2016 (12) TMI 330 - AT - Central Excise

Valuation - inclusion in the cost of the final product, various charges like testing charges, conversion charges, administrative expenses and notional profit while arriving at assessable value - Held that - We find that the demand is for the period from May 1995 to 24.09.1997. The demand was raised only on the captive by consumed M.S. Pipes and Shells as the value arrived on cost consideration method. The Department initially raised the dispute in the year 1997 and the appellant has deposited duty amount of ₹ 34,07,750/-. Therefore it was not known whether the value is correct or otherwise. Specifically the matter was referred to the Special Audit and accordingly, vide show-cause notice dated 15.12.2000 the demand of differential duty was raised. The appellant is a Maharashtra State Government Corporation; M.S. Pipes is manufactured and used for the Government projects. Therefore the Corporation is not meant for making any product manufactured by them, is not sold in the commercial market but only meant for use of the Government project. Therefore in our considered view the Government entity cannot make payment of duty. Extended period of limitation - Held that - For the purpose of invoking extended period, the assessee should have intent to evade payment of duty with fraud, suppression of fact, collusion etc. The intention of evasion of tax imposed by the Finance Ministry does not exist accordingly there is no ingredient exist either for the Company or promoters of the Company benefited intentional to evade payment of duty. In present case the appellant being a Government Organisation whether the gain or loss of Government entity, therefore cannot be any intention or evasion, there is no policy of the Government to indulged in such activity of evasion of duty. Moreover the valuation dispute was raised in the 1997 and the appellant as per their calculation paid the differential duty therefore if it is sought payment of duty the Department have issued a show-cause notice within normal period of limitation. In the show-cause notice for the period from May 1995 to 24.09.1997 was issued on 15.12.2000 which is much after the normal period of one year therefore the entire demand is time barred as proviso to Section 11A. As per the above discussion and the facts and circumstances, we are of the view that the demand is not sustainable being time barred. Since we decide the matter on limitation action, we do not feel necessary to decide the issue of valuation. The impugned order is set aside and the appeal is allowed.

Summary

Issues:
1. Valuation dispute regarding assessable value of goods manufactured.
2. Time-barred demand raised by the Department.
3. Applicability of intent to evade payment of duty by a Government Corporation.
4. Interpretation of the extended period for raising demand under Section 11A.

Analysis:
1. The appellant, a Maharashtra State Government Corporation, hired a contractor for manufacturing M.S. Pipes and Shells using their own machinery and labor. The Department disputed the valuation of goods due to the appellant's failure to include various charges in the cost of the final product. The appellant acknowledged the error and paid the differential Excise duty. A show-cause notice was issued proposing a demand of Central Excise duty, which the adjudicating authority confirmed along with penalties and interest. The appellant contended that the notice was time-barred and lacked intent to evade duty, citing relevant case laws. The Department relied on judgments supporting their findings.

2. The Tribunal noted that the demand was for a specific period, and the dispute initially arose in 1997, leading to the appellant depositing a portion of the duty. The show-cause notice for the remaining demand was issued in 2000. Considering the appellant's status as a Government entity and the absence of intent to evade duty, the Tribunal held that the demand was time-barred under Section 11A. The Tribunal emphasized that for the extended period to apply, there must be evidence of intent to evade duty, which was lacking in this case due to the appellant's prompt payment upon identification of the error.

3. The Tribunal highlighted that as a Government Corporation involved in public projects, the appellant's activities were not profit-oriented, and the goods manufactured were solely for government use. Therefore, the Tribunal reasoned that there was no intention to evade duty, as the Corporation's actions were in line with government policies. The Tribunal's decision was based on the absence of fraudulent intent or suppression of facts, crucial elements required to trigger the extended period for raising demands under Section 11A.

4. Ultimately, the Tribunal set aside the impugned order, allowing the appeal on grounds of being time-barred. By emphasizing the lack of intent to evade duty by a Government Corporation engaged in public projects, the Tribunal concluded that the demand for Central Excise duty was not sustainable within the extended period provided by law. The decision focused on the procedural aspect of limitation, rendering the valuation dispute moot in light of the time-barred demand.