2008 (9) TMI 152 - HC - Central Excise

Demand limitation Dept. has failed to point out any positive act on the part of the manufacturer which could be said to be fraudulent, collusive or amounted to making a wilful misstatement - Company had not hidden/misstated the product which it was manufacturing - CEGAT was right in holding that the extended period was not invocable - CEGAT should have taken into account the amended provisions of S. 11A which had been amended with retrospective effect vide S. 110 of the Finance Act of 2000

Summary

Issues:
1. Interpretation of proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944 regarding the extended period invocable.
2. Consideration of Section 110 of the Finance Act, 2000 for validating actions under Section 11A with retrospective effect.

Analysis:

Issue 1:
The case involved a dispute over the classification of a product known as Penicillin G. Amidase Biocatalyst under the Central Excise Tariff Schedule. The manufacturer initially classified it under sub-heading 3002.00, attracting nil duty rate, which was approved by the Assistant Commissioner. However, the department contended that the product should be classified under a different heading. The Central Excise Gold (Control) Appellate Tribunal (CEGAT) determined the correct classification as heading 35.07, rejecting the manufacturer's classification. CEGAT further held that the extended period under Section 11A could not be invoked as the manufacturer had provided complete details and the approved list, thus making the demand for the period prior to the notice time-barred.

Issue 2:
The analysis delved into the unamended and amended provisions of Section 11A of the Central Excise Act. The amendment introduced by the Finance Act, 2000, specifically Section 110, provided retrospective effect from the date of Section 11A's introduction. The court referenced a Supreme Court judgment affirming the retrospective application of the amendment. It was established that the amended provisions, including a one-year limitation for duty recovery, were applicable even when the department had given approval. The court clarified that the proviso's application for a five-year limitation required evidence of fraud, collusion, wilful misstatement, or contravention of provisions, which was not present in the case at hand. Consequently, the court concluded that the extended period was not applicable, and CEGAT should have considered the amended provisions, setting the recovery limitation at one year instead of six months as determined by CEGAT.

In conclusion, the court answered the raised questions by affirming CEGAT's decision on the extended period's inapplicability and directing consideration of the amended provisions for a one-year recovery limitation.