2010 (9) TMI 608 - AT - Central Excise

Demand - Classification - Scrutiny - A show cause notice dated 17th June 2008, while invoking the extended period of limitation, came to be issued to the appellants - the appellants do not dispute their liability to pay the duty in relation to the said product and non-availability of exemption under the said notification pursuant to the Board Circular dated 6th February 2007 and in fact, they commenced paying duty thereafter - Mere clarification about availability of exemption or not, in our considered opinion, cannot amount to be of oppressive nature against the assessee - It was vehemently argued on behalf of the appellants that the records do not justify invocation of the extended period of limitation - On the contrary, in the face of the said findings in the absence of any document being produced which could disclose necessary details having been revealed by the appellants during the relevant time to the department, there is nothing before us to arrive at the conclusion that the department was fully aware of the fact that the appellants were in fact manufacturing I.V. Cannulas - However, considering the facts and circumstances of the case, we direct the appellants to deposit sum of Rs. 15,00,000/- (Rupees Fifteen Lakhs) within ten weeks while waiving the balance amount demanded under the impugned order

Issues Involved:
1. Entitlement to exemption under Notification No. 6/2006-C.E. and Notification No. 6/2002-C.E.
2. Invocation of the extended period of limitation.
3. Application of Circular No. 847/05/2007-CX.
4. Prima facie case for grant of stay of the impugned order.
5. Relevance of previous judgments and Board Circulars.
6. Requirement for pre-deposit.

Detailed Analysis:

1. Entitlement to Exemption under Notification No. 6/2006-C.E. and Notification No. 6/2002-C.E.
The appellants were engaged in the manufacture of I.V. Cannulas and were availing the benefit of exemption under Notification No. 6/2006-C.E. and Notification No. 6/2002-C.E. The department contended that the appellants were not entitled to this exemption for the period from October 2004 to February 2007. The appellants began paying duty after the issuance of Circular No. 847/05/2007-CX. dated 6th February 2007, which clarified that I.V. Cannulas were not covered under the exemption notifications.

2. Invocation of the Extended Period of Limitation
The department issued a show cause notice on 17th June 2008, invoking the extended period of limitation. The appellants argued that they had been regularly filing returns and declarations, and the department was aware of their manufacturing activities. However, the Adjudicating Authority found that the appellants had not specifically declared I.V. Cannulas in their returns, leading to the conclusion that there was suppression of facts with intent to evade duty.

3. Application of Circular No. 847/05/2007-CX.
The Circular dated 6th February 2007 clarified that I.V. Cannulas are not covered under the description provided in the exemption notifications. The appellants argued that this circular should apply prospectively and not retrospectively. The Tribunal noted that the circular did not introduce any new classification but merely clarified the non-availability of the exemption for I.V. Cannulas. Therefore, it was not considered oppressive or retrospective in nature.

4. Prima Facie Case for Grant of Stay of the Impugned Order
The appellants relied on the decision in Commissioner of Central Excise, Coimbatore v. Saberwal Surgical (P) Ltd., which was not interfered with by the High Court. The Tribunal, however, distinguished this case from the present one, noting that the decision in Saberwal Surgical did not deal with the specific entry in the exemption notification and was based on expert certificates. The Tribunal found no prima facie case for the stay of the impugned order.

5. Relevance of Previous Judgments and Board Circulars
The appellants cited the decisions in Suchitra Components Ltd. v. CCE, Guntur and CCE, Bangalore v. Mysore Electricals Industries Ltd. to argue against the retrospective application of the circular. The Tribunal noted that these decisions dealt with reclassification issues, which were not applicable in the present case. The circular in question merely clarified the non-availability of the exemption, and thus, the cited decisions were not relevant.

6. Requirement for Pre-Deposit
The Tribunal directed the appellants to deposit Rs. 15,00,000/- within ten weeks while waiving the balance amount demanded under the impugned order. This decision was based on the facts and circumstances of the case, including the findings of the Adjudicating Authority regarding the suppression of facts and the non-disclosure of I.V. Cannulas in the returns.

Conclusion:
The Tribunal upheld the order of the Commissioner (Appeals), confirming the demand of duty and penalties against the appellants. The Tribunal found no prima facie case for the stay of the impugned order and directed a partial pre-deposit while waiving the balance amount. The application of the circular was considered clarificatory and not retrospective, and the invocation of the extended period of limitation was justified due to the suppression of facts by the appellants.

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