Limitation Plea Can Be Raised At Any Stage As Long As Facts Are On Record: Madras High Court

In a recent ruling, the Madras High Court held that a belated plea of limitation cannot be entertained where the factual foundation necessary to examine such a plea is absent on record.

The ruling came from a bench of Justice Dr. Anita Sumanth and Justice P Dhanabal while dismissing an appeal filed by Modern Engineering & Plastics Pvt. Ltd.

The court noted that "Normally, limitation, if it were to be a pure question of law may be raised at any stage of the proceeding, and it would not have been fatal for either the Tribunal or even this Court, at the stage of appeal on a substantial question of law, to consider the question of limitation for the first time. The only caveat is that all necessary facts to determine that question are available on record. In the present case, the necessary facts, to determine as to whether invocation of larger period of limitation is correct or otherwise, are unavailable."

The dispute traces back to 1995-96. The excise department alleged that Modern Engineering & Plastics had set up two shadow entities, Modern Fabricators and Engineers and Engineering Plastics Incorporation, to keep its clearances below the Small Scale Industry exemption limit.

According to the department, all three units were effectively operating as one, and the arrangement was meant to continue claiming exemption even after crossing the Rs 30 lakh threshold.

On that basis, the department sought to club the clearances and raise a duty demand, along with a penalty. The adjudicating authority accepted this version, and the orders were later upheld in appeal and by the Customs, Excise, and Service Tax Appellate Tribunal.

When the matter reached the High Court, the company pressed on with the argument of limitation. It argued that the extended period under Section 11A of the Central Excise Act could not be applied.

The company said the department already knew about Modern Fabricators and Engineers, since it had been granted SSI exemption in earlier years, and there was no question of suppression.

The bench said the record did not support that claim, at least as far as Engineering Plastics Incorporation was concerned. It pointed out that there was nothing to show that the department was aware of EPI during the relevant period.

“As far as EPI is concerned, there is only a registration certificate dated 03.02.1998 and nothing to indicate that EPI was in existence prior to its registration on the aforesaid date. Hence, we are unable to accept, as a fact, the position that the Department was well aware of the existence of EPI and its activities,” the court said.

The court held that limitation here depended on facts as much as law. With those facts missing from the record, the tribunal was right in refusing to entertain the plea raised for the first time at the hearing stage. The appeal was dismissed.

Case Title: Modern Engineering v. Customs, Excise And Service Tax Appellate Tribunal

Citation: 2026 LLBiz HC (MAD) 18

Case Number: CMA No. 3435 of 2009

Counsel for Appellant: Advocate S. Murugappan

Counsel for Respondent: Senior Standing Counsel, Revathi Manivannan