Meaning of Suppression of Facts (with court judgements)

blog

Time limit for raising demand and penalty amount increases if there is charge of fraud or any wilful-misstatement or suppression of facts to evade tax.

The expression “suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer – Explanation 2 to section 74 of CGST Act, 2017.

There can be no suppression of facts if facts which are not required to be disclosed are not disclosed – CCE v. Ranka Wires (2015) (SC).

Suppression should be wilful

Intention to evade payment of duty is not mere failure to pay duty. It must be something more, i.e. that assessee must be aware that duty was leviable and he must deliberately avoid payment of duty. ‘Evade’ means defeating the provision of law of paying duty. It is made more stringent by the use of word ‘intent’. In other words, the assessee must deliberately avoid payment of duty payable under the law. Where there was scope of doubt whether duty was payable or not, it is not ‘intention to evade duty’.

No suppression if all facts were disclosed

If all facts have been disclosed to department, extended period for demand, is not applicable – Nestler Boilers (P.) Ltd. v. Collector – 1990 (CEGAT).

Mere inaction or mere non-disclosure is not Suppression of Facts

Suppression means not providing information which the person is legally required to state, but is intentionally or deliberately not stated.

Hon. Supreme Court, in Collector v. Chemphar Drugs, has held that mere inaction or failure on part of manufacturer will not amount to suppression of facts. Conscious or deliberate withholding of information when the manufacturer knew otherwise, is required to be established, before saddling the manufacturer with liability for extended period.

In the case of Padmini Products v. CCE – 1989 (SC), it has been held by Apex Court that mere non-declaration is not sufficient to invoke larger period but some more positive act is required. It was held that mere failure or negligence on part of manufacturer to take licence or pay duty in case where there was scope for doubt as to whether goods were dutiable or not, could not attract the extended limitation. In this case, the assessee did not obtain excise licence under belief that the goods are exempt from duty. There was scope of doubt regarding liability of duty. Hence, demand for period beyond period of one year (that time six months) was set aside.

Mere omission to give correct information did not constitute suppression unless that omission was made wilfully in order to evade duty. Suppression would mean failure to disclose full and true information with the intent to evade payment of duty – CCE v. Ballarpur Industries Ltd. (2007) (SC).

No suppression of facts if taxable person had a bona fide belief

If a party bona fide believes in a legal position (e.g. that no duty is payable or no licence is required in his case) and if there is scope for such belief and doubt, penal provisions of section 11A will not apply. – Padmini Products v. CCE – 1989 (SC).

No suppression if department aware of facts

Extended period of five years is not applicable for any omission on part of assessee, unless it is a deliberate attempt to escape from payment of duty. When facts were known to the department, extended period of five years is not applicable – Pushpam Pharmaceuticals Co. v. CCE 1995 (SC).