2016 (5) TMI 1241 - AT - Central Excise

SSI Exemption - wrong valuation - Tread rubber cleared by the appellant was not valued at the rate of 115% (or 110% with effect from 05.07.2003) of the cost of production and when so done, the appellants exceeded the SSI exemption limit prescribed under Notification No.8/2003-CE, dated 01.03.2003 - Willful mis-statement or suppression of facts. - Period of limitation - Demand of duty alongwith interest and imposition of penalty - Held that - in the case of Uniworth Textiles Ltd. Vs. CCE, Raipur 2013 (1) TMI 616 - SUPREME COURT it was held that mere non-payment of duties is not equivalent to collusion or wilful mis-statement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be met within the normal limitation period and the burden is on Revenue to prove allegations of wilful mis-statement. The onus is not on the assessee to prove its bona fides. In the case of Chemphar Drugs Liniments 1989 (2) TMI 116 - SUPREME COURT OF INDIA , the Supreme Court held that some positive other than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when assessee knew otherwise, is required before it is saddled with the liability the extended period. In the case of Continental Foundation Joint Venture 2007 (8) TMI 11 - SUPREME COURT OF INDIA , Supreme Court went to the extent of ruling that mere omission to give correct information is not suppression of facts unless it was deliberate and that an incorrect statement cannot be equated with wilful mis-statement. In the case of Vivek Re-rolling Mills Vs. Collector 1995 (8) TMI 317 - SUPREME COURT , Supreme Court held that extended period is not invokable when assessee had reason to believe that its goods were exempted. Bombay High Court in the case of CC Vs. Star Entertainment 2015 (2) TMI 1050 - BOMBAY HIGH COURT in effect held that extended period is not invokable in the case of unclear or doubtful legal position. In view of the above, the allegation of wilful mis-statement or suppression of facts cannot be sustained. It is found that the Show Cause Notice was issued on 22.03.2006 where the demand pertains to the period 2001-02 to 2003-04 and therefore the entire demand is beyond normal period of one year. We may point out that the Notification No.8/2003-CE, dated 01.03.2003 cited in the Show Cause Notice was effective from 01.04.2003 while part of the demand pertains to the period prior to the date of issuance of the said Notification. However, we need not dwell upon this point as the entire demand has been held to be time barred. By following the judgment of High Court of Allahabad in the case of CCEST Vs. Monsanto Manufacturer Pvt. Ltd. 2014 (4) TMI 505 - ALLAHABAD HIGH COURT , once the demand is held to be time barred there is no occasion for the Tribunal to enquire into the merits and such act of Tribunal was outside of its jurisdiction. Therefore, we refrain from discussing the merits of the case. - Decided in favour of appellant

Summary

Issues:
- Classification of tread rubber under Central Excise Tariff Act
- Time bar on the demand of duty

Classification of Tread Rubber:
The case involved appeals against Orders-in-Appeal confirming a duty demand on tread rubber manufactured by two appellants. The appellants contended that the tread rubber should be classified under CTH 4008.21, attracting a nil rate of duty, while the authorities classified it under CTH 4008.22. The Commissioner (Appeals) upheld the classification under CTH 4008.22, stating that the tread rubber did not fall under 4008.21 as claimed by the appellants. The Commissioner highlighted the discordance in Note 9 of Chapter 40 but emphasized that the note was still part of the Central Excise Tariff, making the classification valid. The difference in opinion within the department regarding the classification added ambiguity to the case.

Time Bar on Demand of Duty:
The appellants argued that the demand was time-barred as they believed in good faith that the product was classified under sub-heading 4008.21. The Tribunal referred to legal precedents to establish that mere non-payment of duties does not imply collusion or willful misstatement, and inadvertent non-payment falls within the normal limitation period. The burden of proof lies on the Revenue to show willful misstatement. The Tribunal found the demand beyond the normal limitation period and cited the Notification's effective date to support the time-bar argument. Following the judgment of the High Court of Allahabad, the Tribunal refrained from discussing the merits of the case once the demand was deemed time-barred. Consequently, the appeals were allowed, and the impugned orders were set aside.

This detailed analysis of the judgment covers the issues of classification of tread rubber and the time bar on the demand of duty, providing a comprehensive understanding of the legal reasoning and outcomes in the case.