2017 (6) TMI 211 - AT - Central Excise

Whether the present issue is hit by limitation as claimed by the appellant or the contention of the original authority that the same is not hit by limitation is tenable? Held that - ld. original authority has recorded that the appellant had submitted information vide their letter dated 11.02.2005 and since the information was available with Revenue as on 11.02.2005 and further that information about dying of grey yarn was submitted to the authority by the appellant as early as 13.08.2004 the contention in the show cause notice that the information was suppressed from the department is not established to be true. Therefore the said SCN is hit by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the demand for Central Excise duty on dyed yarn is valid.
2. Whether the appellant suppressed information from the department.
3. Whether the demand is hit by limitation.
4. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002.

Analysis:

Issue 1: Validity of Central Excise duty demand on dyed yarn
The case involved the appellants purchasing grey yarn for dyeing and using the dyed yarn in manufacturing Handloom Durries and Rugs. The Revenue contended that dyed yarn attracts Central Excise duty as dyeing amounts to manufacture. The appellants argued that since the final product attracted nil rate of duty, they were eligible for the benefit of a specific Notification. The show cause notice demanded Central Excise duty for the dyed yarn. The Tribunal examined the contentions and held that the demand for Central Excise duty on dyed yarn was not valid.

Issue 2: Suppression of information
The original authority alleged that the appellants suppressed information regarding dyeing of grey yarn in their monthly ER-I returns. The appellants argued that they had provided necessary information during an investigation in 2004 and through various letters to the department. The Tribunal noted that the information was submitted by the appellants in 2004 and 2005, and therefore, the contention of suppression of facts was not valid.

Issue 3: Limitation of demand
The appellants contended that the demand was hit by limitation, stating that relevant information was submitted in 2004 and 2005, making the show cause notice issued in 2007 time-barred. The Tribunal agreed with the appellants, holding that the show cause notice was indeed hit by limitation based on the timeline of information submission.

Issue 4: Imposition of penalty
The original authority imposed a penalty on the Director of the appellant company under Rule 26 of the Central Excise Rules, 2002. The appellants argued that since there was no proposal for confiscation of goods, the penalty was not applicable. The Tribunal did not delve into this issue as the main demand for Central Excise duty was found to be invalid, leading to the setting aside of the impugned order-in-original and allowing the appeals.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand for Central Excise duty on dyed yarn, citing the limitation of the show cause notice and the lack of suppression of information. The penalty imposed on the Director was not addressed due to the primary issue being resolved in favor of the appellants.