2011 (6) TMI 571 - AT - Central Excise

Extended period of limitation demand of duty, interest and imposing penalty manufacture - turnkey contracts - department was of the view that the activity of manufacture of loose furniture amounts to manufacture - show-cause notice has been issued on 24/06/2002 for the period 1998-99 invoking the extended period of limitation Held that - when it was in the knowledge of the department that the activity undertaken by the appellant at site amounts to manufacture on 27/01/1999, therefore, the show-cause notice has to be issued within one year from 27/01/1999. As the show-cause notice has been issued on 24/06/2002. extended period of limitation is not invokable. appeal is allowed

Summary

Issues:
- Appeal against order demanding duty, interest, and penalty on the ground of manufacturing loose furniture
- Applicability of Central Excise duty on clearances involving interior decoration turnkey contracts
- Validity of show-cause notice issued beyond the normal period of limitation

Analysis:
The appellant filed an appeal against an order demanding duty, interest, and penalty, contending that their activity of manufacturing loose furniture during interior decoration turnkey contracts does not amount to manufacture, thus Central Excise duty should not apply to their clearances. The department inspected one of the sites where the appellant was working and found them engaged in manufacturing loose furniture. A show-cause notice was issued demanding duty for the period 1998-99, which was adjudicated with demands confirmed, interest imposed, and a penalty of Rs. 50,000 under Section 11AC of the Central Excise Act. The appellant argued that the show-cause notice issued on 24/06/2002, beyond the normal limitation period, should be set aside based on the decision of the Hon'ble apex court in a similar case. The department contended that the extended period of limitation could be invoked as they were not aware of the appellant's activity earlier.

The Tribunal considered the submissions and found that the show-cause notice issued on 24/06/2002 for the period 1998-99 invoking the extended period of limitation was not acceptable. The department had knowledge of the appellant's manufacturing activity on 27/01/1999 when the site was visited, and as per legal precedent, the show-cause notice should have been issued within one year of this knowledge. Referring to a previous case involving the same activity for the period 1994-97, where the extended period of limitation was not invoked, the Tribunal held that in this case as well, the extended period of limitation was not applicable. Therefore, the impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of issuing show-cause notices within the prescribed limitation period based on the department's knowledge of the appellant's activities. It also emphasizes the consistency in applying legal precedents to determine the applicability of the extended period of limitation in Central Excise cases.