2015 (6) TMI 433 - AT - Central Excise

Duty demand - Captive consumption - Whether the Transmission Assemblies captively consumed in the manufacture of tractors of Engine Displacement Capacity (EDC) below 1800-CC manufactured by respondent during the period 1.8.1996 to 1.06.1998 is exigible to excise duty - Bar of limitation - Held that - TA comes into existence during manufacture of Tractor, is an intermediate product and the same is a distinct product commercially known to the market as such. The Apex Court 2015 (5) TMI 28 - SUPREME COURT has categorically held that the transmission assemblies of tractors are commercially known products, and that the fact that not a single sale of such Assembly has been made by the appellants is irrelevant. The ratio in the above case is squarely applicable to the case before us. We, therefore, have no doubt to hold that in this case the TAs came into existence in manufacture of Tractors by the respondent and the same are excisable goods. We therefore, uphold the levy of excise duty on TAs which came into existence in the course of manufacture of Tractors. - Respondent cannot be accused of any fraud, wilful misstatement or suppression of facts so as to invoke the extended period of limitation clause as per proviso to Section 11A(1) of the Central Excise Act, 1944. Since the Show Cause Notice for demand of duty for the period from 1.8.1996 to 1.6.1998 has been issued on 31.8.2001, the same is wholly time barred and the duty demand is not sustainable on limitation. - Decided against Revenue.

Summary

Issues:
1. Exigibility of excise duty on Transmission Assemblies (TA) captively consumed in the manufacture of tractors of Engine Displacement Capacity (EDC) below 1800-CC.
2. Applicability of extended period of limitation for invoking excise duty demand.

Analysis:

Issue 1: Exigibility of excise duty on Transmission Assemblies (TA)
The appeal revolved around whether the TA captively consumed in the manufacturing process of tractors below 1800-CC EDC is subject to excise duty. The Revenue contended that TA is an excisable product and demanded excise duty, while the respondent argued that TA is not a distinct product but part of the continuous manufacturing process. The Commissioner, Chandigarh initially dropped the proceedings, stating that no identifiable product like TA emerges in the intermediate stage of tractor manufacture. However, the appellate tribunal relied on a previous Supreme Court judgment (M/s ESCORTS LTD Vs. CCE, Faridabad) to hold that TA is a distinct commercially known product that emerges during tractor manufacturing and is subject to excise duty.

Issue 2: Applicability of extended period of limitation
The question arose whether the extended period of limitation could be invoked for the excise duty demand covering the period from 1.8.1996 to 1.6.1998, with the show cause notice issued on 31/8/2001. The Revenue argued for invoking the extended period due to alleged fraud and suppression of facts by the respondent. However, the respondent claimed a bona fide belief that TA was not subject to excise duty and there was no intention to deceive. The tribunal found merit in the respondent's argument, stating that the respondent had disclosed the manufacturing process to the department, and there was no evidence of deliberate concealment. Therefore, the tribunal held that the extended period of limitation could not be invoked, rendering the duty demand for the mentioned period time-barred and unsustainable.

In conclusion, the appellate tribunal upheld the levy of excise duty on the Transmission Assemblies used in tractor manufacturing and set aside the impugned order, disposing of the appeal in favor of the respondent.

*(Pronounced on 26/5/2015)*