2011 (1) TMI 801 - AT - Central Excise

Extended Period of Limitation - Penalty u/s 11A of Central Excise Act - Retrospective insertion of an explanation - exemption under Notn.No.68/71-CE dated 29.05.1971 - With effect from 25.11.1978, an Explanation added, providing meaning to Flexible & Rigid . - Notn.No.231/82-CE dated 23.10.1982 was issued exempting Polyethylene films of thickness not exceeding 0.25 mm from levy of duty. - The issue emerges whether the extended period of limitation is invocable for the clearance made by the assessee by claming the exemption under Notification 68/71 dated 29.5.1971 prior to 25.11.1978. - Held that - extended period of limitation is not invocable in the facts and circumstances of the case.

Issues Involved:
1. Exemption eligibility under Notification No. 68/71-CE for LDPE Films.
2. Interpretation of 'Flexible' and 'Rigid' in the context of the Notification.
3. Applicability of the extended period of limitation for duty recovery.
4. Validity and retrospective effect of the Explanation added to Notification No. 68/71-CE.
5. Invocation of extended period based on alleged willful misstatement or suppression of facts.

Detailed Analysis:

1. Exemption Eligibility under Notification No. 68/71-CE for LDPE Films:
The appellants claimed exemption for their LDPE Films under Notification No. 68/71-CE, asserting that their films were 'flexible'. The Commissioner denied this exemption based on a Test Report classifying the films as 'Rigid Plastic'. The appellants argued that their films, with a thickness of 0.038 mm, were indeed flexible and should be exempt.

2. Interpretation of 'Flexible' and 'Rigid':
The dispute centered on the definition of 'Flexible' and 'Rigid' as per the Notification. The Explanation added on 25.11.1978 provided specific meanings to these terms. The appellants contended that prior to this amendment, the ordinary dictionary meaning should apply. They referenced the Oxford Dictionary and cited the Bombay High Court's decision in Mechanical Packing Industries Pvt. Limited, which supported using the dictionary meaning in the absence of a defined term.

3. Applicability of the Extended Period of Limitation for Duty Recovery:
The extended period of limitation was invoked by the Commissioner on grounds of non-issuance of licenses and GPIs. The appellants argued that the extended period was not applicable as there was no willful misstatement or suppression of facts. They cited several judgments, including Padmini Products and Chemphar Drugs, to support their stance that mere inaction or failure does not justify invoking the extended period.

4. Validity and Retrospective Effect of the Explanation Added to Notification No. 68/71-CE:
The appellants challenged the retrospective application of the Explanation added on 25.11.1978. They referenced various judgments, including the Supreme Court's decision in State of Punjab & Ors Vs. Bhajan Kaur & Ors, asserting that any curtailment of rights should have prospective effect. The Tribunal noted that the explanation's validity was upheld by the Supreme Court in Aflon Engineering but did not address its retrospective application.

5. Invocation of Extended Period Based on Alleged Willful Misstatement or Suppression of Facts:
The Tribunal observed that the issue of whether the extended period could be invoked was settled in favor of the appellants by the Tribunal's decision in East West Packaging Ltd., which held that the issuance of a Section 11C Notification indicated a general practice of non-levy of duty, thereby negating allegations of willful misstatement or suppression. The Tribunal concluded that the appellants did not commit fraud or willful misstatement, thus the extended period was not invocable.

Conclusion:
The Tribunal set aside the demands confirmed by the impugned order, ruling that the extended period of limitation was not applicable due to the absence of willful misstatement or suppression of facts. The appeal was allowed, granting consequential relief to the appellants.

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