2013 (9) TMI 278 - AT - Central Excise

Extended period of limitation - Captive Consumption No. 67/95 - use of material in Job work as well as own manufacturing - manufacture of printed cartons, corrugated boxes, paper labels, advertising material etc. - The appellant was also manufacturing ink and using the same captively under exemption Notification No. 67/95 - Some of the appellant s products were dutiable and some of them were exempted - The demand stands confirmed against them at 8% of the value of the exempted product on the ground that common inputs were being used in the manufacture of the dutiable as also the exempted products. - Third member decision on the issue of period of limitation. The adjudicating authority having recorded clear cut finding that there is no suppression, mis-statement, fraud or collusion for setting aside the demand for the extended period of limitation, for all the purposes, the same findings having not been challenged by Revenue in their appeal, will apply for the entire period of the demand which is from October 1996 to March 2000, while the Show Cause Notice is issued in November 2001 - Since the entire appeal is allowed, the question of imposition of penalty under Section 11AC does not arise - Decided in favor of assessee.

Issues Involved:
1. Confirmation of demand of duty.
2. Dropping of demand of duty.
3. Applicability of Rule 57CC.
4. Limitation period for demand.
5. Imposition of penalty under Section 11AC.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Duty:
The Commissioner of Central Excise, Ahmedabad, in de novo proceedings, confirmed the demand of duty of Rs. 18,93,141/- out of the proposed demand of Rs. 63,88,474/-. The demand was based on the use of common inputs in the manufacture of both dutiable and exempted products. The Commissioner accepted the assessee's contention that corrugated boxes were manufactured by M/s. Labh Packaging on a job work basis and dropped the demand of Rs. 3,33,657/- accordingly. However, the Commissioner confirmed the demand in respect of printed labels and advertising material cleared by the appellant on their own behalf.

2. Dropping of Demand of Duty:
The adjudicating authority dropped the demand of Rs. 3,33,657/- for corrugated boxes as they were manufactured by M/s. Labh Packaging on a job work basis and no Modvat credit was availed by the appellant. Similarly, the demand for printed labels manufactured on a job work basis was also dropped, as Rule 57CC was held not applicable to job work clearances.

3. Applicability of Rule 57CC:
The Hon'ble Supreme Court in the case of CCE, Nagpur v. Ballarpur Industries Ltd. held that Rule 57CC, which seeks to recover 8% of the price of exempted final products, applies to stock transfers. Applying this ratio, the Tribunal noted that Rule 57CC would also apply to goods cleared under job work basis. The learned advocate for the appellant admitted that Rule 57CC would apply to job work clearances but contended that the entire demand was barred by limitation.

4. Limitation Period for Demand:
The period in question was from October 1996 to March 2000, with the show cause notice issued on 5-11-2001. The adjudicating authority found no suppression on the part of the assessee and held the demand for the period from October 1996 to July 1998 as barred by limitation. However, the benefit of limitation was not extended to the assessee for the remaining period on the ground that they had accepted their liability and deposited the dues. The Tribunal disagreed with this reasoning, stating that merely agreeing to pay the demand cannot be a reason not to assess liability in accordance with the law. The Tribunal concluded that the entire demand was barred by limitation and allowed the appeal filed by the assessee while rejecting the appeal filed by the Revenue.

5. Imposition of Penalty under Section 11AC:
The Commissioner set aside the penalty under Section 11AC. However, the Member (Technical) proposed a different order, imposing a penalty equal to the duty demand, citing suppression of facts and mis-declaration with intent to evade payment of duty. The Member (Judicial) disagreed, stating that there was no suppression or intent to evade duty as found by the adjudicating authority. The Tribunal, by majority, held that the demand was barred by limitation, and hence, the question of imposing a penalty under Section 11AC did not arise.

Separate Judgments Delivered by the Judges:
The judgment involved a difference of opinion between the Member (Judicial) and the Member (Technical). The Member (Judicial) held that the entire demand was barred by limitation and no penalty was imposable, while the Member (Technical) proposed confirming the entire demand and imposing a penalty. The third Member (Judicial) agreed with the Member (Judicial), leading to the majority order allowing the appeal filed by the assessee and rejecting the appeal filed by the Revenue.

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