2016 (8) TMI 978 - AT - Central Excise

Period of limitation - Demand - Woven Fabrics HDPE/PP strips captively consumed - final product was exempted - availed small scale exemption Notification No. 8/98 - Held that - the appellants availed the benefit of small scale exemption notification with the due knowledge and permission of their Jurisdictional Central Excise Authorities, who are expected to know about the fact that the emergence of HDPE/PP strips is an inevitable fact for the manufacture of HDPE/PP Woven Fabrics from HDPE/PP granules. In spite of that, no objection was ever raised by the appellants Range Authorities. Apart from that it is also noted that in case duty was required to be paid on the strips, the appellant was entitled to avail credit of duty paid on the granules, which would have neutralized the entire demand on the strips. As such inasmuch as in this Revenue neutrally background, we are of the view that there could be no malafide on the part of the appellant to evade duty, if any.Therefore, the demand is hit by bar of limitation and set aside. - Decided in favour of assessee

Summary

Issues:
1. Applicability of small scale exemption notification for HDPE/PP strips used captively.
2. Imposition of duty on HDPE/PP strips by Revenue.
3. Validity of demand and penalty confirmed by Adjudicating Authority.
4. Benefit of small scale exemption notification and limitation period.
5. Duty paid on inputs and motive for duty evasion.
6. Consideration of HDPE/PP strips as excisable goods.
7. Granting of extended period for demand.

Analysis:
1. The appellant, engaged in manufacturing HDPE/PP Woven Fabrics, availed the small scale exemption notification during 1998-1999 for exempted clearances. The Revenue contended that HDPE/PP strips emerging during fabric manufacture were excisable goods, requiring duty payment, leading to a demand of ?2,72,219 for 1998-99.

2. The Adjudicating Authority upheld the demand and penalty, a decision affirmed by the Commissioner (Appeals). The appellant argued that as per a Tribunal decision, similar clearances to job workers did not negate exemption eligibility. They also challenged the limitation period for the demand.

3. The appellant claimed no intent to evade duty, citing the higher duty on granules compared to strips, which could neutralize the demand. The Revenue argued for duty payment on strips, considering them as excisable goods with an independent market.

4. The Tribunal found the demand time-barred, noting the appellant's compliance with small scale exemption with no objections from authorities aware of strip emergence inevitability. The absence of malafide intent to evade duty, coupled with the duty credit on granules, supported setting aside the demand.

5. The judgment emphasized the Revenue-neutral background, absolving the appellant of duty evasion suspicions. The Tribunal ruled in favor of the appellant, setting aside the demand due to the limitation bar, allowing the appeals.