246.            The taxable person was engaged in the manufacture of various toilet preparations such as after shave lotion, deo-spray, mouthwash, skin creams etc. The taxable person procured extra natural alcohol (ENA) from the local market on payment of tax, to which di-ethyl phthalate (DEP) was added so as to denature it and to render the same unfit for human consumption. The addition of ENA and DEP resulted in the manufacture of new product the department alleged that the said product is also liable to tax.

However the taxable person alleged that notice issued was time barred. The department pleaded that non-disclosure as regards manufacture of di-ethyl alcohol amounted to suppression of material facts thereby attracting the extended period of limitation of 5 years u/s 74. Examine whether the department plea is valid in law?

No the department plea is not justified in law. The denaturing process in the cosmetic industry was a statutory requirement under the medical and toilet preparation Act. Thus addition to make the same unfit for human consumption was a statutory requirement. Hence failure on the part of taxable person to declare the same could not be held to be suppression of facts as department knowing the fact that the taxable person was manufacturing cosmetics must have the knowledge of the said requirement.