2004 (4) TMI 387 - AT - Central Excise

Summary

Issues:
1. Valuation of goods under Section 4 or Section 4A of the Central Excise Act, 1944.
2. Bar on demands by time and applicability of larger period for raising demands under proviso to Section 11A.
3. Imposition of penalty in cases of voluntary payment of duty before the issue of show cause notice.

Issue 1: Valuation of goods under Section 4 or Section 4A of the Central Excise Act, 1944:

The appellants contended that they are manufacturers of self-adhesive tapes classifiable under Chapter Heading 39.19 of the Central Excise Tariff Act, 1985. They supplied goods in bulk to industrial users, including cigarette manufacturers, under Section 4A of the Act. However, doubts arose regarding the valuation under Section 4 or Section 4A, leading to a clarification by the Board through a Circular. Upon receiving the clarification, the appellants voluntarily revalued the goods under Section 4 and paid the differential duty. They argued that since they proactively addressed the issue and paid the duty before any show cause notice, there was no intention to defraud the exchequer. The Tribunal found that the appellants had acted in good faith, and the invocation of a larger period for demanding duty was not warranted.

Issue 2: Bar on demands by time and applicability of larger period for raising demands under proviso to Section 11A:

The Chartered Accountant representing the appellants argued that demands were time-barred as there was a prevailing doubt regarding the valuation of goods under Section 4 or Section 4A, as highlighted in the Board Circular. Citing precedents, he contended that when doubts existed and were subsequently clarified by the Board, demands could only be prospective from the date of the clarification. The Tribunal agreed, emphasizing that the appellants had voluntarily paid the duty upon clarification, and there was no suppression of facts. The Tribunal held that penalties were not imposable as the duty had been paid before any show cause notice was issued, aligning with previous judgments that supported non-imposition of penalties in such cases.

Issue 3: Imposition of penalty in cases of voluntary payment of duty before the issue of show cause notice:

The Department argued that a larger period was invocable and penalties were imposable based on a Tribunal judgment in a different case. However, the Tribunal disagreed, noting that in the present case, the appellants had voluntarily rectified the valuation issue and paid the duty and interest before any formal notice was issued. The Tribunal highlighted that there was no suppression of facts, and the Department was aware of the ongoing transactions. Relying on various judgments, including those of the Supreme Court and High Courts, the Tribunal concluded that penalties were not justified in this scenario. Therefore, the Tribunal set aside the invocation of a larger period and the imposition of penalties, ultimately allowing the appeal in favor of the appellants.