2017 (11) TMI 1503 - AT - Central Excise

Short payment of excise duty - scope of word assessee - extended period of limitation - change of opinion - Held that - Revenue have accepted M/s PCAL is the manufacture of the goods in question, by granting them registration as manufacturer and accepting filing of returns on payment of duty by them. Nowhere in the Show Cause Notice, it is alleged that instead of M/s PCAL why not M/s KCIL be treated as a manufacturer. Further, it is nowhere the case of Revenue that the depot of M/s KCIL located at Kolkata or the depot of the consignment agents are also the Depot of the manufacturer M/s PCAL. In such case and facts on record, I find that the whole Show Cause Notice is misconceived. Extended period of limitation - Held that - the Show Cause Notice has been issued by way of change of opinion and the same is bad for invocation of extended period of limitation, there being no suppression of facts as admittedly the agreement between the parties was filed with the Revenue and proper returns etc. were filed and taxes were paid. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Differential duty demand under Section 11-A(I) of Central Excise Act, 1944
2. Penalty under Section 11AC and Rule 25 of Central Excise Rules, 2002
3. Penalty under Rule 26 of Central Excise Rules, 2002
4. Manufacturer liability and ownership of goods determination
5. Misconceived Show Cause Notice and extended period of limitation invocation

Analysis:
1. The appeals addressed the issue of whether the differential duty demand under Section 11-A(I) of the Central Excise Act, 1944, along with penalties under Section 11AC and Rule 25 of the Central Excise Rules, 2002, were rightly imposed by the ld. Commissioner in the Order-in-Original dated 05/03/2009. The case involved M/s Kanoria Chemicals & Industries Ltd. (M/s KCIL) entering into an agreement with Prajapati Chemicals & Allied Ltd. (M/s PCAL) for manufacturing Chlorinated Paraffin Wax. The duty payment arrangement between the parties was questioned, leading to the demand for differential duty. The Tribunal found the Show Cause Notice misconceived and beyond limitation, as there was no suppression of facts, and the agreement between the parties was disclosed to the Revenue.

2. The issue of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002, was also deliberated. The Tribunal observed that the Revenue had accepted M/s PCAL as the manufacturer of the goods, as evidenced by their registration and filing of returns. It was noted that nowhere in the Show Cause Notice was it alleged why M/s KCIL should be treated as the manufacturer. The Tribunal held that the Notice was issued based on a change of opinion and was invalid for invoking the extended period of limitation. Consequently, the appeals were allowed, and the impugned order was set aside, granting the appellant any consequential relief in accordance with the law.

3. The judgment further analyzed the determination of manufacturer liability and ownership of goods. Referring to Rule 2(c) of the Central Excise Rules, 2002, the Tribunal defined the appellant-assessee and cited a Supreme Court case establishing that the manufacturer or job worker liable for duty and owning the goods is crucial. The Tribunal emphasized that the Revenue had acknowledged M/s PCAL as the manufacturer, and there was no assertion that M/s KCIL should be considered the manufacturer. This clarification played a significant role in the decision to set aside the impugned order.

4. In conclusion, the Tribunal's detailed analysis highlighted the importance of correctly determining the liability for duty payment and ownership of goods in excise matters. The judgment underscored the necessity for clarity in assessing manufacturer status and the implications for duty payment obligations. By scrutinizing the facts and legal provisions, the Tribunal concluded that the Show Cause Notice was flawed, leading to the allowance of the appeals and the setting aside of the impugned order.