2001 (9) TMI 540 - AT - Central Excise

Summary

Issues:
1. Whether the demand of excise duty is time-barred.
2. Whether any penalty is imposable on the appellant.

Issue 1: Time-barred demand of excise duty
The appeal questioned whether the demand of excise duty amounting to Rs. 1,71,637/- for yarn on cones cleared during a specific period was time-barred. The appellant argued that the duty demand was time-barred as the show cause notice was issued beyond the statutory limitation period. The appellant contended that they operated under a bona fide belief that they were not liable to pay duty on yarn in cones as they considered themselves manufacturers of hosiery articles and not yarn. The appellant highlighted the absence of wilful misstatement or suppression of facts, relying on the decision in Pee Jay Apparels (P) Ltd. v. C.C.E. Chandigarh. The Tribunal, after considering various legal precedents, concluded that the demand was time-barred due to the absence of fraud, collusion, or suppression of facts, as the appellant's product was exempt from duty, and no classification list or intimation was required to be filed.

Issue 2: Imposition of penalty under Section 11AC
The appellant contended that penalty under Section 11AC was not imposable as the period in question predates the introduction of these provisions. The Tribunal concurred, citing the Supreme Court's decision in C.C.E. v. Elgi Equipment, and held that as no suppression of facts was found, the provisions of Section 11AC were not applicable. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that without evidence of suppression or misstatement, the penalty provisions could not be invoked. Additionally, the Tribunal clarified that Section 110 of the Finance Act, 2000, did not validate the action to demand duty for an extended period in the absence of fraud, collusion, or suppression of facts, emphasizing the necessity of proving non-levy or short levy due to fraudulent activities for invoking the extended period under Section 11A of the Central Excise Act.

In summary, the judgment by the Appellate Tribunal CEGAT, New Delhi, addressed the issues of whether the demand of excise duty was time-barred and whether a penalty was imposable on the appellant. The Tribunal ruled in favor of the appellant, holding that the demand was time-barred due to the absence of fraud or suppression of facts, and that the penalty under Section 11AC was not applicable as the period predated its introduction. The decision underscored the importance of proving fraudulent activities for invoking extended periods under the Central Excise Act, highlighting the legal precedents and statutory provisions guiding the resolution of the issues at hand.