Goods and Service Tax (CGST) and Central Excise officers found that the goods should have been assessed under Section 4A with a duty rate of 6%, based on retail sale price. They also found that the assessee wrongly claimed SSI exemption as their turnover exceeded the limit. A Show Cause Notice was issued in June 2019, alleging wrong valuation, wrongful exemption claim, delayed registration despite high turnover, and non-cooperation during the audit. The demand for duty, along with interest and penalties, was raised.
The Order-in-Original passed in May 2020 confirmed the duty demand and penalties and upheld the extended period of limitation, noting that the appellant did not submit price lists and wrongly claimed SSI exemption despite turnover above the threshold. The assessee appealed against the order, arguing that only some syrups like rose and khus syrup came under tariff 2106 9011, while other products like premium thandai, kesaria pista, and badam pista were under tariff 2008 1990, and squash under 2008 99. They also disagreed with the use of the extended period of limitation.
The Commissioner (Appeals) partly agreed with the assessee, stating that the classifications were correct. However, they maintained that all goods were taxable under Section 4A with duty based on retail price, allowing abatements of 25% or 35%. The duty demand was reduced to Rs. 8,54,720, and the case was sent back to check the retail prices and recalculate the duty. The Commissioner rejected the claim against the extended period of limitation, stating that the assessee had wrongly classified and valued the goods and did not disclose this in returns.
The two-member bench of CESTAT examined whether the extended period of limitation was properly applied. The original order stated that the assessee suppressed facts and evaded duty by not submitting a price list and wrongly claiming SSI exemption despite high turnover. The tribunal disagreed, finding that the assessee had disclosed the nature, classification, and ingredients of its goods when registering and filed returns showing clearances and exemption claims. Since the department was aware of these facts, the appellate tribunal concluded there was no suppression or intent to evade duty. Simply paying duty under the wrong section did not count as suppression.
The bench also ruled that not submitting a price list was not a valid reason for extending the limitation period because the assessee paid duty under Section 4A without objection. The tribunal noted that the order relied on reasons not mentioned in the original decision, which was not allowed. Therefore, the CESTAT set aside the part of the order that confirmed the extended limitation period, and the appeal was allowed.
Frequently Asked Questions
What is CESTAT?
CESTAT stands for Customs, Excise and Service Tax Appellate Tribunal. It is a higher appellate body in India that hears appeals against orders passed by the Commissioner of Central Excise, Customs, and Service Tax.
What was the main issue in the case of Mishrambu Beverages Pvt. Ltd.?
The main issue was the alleged misclassification and undervaluation of dry fruit sharbats, syrups, and squashes, which led to the invocation of an extended period of limitation for the assessment of additional duty and penalties.
Why did the tribunal set aside the extended period of limitation?
The tribunal set aside the extended period of limitation because the assessee had fully disclosed the nature, classification, and ingredients of its goods, and the department was aware of these facts during the initial audit.
What is the significance of the extended period of limitation in tax cases?
The extended period of limitation allows the tax authorities to assess additional taxes and penalties beyond the usual limitation period if there is evidence of suppression or concealment of facts.
How did the tribunal rule on the issue of the price list submission?
The tribunal ruled that not submitting a price list was not a valid reason for extending the limitation period because the assessee had already paid duty under the correct section without objection.
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