2015 (10) TMI 39 - AT - Central Excise

100% EOU - Duty demand - They procured diesel duty free as well as on payment of duty and claimed that the electricity generated by using duty paid diesel would have been more than the quantity of electricity supplied to the colony. - Invocation of extended period of limitation - Held that - Appellants had duly intimated Revenue that they would be supplying electricity to their residential colony w.e.f 1-1-2000. They had been procuring (importing) duty paid diesel also and their use of such diesel, it is not disputed by Revenue, would have produced more electricity than the quantity of electricity supplied to the colony for which they had even installed a separate meter. The show cause notice does not bring out as to what they wilfully misstated/suppressed with the intention to evade. - while issuing second and third show cause notices involving same/similar facts, suppression/wilful misstatement could not be alleged. Further the appellants were not unjustified in thinking that as the total duty paid diesel used by them would have generated more electricity than the quantity supplied to their residential colony, they were complying with condition of Notification No. 1/95-C.E./22/2003-C.E. In the case of Gopal Zarda Udhyog v. Commissioner of CCE, Delhi - 2005 (9) TMI 83 - SUPREME COURT OF INDIA - the Supreme Court observed that mere failure or negligence on the part of the manufacturer does not attract the extended period. In case of CCE v. Chempher Drugs Liniments 1989 (2) TMI 116 - SUPREME COURT OF INDIA , Supreme Court held that something positive other than mere inaction or failure on the assessee s part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. - Thus, the allegation of wilfull misstatement/suppression of fact is clearly not sustainable. If it is not possible (because of common storage tank) for the appellants to conclusively demonstrate that duty paid diesel only was used for generating electricity supplied to the colony, it is equally impossible for the Revenue to show that it was not so used or to quantify as to how much duty free diesel out of the mixed lot was used for that purpose. What is being stated here is that such approach of the department is shylockian, untenable and falls in the category of ludicrous hair-splitting. Incidentally, similar demand, against the appellants for a different period was set aside by CESTAT - 2009 (12) TMI 784 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
Appeal against Order-in-Appeal upholding Order-in-Original based on show cause notice alleging duty evasion through diesel usage for electricity generation.

Analysis:
1. Factual Background: The appellant, a 100% export-oriented unit, generated electricity for both internal use and supply to a residential colony. They informed the Revenue about supplying electricity to the colony from a specified date and paying duty on diesel used for this purpose.

2. Show Cause Notice: The Department issued a show cause notice alleging that the appellant did not have a separate storage tank for duty-paid diesel, questioning the claim that only duty-paid diesel was used for generating electricity for the colony. The Revenue computed a duty demand based on the presumption of non-duty paid diesel usage.

3. Appellant's Contention: The appellant argued that there was no wilful misstatement or suppression on their part. They claimed that the total duty-paid diesel used would have generated more electricity than supplied to the colony.

4. Judgment Analysis: The Tribunal noted that the appellant had intimated the Revenue about supplying electricity to the colony and had procured duty-paid diesel. The show cause notice did not establish wilful misstatement or suppression. Referring to legal precedents, the Tribunal held that multiple show cause notices on the same issue do not imply suppression. The appellant's belief that they were compliant with relevant notifications was considered justified.

5. Merit of the Case: The Tribunal found that the appellant had procured more duty-paid diesel than needed for colony electricity generation. Due to a common storage tank, it was impossible for the appellant or the Revenue to conclusively prove the diesel usage. The Tribunal criticized the Revenue's approach as untenable and unsustainable, likening it to ludicrous hair-splitting.

6. Conclusion: In light of the above analysis, the Tribunal allowed the appeal, emphasizing the lack of sustainable evidence for wilful misstatement or suppression. The judgment was pronounced on a specific date, concluding the legal proceedings in favor of the appellant.