2013 (10) TMI 1144 - AT - Central Excise

Benefit of Notification No. 67/95 Captive consumption - Held that - Molasses has been utilised in the manufacture of rectified spirit on which the duty liability is nil and such rectified spirit has been cleared by the appellant as such - thus the conditions of Notification No. 67/95-CE stands violated and the appellant is not eligible for the benefit of the said exemption - This situation got rectified only in 01/06/2001 when Notification No. 67/95-CE was amended, which provided for payment of duty of a sum on the exempted final products as prescribed under Rule 57AD - prior to 01/06/2001, there was no provision in Notification No.67/95-CE for discharge of a sum @8% on the value of the final products which were chargeable to nil rate of duty or exempted from payment of duty - the contention of the appellant that, they were discharging a sum @8% on the value of the exempted final products would entitle them to the benefit of Notification No. 67/95-CE is without any merit. Demand Time-Barred Held that - The period of demand pertains to April 2000 to May, 2001 and the show cause notice has been issued only on 30/04/2005 - the allegation that the appellant suppressed the facts from the Revenue with intent to evade payment of excise duty is not sustainable in law - If the applicant has not indulged in suppression of facts, there is no reason as to how the extended period of time could have been invoked at all - if the appellant pays duty, he is entitled for the credit thus it leads to a revenue neutral situation order not sustainable as time barred decided in favour of assessee.

Summary

Issues:
1. Interpretation of Notification No. 67/95-CE regarding exemption on captively consumed goods.
2. Eligibility for exemption under Notification No. 67/95-CE for goods subject to ‘nil' rate of duty.
3. Time-barred nature of the duty demand.
4. Allegation of suppression of facts by the appellant.
5. Revenue neutrality in case of duty liability on molasses.

Analysis:

1. The case involves the interpretation of Notification No. 67/95-CE, which grants exemption to goods captively consumed within the factory of manufacturers, subject to specified conditions. The appellant, a manufacturer of sugar products, availed this exemption for molasses used in the production process. However, issues arose due to the utilization of molasses in the manufacture of both dutiable and exempted products, leading to a demand for duty on molasses captively consumed.

2. The appellant argued that since they paid duty on the exempted final product, rectified spirit, at 8% of its value, they should be eligible for the benefit of Notification No. 67/95-CE. However, the Tribunal rejected this argument, emphasizing that the conditions of the notification were violated as the rectified spirit was cleared without duty payment, rendering the appellant ineligible for the exemption.

3. Regarding the time-barred nature of the duty demand, the Tribunal found merit in the appellant's contention. The demand was related to a period from April 2000 to May 2001, with the show cause notice issued in April 2005, almost four years later. The appellant had disclosed the relevant information in their returns, negating any intent to evade duty payment, leading to the rejection of the extended period invocation and the subsequent duty demand.

4. The allegation of suppression of facts by the appellant was refuted by the Tribunal, citing the appellant's disclosure in their returns. The adjudicating authority's own conclusion acknowledged that the appellant could only be accused of escaping charges of suppression, further supporting the rejection of the extended period invocation.

5. The Tribunal also considered the concept of revenue neutrality in the case of duty liability on molasses. Given that duty payment would entitle the appellant to credit, leading to a revenue-neutral scenario, the demand for duty on molasses captively consumed was deemed unsustainable. The Tribunal allowed the appeal, setting aside the demand confirmation, interest, and penalties imposed on the appellant.

In conclusion, the Tribunal's decision favored the appellant, emphasizing compliance with statutory provisions, disclosure of information, and the principle of revenue neutrality in excise duty matters.