2008 (3) TMI 521 - AT - Central Excise

Ferrous waste and scrap - Exemption Notification - Date of effect - Demand - Limitation - Extended period

Summary

Issues:
1. Duty demand on waste and scrap without payment during a specific period.
2. Exemption of waste and scrap from duty under different notifications.
3. Applicability of extended period of limitation for duty demand.

Analysis:
1. The appellants were involved in manufacturing windmills and cleared ferrous waste and scrap without paying duty between 1-3-1994 to 18-8-1994. The department issued a show-cause notice in 1998 to recover duty and impose penalties. The original authority upheld the duty demand and penalty, which was also confirmed by the Commissioner (Appeals), leading to the current appeal challenging the decision.

2. The waste and scrap were initially exempt from duty before 1-3-1994 under Notification No. 171/88-C.E., which was rescinded on 1-3-1994. The exemption was reintroduced by Notification No. 23/95-C.E. dated 16-3-1995. The appellants argued that the later notification should be considered retrospective based on a Supreme Court decision, but the tribunal found no grounds to accept this argument. Unlike the previous case, there was no evidence of a clarificatory intent behind the 1995 notification, leading to a strict construction of the exemption, making it prospective only.

3. Despite the lack of exemption during the disputed period, the appellants had a strong case regarding the limitation period. The duty demand notice was issued more than four years after relevant facts were collected during a department visit in 1994. The appellants believed their waste and scrap were still exempt, and the extended limitation period was deemed inapplicable. Additionally, the appellants argued that MODVAT credit on inputs could cover the duty demand if upheld, showing no intent to evade payment. The tribunal agreed with this argument, setting aside the duty demand and consequent penalty, ultimately allowing the appeal.