2006 (3) TMI 437 - AT - Central Excise

Summary

Issues:
1. Inclusion of conversion and incidental charges in the assessable value.
2. Time bar on demands due to suppression of facts.

Analysis:
1. Inclusion of conversion and incidental charges in the assessable value:
The appellant contested the Order-in-Appeal confirming demands on converting paper reels into reams and selling them, arguing that the conversion charges should not be included in the assessable value. They claimed that the demands were time-barred since they had applied for registration for this activity, which was rejected by the Department. The appellant highlighted that there were communications with the Department prior to 1997 regarding this issue, indicating no suppression of facts. The Department rejected their registration request based on the argument that cutting and packing of paper did not constitute manufacturing under the Central Excise Act. The Tribunal noted that the Department was fully aware of the conversion activity, as evidenced by the registration application and subsequent correspondence. Therefore, the Tribunal held that the demands were not sustainable for the larger period due to the absence of suppression of facts or deliberate misrepresentation.

2. Time bar on demands due to suppression of facts:
The Department contended that the findings of the Commissioner supported the demands, but the Tribunal disagreed. It was observed that the appellant had sought registration for the paper cutting activity, which was denied by the Department on the grounds that it did not amount to manufacturing. The Tribunal emphasized that the Department's rejection of the registration plea indicated their awareness of the conversion process, precluding any allegation of suppression of facts at a later stage. Consequently, the Tribunal ruled that the demands were time-barred, as there was no evidence of intentional withholding of information or fraudulent behavior. The appeal was allowed based on this ground alone, with any consequential relief granted accordingly.

In conclusion, the Tribunal found in favor of the appellant, ruling that the demands were time-barred due to the Department's prior knowledge of the conversion activity and the absence of suppression of facts. The inclusion of conversion charges in the assessable value was deemed unjustified, leading to the allowance of the appeal solely on the basis of the time bar issue.