2011 (11) TMI 547 - AT - Central Excise

Duty demand - Bar of limitation - Whether a show cause notice dated 26-2-2004 issued by the lower authorities for recovery of an amount of 8% of the value of the exempted goods cleared by the appellants by utilizing common inputs on which Cenvat credit was availed was time-barred or not - Held that - show cause notice clearly indicates that the demand of 8% of the value of the exempted final products has arisen due to the audit objection raised by CERA authorities. It is undisputed by the revenue authorities in their grounds of appeal that the appellant had filed the monthly returns during the relevant period i.e. for the month of February, 2001 and in that they have indicated clearances of finished product at nil rate of duty. This would indicate that the respondent had followed the law of filing the returns with the authorities by indicating nil rate of duty paid clearances. It was for the revenue authorities during the relevant period to raise an objection or call for explanation from the assessee why they have cleared the said consignments at nil rate of duty. There is nothing on record to show that the revenue authorities had raised a query or corresponded with the assessee-respondent directing him to produce the details of nil rate of duty paid clearances affected by him. In the absence of any such correspondence, we cannot find fault with the order of the first appellate authority in setting aside the adjudicating authority s order by holding that the demand is blatantly time-barred - Decided against Revenue.

Summary

Issues:
Recovery of 8% value of exempted goods, Time-barred show cause notice

Analysis:
The appeal before the Appellate Tribunal CESTAT Ahmedabad involved a dispute regarding the recovery of 8% of the value of exempted goods cleared by the appellants using common inputs, and whether the show cause notice issued for this recovery was time-barred. The appellants had manufactured both dutiable and exempted final products using common inputs and cleared a portion of their final product at nil rate of duty, availing certain notifications. The Revenue authorities contended that the appellants should have paid 8% of the value of the exempted goods as per the rules. A show cause notice was issued to the appellants for recovery, which was contested before the adjudicating authority. The adjudicating authority confirmed the demand, imposed interest and penalty. The first appellate authority allowed the appeal on the basis of limitation, stating that the show cause notice was time-barred as the appellant had filed monthly returns indicating nil rate of duty paid clearances. The Revenue appealed this decision.

The Revenue argued that the appellants had not declared in their returns whether they maintained separate accounts for common inputs in exempted and dutiable products, leading to mis-declaration and invoking the extended period of limitation. The appellants, on the other hand, contended that their monthly returns clearly showed the clearances availed under notifications without duty payment, and the Revenue should have questioned this earlier. The Tribunal considered both arguments and examined the records.

The key issue for determination was whether the show cause notice for recovery was time-barred. The Tribunal noted that the first appellate authority had ruled against the appellants on the merits, which was not challenged. However, on the issue of limitation, the Tribunal found that the show cause notice indicated the demand arose from an audit objection, and the appellants had filed monthly returns indicating nil rate of duty clearances. The Tribunal emphasized that the Revenue should have raised objections or sought explanations during the relevant period, which they failed to do. As there was no correspondence or query from the Revenue authorities regarding the nil rate of duty clearances, the Tribunal upheld the first appellate authority's decision that the demand was time-barred. Consequently, the Tribunal held that the impugned order was correct and legal, rejecting the Revenue's appeal for lacking merit.

In conclusion, the Tribunal upheld the decision that the demand for recovery was time-barred due to the Revenue authorities' failure to raise objections or seek clarification during the relevant period, affirming the first appellate authority's ruling and dismissing the Revenue's appeal.