2016 (1) TMI 1135 - AT - Central Excise

Invokation of extended period of limitation - Demand and imposition of penalty - differential duty - inclusion of element of bonus and gratuity in the cost of the product -appellant supplying their goods to sister concern unit on the valuation arrived at through Cost Construction Method on the basis of Cost Accountant s Certificate - Held that - it is found that the appellant have been filing their price declaration in form annexure II(b) alongwith necessary certificate of costing for the product declared in their declaration. They have categorically stated method of costing. They also declared that at the end of the year, after finalization of the cost, differential duty shall be paid. With these facts whether certain element, which were escaped to be included in the cost or otherwise could have been detected by the department on the basis of declaration and costing certificate. Moreover, the allegation of non inclusion of certain element in the cost is not based on the any evidence or documents. It is also observed in the show cause notice that there is no specific allegation of suppression of facts or mis-declaration for invoking extended period under proviso to Section 11A. Therefore demand for extended period is not sustainable. Since duty demand itself is not sustainable, penalty is also not imposable. In absence of suppression of facts on the part of the appellant impugned order is set aside. Duty for the normal period, paid by the appellant alognwith interest is maintained. - Decided in favour of appellant

Summary

Issues:
1. Confirmation of demand for differential duty based on inclusion of bonus and gratuity in the cost of the product.
2. Invocation of extended period for duty demand.
3. Dispute regarding limitation on duty demand.
4. Arguments presented by both parties.
5. Consideration of submissions by the Tribunal.

Analysis:

1. The appeal was filed against an Order-in-Original confirming a demand of differential duty amounting to Rs. 4,24,432 based on the inclusion of bonus and gratuity in the cost of the product. The appellant had been supplying goods to a sister concern unit using the Cost Construction Method. The Adjudicating authority held that only bonus and gratuity were includible in the cost, leading to the reduction of the demand.

2. The Show Cause Notice was issued for the period between September 1997 to March 2002, alleging suppression of value due to certain elements not being included in the cost. The appellant argued that the method of valuation through Cost Accountant's Certificate was known to the department as they had been submitting price declarations. It was contended that the extended period should not have been invoked due to the department's awareness of the valuation method.

3. The appellant did not dispute the duty demand on merit but raised a limitation issue. It was highlighted that for the normal period from October 2001 to March 2002, the appellant had paid the excise duty along with interest. The appellant's counsel argued that the department had knowledge of the valuation process through the submitted documents, thus limiting the department's ability to invoke the extended period.

4. The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, supporting the confirmation of the duty demand based on the inclusion of bonus and gratuity in the cost of the product.

5. After considering the submissions from both sides, the Tribunal found that the department could have detected the elements allegedly not included in the cost based on the declarations and costing certificates submitted by the appellant. It was observed that the show cause notice lacked specific evidence or documents supporting the allegation of non-inclusion of certain elements in the cost. Consequently, the Tribunal concluded that the demand for the extended period was not sustainable, leading to the setting aside of the impugned order and allowing the appeal. The duty payment for the normal period, along with interest, was maintained.