2016 (9) TMI 1410 - AT - Central Excise

Recovery of Rebate allowed - main allegation is that rebate was claimed by the appellant on the strength of invoices/bills without physically receiving the goods - Held that - the show cause notice has not spelt out the source of procurement of alternate materials. The only documents relied upon showing procurement of materials is no way related to the disputed period - It is evident from rebate sanction orders from the period from 8-12-2006 to 18-9-2007 that entire facts were before the department and the appellant had given undertaking as required by the department to refund the amount sanctioned if demanded within a year. It was also found that ARE-2 containing all the details of raw materials used were filed by the appellant within 24 hours of export clearance from the factory - the demand is time-barred. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Limitation period for issuing show cause notice.
2. Violation of Principles of Natural Justice.
3. Procurement of raw materials for export goods.
4. Imposition of penalty.

Analysis:

1. Limitation period for issuing show cause notice:
The appellant contended that the show cause notice issued to recover duty paid on raw materials used for export goods was beyond the prescribed limitation period. The appellant had filed ARE-2 detailing raw material particulars between 5-12-2005 to 14-5-2006, while the notice was issued on 5-12-2011. The appellant argued that the demand was time-barred as all relevant facts were known to the department earlier. The Tribunal agreed, citing rebate sanction orders and the timely filing of ARE-2, holding the demand as time-barred.

2. Violation of Principles of Natural Justice:
The appellant argued that the proceedings were tainted due to the denial of cross-examination of transporters, upon whose statements the allegations were based. The Tribunal found merit in this argument, noting that the orders lacked discussion on case laws supporting the right to cross-examination. Citing precedents, the Tribunal held that the orders were passed in violation of Principles of Natural Justice.

3. Procurement of raw materials for export goods:
The appellant emphasized that the department failed to establish how raw materials for export goods were procured. They argued that all payments were made through proper channels with documentation. The Tribunal agreed, stating that the show cause notice did not specify the source of alternate materials, and the documents relied upon were irrelevant to the disputed period. Citing case laws, the Tribunal supported the appellant's contentions.

4. Imposition of penalty:
Given the unsustainable demand, the appellant argued against imposing penalties on the company and the authorized signatory. The Tribunal concurred, stating that without a sustainable demand, penalties were unwarranted. Consequently, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

This comprehensive analysis of the judgment highlights the key issues raised, the arguments presented by the parties, and the Tribunal's findings and conclusions on each issue.