2011 (9) TMI 331 - AT - Central Excise

Penalty under Rule 25 - Exemption under Notification 64/95 dated 16.3.95 - Appellant are the manufacturer of paint etc. and if any goods are exclusively for use on board or as stored for consumption on board are entitled for exemption from excise duty under Notification 64/95 dated 16.3.95 - The appellant have filed the said declaration on the basis of a certificate issued by Indian Navy - Therefore it cannot be said that the declaration filed the appellant is wilful mis-statement hence the wilfully in the absence of any intent on the part of the appellant extended period of limitation is not invocable - When the extended period is not invocable the show-cause notice is barred by limitation therefore impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
- Demand of duty, interest, and penalty under Section 11AC of the Central Excise Act
- Invocation of extended period of limitation for issuing show-cause notice
- Contesting the sustainability of the show-cause notice
- Applicability of the extended period due to wrong declaration
- Interpretation of Section 11A of the Central Excise Act for invoking extended period

Analysis:
1. The appellant filed an appeal against an order upholding the demand of duty, interest, and penalty under Section 11AC of the Central Excise Act, related to the supply of paint and thinner without duty payment, claiming exemption under Notification 64/95. The show-cause notice invoked the extended period due to alleged misuse of the goods supplied to the Indian Navy. The Commissioner (Appeals) modified the order, dropping one penalty but confirming the rest, leading to the appeal before the Tribunal.

2. The appellant contested the sustainability of the show-cause notice, arguing that the extended period was not justified. They claimed to have filed a valid declaration under Rule 173B of the Central Excise Rules, supported by certificates from the Indian Navy, exempting the goods from duty. The appellant maintained that there was no intent to evade duty, thus the extended period should not apply.

3. The respondent argued that the appellant's wrong declaration warranted the invocation of the extended period. Citing precedents, they contended that the misdeclaration allowed for the extended limitation period. The Tribunal examined the documents provided by the appellant, including the exemption certificate issued by the Indian Navy, to determine the validity of the declaration.

4. The Tribunal analyzed Section 11A of the Central Excise Act, which allows for the invocation of the extended period in cases of fraud, collusion, willful misstatement, or intent to evade duty. It was crucial to establish whether the appellant's misdeclaration was willful and with intent to evade duty. The Tribunal found that while there was a misdeclaration, there was no evidence of willful intent on the part of the appellant.

5. The Tribunal emphasized the importance of the term "willful" in invoking the extended period of limitation. It distinguished the present case from the cited precedents, highlighting that the appellant acted in good faith based on the certificates provided by the Indian Navy. As the appellant's declaration was not willful misstatement, the extended period was deemed inapplicable, leading to the setting aside of the impugned order and allowing the appeal with consequential relief.