2017 (10) TMI 653 - AT - Central Excise

Manufacture - base frame fitted with engines or alternators, fuel tank and acoustic enclosures and base frame fitted with engine, alternator fuel tank and acoustic enclosures cleared to 100% EOU - According to department, the goods have been procured on the basis of invoices and the goods have been cleared as such since the activity of fitting of the base frame with acoustic enclosure etc. does not amount to manufacture - Held that - since for the very same goods, after visit to the factory for the period 2006 07, the department having accepted that the process in the factory amounted to manufacture and also for the reason that clearances of the subject goods to independent buyers and DTA units are undisputedly made on payment of duty, the allegation that the activity does not amount to manufacture when very same goods are cleared to 100% EOU is not justified. Extended period of limitation - Held that - there is no evidence to establish any suppression of facts or willful mis-statement with intent to evade payment of duty on the part of the respondent - the demand invoking the extended period is unsustainable. The respondent has vehemently argued to award damages basing upon the CBEC Circular F. No.390/CESTAT/69/2014-JC dated 22.12.2015 for awarding cost to the respondent as the respondent has been dragged to frivolous litigation by the department. The issue that has arisen for determination is on the basis of a show cause notice and the fact does not disclose any vexatious action on the department - the said plea is without basis. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
Department's appeal against order setting aside demand, interest, and penalties imposed by Commissioner (Appeals).

Analysis:
1. The department contended that the respondent was not eligible for benefits under Notification No. 22/2003 for goods cleared to EOU, alleging they were not manufacturers. The Commissioner (Appeals) held the demand was time-barred and accepted the respondent's status as a manufacturer for goods cleared to DTA and independent buyers. The department argued for invoking the extended limitation period, citing discrepancies in the manufacturing process. They claimed the respondent removed goods to EOU without manufacturing them, contrary to their claims.

2. The respondent argued that the show cause notice was time-barred, as they regularly filed returns and communicated with the department. They emphasized manufacturing activities undertaken, such as manufacturing base frames fitted with engines or alternators. They highlighted the department's contradictory stance on goods cleared to DTA, independent buyers, and EOU, pointing out the department's acceptance of manufacturing for some clearances but not for EOU clearances.

3. The Tribunal observed the department's inconsistent stance on the respondent's manufacturing status for the same goods. The Commissioner (Appeals) highlighted the contradictory positions taken by the department for goods cleared to different entities. The Tribunal agreed with the Commissioner's findings that the demand was time-barred, as the respondent had complied with reporting requirements and there was no evidence of willful misstatement to evade duty payment.

4. The Tribunal dismissed the department's appeal, finding it lacked merit and upheld the impugned order. The respondent's plea for damages based on a CBEC Circular was rejected, as the Tribunal found no vexatious action by the department in issuing the show cause notice. The appeal filed by the department was ultimately dismissed, with the judgment pronounced on 13.10.2017.