2006 (7) TMI 77 - AT - Central Excise

Demand - Limitation - Duty payment stopped after a favourable decision by CESTAT and again started after a decision of Apex court - HELD No wilful suppression of facts by assessee

Summary

Issues Involved:
1. Duty liability of Quality Information Service (QUIS) samples drawn for testing.
2. Invocation of extended period for demand under Section 11A of the Central Excise Act, 1944.
3. Imposition of penalties under Section 11AC and Rule 25 of the Central Excise Rules.

Detailed Analysis:

Duty Liability of QUIS Samples:
The primary issue is the duty liability on cigarette samples sent to the Quality Information Service (QUIS) Department for testing. The appellants argued that these samples were at a pre-marketable stage and not excisable, citing previous Tribunal decisions in their favor, including Godfrey Philips India Ltd. v. CCE, Bombay and their own case in the Tribunal's Kolkata Bench. They stopped paying duty on these samples after a favorable decision on 10-5-2000 and informed the department accordingly. However, the Supreme Court later ruled on 10-12-2002 that such samples were dutiable unless irretrievably destroyed during testing, provided proper records were maintained.

Invocation of Extended Period for Demand:
The appellants contested the show cause notice dated 29-9-2004, which demanded duty for the period from September 1999 to November 2002, invoking the extended period under Section 11A of the Central Excise Act, 1944. They argued that the notice was barred by limitation, given that the issue was under judicial dispute and the department was aware of their actions. The appellants had informed the department of their stance and the cessation of duty payments following the favorable Tribunal decision. They also highlighted that the department's officers regularly visited their factory, thus negating any claims of suppression.

Imposition of Penalties:
The impugned order imposed penalties under Section 11AC and Rule 25 of the Central Excise Rules. The appellants argued that the penalties were unjustified as they acted in a bona fide manner, relying on judicial decisions in their favor. They cited several Supreme Court decisions to support their claim that the extended period for demand was not applicable and that penalties should not be imposed when there was no intent to evade duty.

Tribunal's Findings:
The Tribunal considered the submissions and found that the issue of dutiability of QUIS samples was under dispute for a long time. The appellants had informed the department of their actions and maintained transparency. The Tribunal noted that the department's demand was based on theoretical estimates rather than concrete evidence of suppression or private records. The Tribunal also questioned the department's delay in issuing the show cause notice after the Supreme Court's decision.

The Tribunal concluded that there was no justification for invoking the extended period for demand, as there was no suppression of facts with intent to evade duty. The appellants had kept the department informed and acted based on judicial decisions. The Tribunal set aside the impugned order, allowing the appeal with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellants, finding that the extended period for demand was not justified and that the penalties imposed were unwarranted. The appeal was allowed, and the impugned order was set aside with consequential relief.