2012 (12) TMI 925 - AT - Central Excise

Waiver of pre-deposit - Held that - appellant has shifted focus from excisability, classification etc. to limitation for the present purpose. We have to consider this issue at this stage. The statement of the Microbiologist has been perused and the same indicates that mineral water was manufactured by the appellant by a process involving several stages, viz, treatment with chlorine gas, filtration, blending, reverse osmosis, treatment with UV light etc. This statement of the expert was only corroborated by a senior functionary of the Company. Note 2 to Chapter 22 of the Tariff Schedule is, prima facie, applicable to the facts of this case and, therefore, there is no escape from the fact that the appellant was manufacturing mineral water chargeable to duty of excise under the appropriate sub-heading of Heading 2201. Apparently, the manufacturing process was not disclosed by the appellant voluntarily to the department at any stage. The internal auditors of the department visited the factory and gathered the information in May 2009. The show cause notice in this case was issued in 2010 invoking, apparently rightly so, the extended period of limitation under the proviso to Section 11 A (1) of the Central Excise Act. The plea of bona fide belief is itself untenable, inasmuch as the law prevailing during the material period clearly required payment of duty of excise on the appellant s product and also required addition of clearances of the exempted product (ready mixed concrete) to the clearances of mineral water for the purpose of the SSI exemption notification as amended. The appellant cannot plead ignorance of law. Prima facie , therefore, the demand is not time.-barred - Conditional stay granted.

Issues:
1. Waiver of pre-deposit and stay of recovery sought by the appellant in relation to the adjudged dues of duty and penalty.
2. Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 is applicable in the case.
3. Claim of CENVAT credit by the appellant and its impact on the demand of duty.
4. Justification for invoking the extended period of limitation by the department.
5. Determining the pre-deposit amount and stay of recovery conditions.

Issue 1: Waiver of pre-deposit and stay of recovery
The appellant sought waiver of pre-deposit and stay of recovery in relation to the adjudged dues of duty amounting to Rs.98,19,504/- and an equal amount of penalty. The duty demand was related to the clearances of bottled water under the brand name "Jeppiaar" during 2005-2006 to 2009-2010. The appellant argued that they had a bona fide belief regarding the inclusion of clearances of ready mixed concrete in the aggregate value of mineral water clearances for SSI purpose, thus not intentionally evading duty payment. Additionally, the appellant claimed CENVAT credit for capital goods, inputs, and input services, which could reduce the duty demand by at least Rs. 35 lakhs. An amount of Rs. 10 lakhs was already paid during investigations. The Tribunal directed the appellant to pre-deposit a further Rs. 20 lakhs within four weeks, subject to which there would be a waiver of pre-deposit and stay of recovery for the penalty and the remaining duty amount.

Issue 2: Extended period of limitation
The department invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944, based on findings that the appellant suppressed the fact of manufacturing and clearing mineral water to evade duty payment. The department's argument was supported by the statement of the Microbiologist of the appellant Company, explaining the manufacturing process of mineral water and justifying the invocation of the extended period of limitation. The Tribunal found that the manufacturing process, as per the expert statement, fell under the definition of mineral water chargeable to excise duty. The appellant's plea of bona fide belief was deemed untenable as the law required duty payment on their product during the material period. Therefore, the demand was not considered time-barred, and the extended period of limitation was upheld.

Issue 3: CENVAT credit claim
The appellant claimed CENVAT credit amounting to Rs. 35 lakhs, which, if allowed, would reduce the duty demand. The Tribunal considered this claim and directed the appellant to pre-deposit a further amount of Rs. 20 lakhs, assuming the appellant's entitlement to the claimed CENVAT credit. This aspect was crucial in determining the final duty liability and the conditions for waiver of pre-deposit and stay of recovery.

Issue 4: Justification for invoking extended limitation
The department justified the invocation of the extended period of limitation based on the appellant's alleged suppression of manufacturing details and intent to evade duty payment. The department argued that the appellant could not claim ignorance of the law, as the manufacturing process was not disclosed voluntarily, and the information was gathered by the department auditors in 2009. The Tribunal agreed with the department's reasoning, finding that the demand was not time-barred and upholding the extended period of limitation.

Issue 5: Determining pre-deposit amount and stay of recovery
Considering all facts and circumstances, the Tribunal directed the appellant to pre-deposit a further Rs. 20 lakhs within four weeks and report compliance. Upon compliance, there would be a waiver of pre-deposit and stay of recovery for the penalty and the remaining duty amount demanded, subject to the conditions specified. This decision aimed to balance the interests of the appellant and the revenue authorities while ensuring compliance with legal obligations and procedures.

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