2016 (1) TMI 64 - AT - Central Excise

Duty demand - Manufacture of transmission assembly - Captive consumption - during the period 1996-1998, the tractors with capacity of less than 1800 cc were exempt - Extended period of limitation - Held that - single assembly line had eliminated the emergence of various intermediate products for separate accounting and listing, and integrated assembly line is a continuous seamless process finally resulted in the manufacture of tractors. As such it is not sustainable to allege suppression of facts or wilful mis-statement on the part of the appellants with reference to non payment of central excise duty on transmission assembly manufactured and consumed by them. The whole marketability and taxability was settled, only by the Apex Court Change over to integrated assembly line resulted changes in the classification list filed in July, 1994 when certain items indicated in the earlier classification list are not mentioned in revised list. This cannot be construed as wilful mis-statement on the part of the appellants. The reason for revised classification list has been explained in the covering letter of the appellants. Finally, we find that non payment of duty during the impugned order cannot be attributed to wilful conduct of the appellants as tax liability on such items was subject matter of dispute and settled only by the Apex Court. As such, if at all, it can be a mistake which is common to both department and the appellant and in such situation no extended period can be invoked and no penalty can be imposed on that ground. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues involved:
Duty liability on transmission assembly for the period 1.1.1996 to 31.5.1998, applicability of time bar under section 11A of Central Excise Act, 1944, marketability and dutiability of transmission assembly, interpretation of classification lists, self-assessment responsibility of the assessee, application of extended period for demand, imposition of penalty.

Analysis:

1. Duty liability on transmission assembly:
The main appellants were involved in the manufacture of tractors and faced duty liability issues on transmission assembly for the period 1.1.1996 to 31.5.1998. The proceedings resulted in a demand of &8377; 25,83,44,804/- along with penalties imposed on the appellants. The issue of duty liability was settled by the Supreme Court in a combined order in Escorts Ltd. The Supreme Court held that there was no suppression or wilful attempt to evade duty, and the appellants had a genuine belief regarding the non-liability of duty on the product consumed captively.

2. Applicability of time bar under section 11A:
The appellants contended that the demands were time-barred under section 11A of the Central Excise Act, 1944. They argued that they had informed the department at various stages about the items manufactured and consumed by them, including the introduction of a single assembly line in March 1994. The Supreme Court held that there was no case for invoking the extended period for demand in similar circumstances.

3. Marketability and dutiability of transmission assembly:
The issue of marketability and dutiability of the transmission assembly was a subject of dispute among major tractor manufacturers in India. Different authorities had taken varying views on this matter until it was finally resolved by the Supreme Court in Escorts Ltd. The Court concluded that there was no suppression or wilful misstatement on the part of the appellants regarding the duty liability of the transmission assembly.

4. Interpretation of classification lists and self-assessment responsibility:
The Revenue argued that the appellants had deliberately failed to mention duty liability on intermediate products like transmission assembly in their classification lists. However, the appellants explained that the change to a single integrated assembly line in 1994 necessitated a revised classification list. The Tribunal found that this change did not constitute wilful misstatement and that the appellants had fulfilled their self-assessment responsibility.

5. Application of extended period for demand and imposition of penalty:
The Tribunal found that the facts and analysis considered by the Supreme Court in Escorts Ltd. were applicable to the present appeals. It was determined that no extended period could be invoked, and no penalty could be imposed on the appellants as the non-payment of duty was a result of a common mistake between the department and the appellants. The appeals were allowed, and the impugned order was set aside solely on the ground of time bar.

This detailed analysis of the legal judgment highlights the key issues involved and the comprehensive reasoning behind the decision rendered by the Tribunal.