2012 (12) TMI 349 - AT - Central Excise

Extended period of limitation invoked - Evasion of Payment of Duty - appellant contended against demand as whole excise is revenue neutral - Held that - As that one unit is clearing waste and scrap generated during manufacture of final products to the independent buyers at a higher price and to the other unit at a lower price. The fact of clearing waste and scrap to the other unit at a lower price was not disclosed to the Revenue. In these circumstances, it cannot be said that the appellants were not aware of the fact that the duty is to be paid on the same assessable value at which the goods are being cleared to the independent buyers. There is no evidence to show that the appellants were under the reasonable belief that they were not required to disclose the fact of clearance of waste and scrap to the other unit at lower price - extended period of limitation is available to the Revenue - in favour of Revenue.

Summary

Issues:
1. Interpretation of revenue neutral situation and invocability of extended period of limitation.
2. Duty demand on clearance of waste and scrap at different prices.
3. Applicability of modvat credit and intention to evade payment of duty.

Issue 1:
The case involved a dispute regarding the invocability of the extended period of limitation due to a revenue neutral situation. The Member (Judicial) opined that the demand was not sustainable as the duty confirmed was available as credit to another unit, making the excise revenue neutral. However, the Member (Technical) disagreed, upholding the demands. The Tribunal referred to relevant case laws and the Supreme Court decision in CCE, Mumbai vs. Mahindra & Mahindra Ltd., emphasizing that the availability of modvat credit does not preclude the invocation of the extended period of limitation.

Issue 2:
The dispute arose from the clearance of waste and scrap generated during the manufacture of iron and steel products at different prices. The appellants were found clearing scrap to another unit at a lower price than to independent buyers, leading to a demand for duty payment. The Revenue argued that duty demand for the extended period cannot be resisted based on the availability of modvat credit to the other unit. The Tribunal highlighted that non-disclosure of clearing waste and scrap at a lower price to the Revenue indicated awareness of duty payment obligations.

Issue 3:
The appellants contended that as duty was demanded from one unit while the other unit could claim credit, there was no intent to evade duty payment. They relied on precedents like Siddeshwar Textile Mills Pvt. Ltd. vs. CCE, Pune III and Sterlite Industries (India) Ltd. vs. CCE, Vapi. However, the Tribunal noted that the failure to disclose the lower price clearance to the Revenue distinguished the present case from the cited precedents, leading to the rejection of the appeal and upholding of the impugned order.

The judgment emphasized the importance of disclosing all relevant information to tax authorities and clarified that the availability of modvat credit does not automatically absolve a manufacturer from duty payment obligations. The decision serves as a reminder for businesses to ensure transparency in their dealings and compliance with tax laws to avoid potential disputes and penalties.