2016 (11) TMI 150 - AT - Central Excise

Reversal of credit - Rule 6(3) of the Central Excise Rules - Penalty - Period of limitation- Held that - that dolochar is a product which emerges during the course of manufacture of sponge iron - that dolochar is a product which emerges during the course of manufacture of sponge iron - Revenue s Appeal rejected.

Summary

Issues: Excisability of dolochar as a final product, applicability of Rule 6(3) of the Central Excise Rules, time bar for raising demand.

Excisability of Dolochar: The case involved the issue of whether dolochar, emerging as waste during the manufacture of sponge iron, should be considered a final excisable product. The Revenue contended that dolochar should be treated as a final product, necessitating the appellants to maintain a separate account or reverse 10% of the value of their final product under Rule 6(3) of the Central Excise Rules. The Commissioner (Appeals) held against the assessee on this excisability issue, citing the Tribunal's Larger Bench decision in Rallies India Ltd. vs. CCE, Salem. However, the appellate authority granted relief to the respondents on the matter of time bar, noting that the Department had previously issued a show cause notice on the same issue, leading to the demand raised being held as barred by limitation. The decision referenced various Supreme Court judgments, including Nizam Sugar Factory vs. CCE AP, to support the time bar ruling.

Applicability of Rule 6(3) of Central Excise Rules: The appellate authority upheld the applicability of Rule 6(3) based on the Larger Bench decision in Rallies India. However, it was highlighted that the Larger Bench decision was subsequently reversed by the Hon'ble Bombay High Court in Rallies India Ltd. vs. Union of India. This reversal was followed by the Tribunal in another case, confirming that the issue of dolochar emergence was settled in favor of the assessee. Despite not challenging the order on this ground, the relief granted to the assessee on the time bar issue indirectly supported their position on the emergence of dolochar.

Time Bar for Raising Demand: The main contention of the Revenue regarding the time bar was that the assessee did not reflect the emergence of dolochar in their ER I return, implying suppression. However, the Revenue's grounds of appeal did not address the Supreme Court decision in Nizam Sugar, which was relevant to the time bar issue. The Commissioner (Appeals) correctly held the demand raised in 2008, invoking the longer period of limitation, as barred by limitation due to the prior show cause notice on the same issue. The absence of a dispute from the Revenue regarding the previous notice further supported the time bar ruling in favor of the assessee.

In conclusion, the appellate tribunal, led by Ms. Archana Wadhwa, rejected the Revenue's appeal, finding no justifiable reason to interfere with the Commissioner (Appeals) order. The decision was pronounced in open court, affirming the relief granted to the assessee based on the time bar and the settled issue of dolochar emergence during sponge iron manufacturing.