2007 (7) TMI 447 - AT - Central Excise

Summary

Issues:
1. Confirmation of demand of differential duty and penalty on manufacturer and General Manager.
2. Mis-declaration of value leading to differential duty on goods cleared.
3. Barred by limitation - applicability of extended period.

Analysis:

Issue 1: Confirmation of demand of differential duty and penalty
The appeals arose from the confirmation of a demand of differential duty and penalty on the manufacturer and General Manager by the Commissioner of Central Excise. The manufacturer was engaged in the production of various fabrics and yarn, including Polyester Tops, Wool Tops, and Blended Tops. The demand was based on the alleged mis-declaration of value and non-payment of duty for certain goods cleared between March 1994 and June 2000. The Assistant Commissioner confirmed the demand on yarn but held that Blended Tops used for captive consumption were exempted. The manufacturer's appeal against the demand on yarn was partially allowed by the Commissioner (Appeals), leading to further proceedings before the Tribunal.

Issue 2: Mis-declaration of value leading to differential duty
The mis-declaration of value for goods cleared by the manufacturer led to the demand of a significant amount of differential duty. The manufacturer had filed price declarations for yarn and tops under relevant rules, but show cause notices were issued for recovery of differential duty based on modifications in the declared value. Despite exemptions available for certain goods, the failure to claim such exemptions and file revised declarations resulted in penalties and demands for duty. The subsequent adoption of new valuation rules in 2000 further complicated the issue, leading to additional demands and penalties.

Issue 3: Barred by limitation - applicability of extended period
The Tribunal considered the issue of limitation and found merit in the appellants' argument that the demand was barred by limitation. The appellants had declared the value of tops in 1996 under specific rules, and the department was aware of this declaration. Despite issuing show cause notices and confirming duty demands on yarn, no such action was taken for tops until later. The Tribunal concluded that the demand on tops was time-barred, as the department failed to act within the prescribed period. Consequently, the demand and penalties were set aside based on the finding that the extended period of limitation could not be applied due to the department's inaction and the lack of intent to evade duty payment.

In conclusion, the Tribunal allowed the appeals, setting aside the demand and penalties imposed on the manufacturer and General Manager, emphasizing the importance of adherence to valuation rules, timely actions by the department, and the limitations on the applicability of the extended period for demanding duty.