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Audi Automobiles v. Commissioner of Central Excise and Service Tax, Indore

Civil Appeal · 2026 INSC 858Decided 13 Aug 2026
Civil Appeal Nos. 10504-10506 of 2017
Justice J.B. Pardiwala · Justice K. Vinod Chandran

Background

The appellant, a motor vehicle body-builder, cleared vehicle chassis at 110% of its cost of manufacture: a fact known to the Excise Department at the time. The Department later issued a show-cause notice claiming excise duty had been under-paid because the correct 10% addition was allegedly not made when computing duty at the time of clearance, and sought to recover the shortfall by invoking the extended (five-year) period of limitation under the proviso to Section 11A of the Central Excise Act, which is normally reserved for cases involving fraud, suppression, or willful misstatement. The demand covered a period from November 2004 to March 2007, but the show-cause notice was issued only in April 2008.

Decision Breakdown

The Supreme Court held that because the manufacturer's practice of clearing chassis at 110% of cost was already known to the Department, there was no suppression of facts or fraud that could justify invoking the extended period of limitation. If the Department believed duty had been under-computed, it ought to have acted promptly within the normal one-year period under Section 11A(1), rather than relying on the extended period years later. Since the show-cause notice was issued beyond the ordinary one-year window and no case for extended limitation was made out, the demand was barred by limitation. The Court set aside the orders of the Tribunal and the authorities below and allowed the appeals, while confirming that the underlying method of computing duty (including the vehicle's full cost) was otherwise correct: the appellants succeeded only on the limitation point.

Lesson Learnt

Tax authorities cannot invoke an extended limitation period meant for fraud or concealment cases when the relevant facts were already known to them at the time: timely action within the ordinary limitation period is essential, or the demand risks being struck down regardless of its underlying merits.

Official source (sci.gov.in)View Judgment (PDF)

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