2008 (5) TMI 90 - AT - Central Excise

Letter issued by department cannot be considered as demand notice but it is just an informal demand delay in issue of SCN - appellant, job-worker - appellant s contention is that the law during the period was that they were not required to add again the value of the scrap in the final products cleared to principal manufacturer - matter was in fluid stage of quantification of actual value of scrap hence demand is time-barred - stay application is allowed

Summary

Issues:
1. Pre-deposit of duty amount
2. Inclusion of scrap value in final products
3. Time-barred demands
4. Applicability of Apex Court rulings
5. Interpretation of demand notice

Pre-deposit of duty amount:
The appellant was required to pre-deposit a duty amount, out of which a partial sum had already been paid. The period of demand was specified, and the appellant argued that the procedure followed by them was in accordance with the law. The Department's audit in 2000 raised concerns about the quantification of the scrap value, but no further action was taken until the show cause notice was issued in 2006. The appellant contended that major demands were time-barred, and a partial amount had already been paid.

Inclusion of scrap value in final products:
The appellant argued that the value of scrap was already added to the final products cleared to their principal, who paid duty on the scrap separately. The appellant relied on a subsequent Apex Court ruling regarding Cost Accounting Certificate to support their case. However, Revenue contended that the value of scrap sold should be considered in the pricing of the final products, citing a different Apex Court judgment.

Time-barred demands:
The issue of time-barred demands was crucial in this case. The Commissioner noted that the matter was in a fluid stage for quantification until the show cause notice was issued. The Tribunal found that the delay in issuing the show cause notice worked in the appellant's favor, indicating that the demands appeared to be time-barred. Consequently, the Tribunal granted a waiver of pre-deposit and allowed the appeal to proceed without recovery until its disposal.

Applicability of Apex Court rulings:
Both parties relied on different Apex Court judgments to support their arguments regarding the inclusion of scrap value in final products. The appellant distinguished the rulings cited by Revenue and emphasized a subsequent order that favored their position.

Interpretation of demand notice:
The Tribunal analyzed the demand notice issued by the Department and found that it lacked clarity and specificity required under the Central Excise Act. The Tribunal considered the delay in issuing the notice and the fluid stage of quantification as factors in favor of the appellant. Consequently, the Tribunal granted a waiver of pre-deposit and allowed the appeal to proceed without recovery until its final hearing.