M/S RASHTRIYA CHEM. AND FER. LTD. vs. COMM. OF CENTRAL EX. AND SERV. TAX(LTU)

C.A. No.-002219-002220 - 2013Supreme Court2026 INSC 28524 March 2026Bench: HON'BLE MRS. JUSTICE B.V. NAGARATHNA HON'BLE MR. JUSTICE UJJAL BHUYANAuthor: HON'BLE MRS. JUSTICE B.V. NAGARATHNA72 pages
For Petitioner: RAJESH KUMAR
AI SummaryAllowed

What were the facts?

The appellant, Rashtriya Chemicals and Fertilizers Limited, procured Naphtha at nil duty under exemption notifications for use in fertilizer manufacture. However, it was also used as fuel for steam generation. The revenue issued show cause notices demanding duty of Rs. 28,55,95,491.00 for November 1996 to March 2001, alleging diversion of Naphtha for other chemicals. The Commissioner confirmed the demand. Subsequent notices were issued for later periods. The CESTAT initially remanded the matter. After de novo adjudication, a demand of Rs. 9,66,38,054.00 was confirmed. The CESTAT, in its order dated 27.03.2012, affirmed the duty levy and penalty under Section 11AC but set aside penalties under Rule 173Q and Rule 25. The appellant's subsequent application for rectification was rejected by the CESTAT, which was upheld by the High Court. The present appeals challenge these orders.

What did the Supreme Court hold?

The Supreme Court held that the appellant should succeed both on merit and on limitation. The Court reasoned that the appellant had furnished requisite particulars to the central excise authorities, and the availing of exemption was dependent on the interpretation of statutory notifications, which the Court upheld. It was emphasized that the appellant, a public sector undertaking, receives subsidies, making the entire exercise revenue neutral. In such revenue-neutral situations, invoking the extended period of limitation under Section 11A(1) of the Central Excise Act is not permissible, as established in the case of Nirlon Limited. The Court found that the appellant had no intention to evade excise duty. Consequently, the impugned orders-in-original dated 27.01.2010 and 04.02.2010, and the CESTAT's order dated 27.03.2012, were set aside. The appeal arising out of SLP (Civil) No. 21441 of 2013 was rendered academic and disposed of accordingly. No issue was expressly left undecided.

What were the issues?

1. Whether the extended period of limitation under Section 11A of the Central Excise Act, 1944, can be invoked by the revenue for levying duty on Naphtha allegedly diverted for purposes other than fertilizer manufacture, when the appellant is a public sector undertaking and the entire exercise was revenue neutral? Assessee's contention: The appellant argued that the extended period of limitation cannot be invoked as there was no suppression of facts. They contended that the use of Naphtha was based on interpretation of exemption notifications, and since the entire exercise was revenue neutral (any duty paid would be reimbursed by subsidy), there was no intention to evade duty. They relied on the Supreme Court's decisions in Pushpam Pharmaceuticals Company and Nirlon Limited. Revenue's contention: The revenue's arguments are not explicitly recorded in the provided text, but their actions of issuing show cause notices and demanding duty imply a contention that the appellant had suppressed facts or otherwise made themselves liable for duty beyond the normal period of limitation.

Which sections of the Income-tax Act were involved?

Section 11A,Section 11AC

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
2026 INSC 285 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 2219-20 OF 2013 M/S. RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED APPELLANT(S) VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX (LTU) RESPONDENT(S) WITH CIVIL APPEAL NO. OF 2026 (ARISING OUT OF SLP (CIVIL) NO. 21441 OF 2013)

J U D G M E N T

UJJAL BHUYAN, J.

Leave granted in Special Leave Petition (Civil) No. 21441 of 2013. 2. The subject matter in the three civil appeals being inter-connected, those were heard together and are hereby disposed of by this common judgment and order.

3.

Civil Appeal No. 2219 of 2013 arises out of the order dated 27.03.2012 passed by the Customs Excise and 2

Service Tax Appellate Tribunal, West Zonal Bench, Mumbai (CESTAT) in Appeal No. E/671/10-Mum whereas Civil Appeal No. 2220 of 2013 is preferred against the same final order dated 27.03.2012 passed by the CESTAT in Appeal No. E/801/10-Mum.

3.1.

It may be mentioned that Appeal No. E/671/

The order continues below.

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