2012 (11) TMI 523 - AT - Central Excise

Pre-deposit of duty, interest and penalty - Held that - Show Cause Notice is issued demanding duty even beyond the period of five years. Further that the Revenue raised an audit objection and the audit para was closed as evident from the letter dated 23.02.2010 and the issue was reopened and the present Show Cause Notice was issued. Thus as the demand is time barred pre-deposit of the dues are, therefore, waived for hearing of the appeal.

Issues:
1. Waiver of pre-deposit of duty, interest, and penalty.
2. Allegation of suppression with intent to evade payment of duty.
3. Valuation of goods manufactured by a job worker.
4. Applicability of Section 11A of the Central Excise Act, 1944.
5. Time limitation for issuing a Show Cause Notice.

Waiver of Pre-Deposit:
The applicant sought waiver of pre-deposit of duty, interest, and penalty amounting to Rs.1,15,70,408/- in relation to a Show Cause Notice issued for the period April 2003 to March 2006. The Revenue alleged suppression with intent to evade payment of duty, contending that the cost of machines received by the applicant from M/s Bajaj Auto Ltd. was not added to the assessable value of the goods manufactured. The applicant argued against the sustainability of the suppression allegation, stating that an audit objection was previously raised and responded to, leading to the closure of the audit para. However, the Revenue reopened the issue beyond the permissible five-year period, leading to the issuance of the Show Cause Notice in 2010. The Tribunal found merit in the applicant's contention that the demand was time-barred, as per Section 11A of the Central Excise Act, 1944, and waived the pre-deposit for the appeal hearing, thereby allowing the stay petition.

Allegation of Suppression:
The Revenue alleged suppression with intent to evade payment of duty based on the applicant's failure to amortize the cost of machines received from M/s Bajaj Auto Ltd. and add it to the assessable value of the goods manufactured. The applicant refuted this allegation by highlighting the closure of an audit para after submitting a detailed reply to the audit objection. The Tribunal noted that the Show Cause Notice was issued beyond the permissible five-year period, contrary to the provisions of Section 11A of the Central Excise Act, 1944. Consequently, the Tribunal found the demand unsustainable and granted waiver of the pre-deposit for the appeal hearing.

Valuation of Goods Manufactured:
The Revenue argued that the cost of machines received by the applicant from M/s Bajaj Auto Ltd. should have been added to the assessable value of the goods manufactured on a job work basis for M/s Bajaj Auto Ltd. Since the applicant did not include this cost, the Revenue justified the demand made in the Show Cause Notice. However, the Tribunal, considering the time limitation for issuing the notice and the closure of the audit para, sided with the applicant's argument that the demand was not sustainable, leading to the waiver of pre-deposit for the appeal hearing.

Applicability of Section 11A:
The Tribunal examined the applicability of Section 11A of the Central Excise Act, 1944, which allows demands to be made for a period of up to five years in cases of suppression of facts or contraventions of rules with intent to evade payment of duty. In this case, the Show Cause Notice was issued for a period beyond five years, prompting the Tribunal to find in favor of the applicant's argument that the demand was time-barred. Consequently, the pre-deposit of dues was waived for the appeal hearing.

Time Limitation for Show Cause Notice:
The Tribunal emphasized the significance of the time limitation prescribed under Section 11A of the Central Excise Act, 1944, which permits demands to be raised within five years in cases involving suppression of facts or contraventions of rules with intent to evade duty payment. Given that the Show Cause Notice in this case was issued beyond the five-year period, and considering the closure and reopening of the audit para, the Tribunal concurred with the applicant's position that the demand was not sustainable due to being time-barred. As a result, the pre-deposit of dues was waived, and the stay petition was allowed.

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