2018 (1) TMI 107 - AT - Central Excise

Extended period of limitation - allegation is that the appellant had mis-declared the quantity of deemed credit eligible during the said period - Held that - The appellant having furnished details and also having reflected all the details in their P&L statement as well as trial balance, cannot be held guilty of fraud or suppression or mis-declaration of facts, especially when the department relies upon the very same documents to demand the duty - the department has failed to establish suppression of facts or willful mis-statement with intent to evade payment of duty. The demand is hit by limitation and requires to be set aside which hereby do - Since the issue on limitation is answered in favor of the appellants, we do not think it necessary to enter into the merits of the case.

Summary

Issues:
1. Incorrect deemed credit availed by the appellant.
2. Allegation of mis-declaration of finished goods in stock.
3. Applicability of limitation period for issuing show cause notice.

Analysis:
1. The appellant, a manufacturer of cotton woven fabric and cotton yarn, availed deemed credit on inputs and semi-finished goods in stock as on 31.3.2003. However, upon scrutiny, it was discovered that they had availed excess deemed credit amounting to ?11,05,246. The department issued a show cause notice to recover the excess credit along with interest and penalty. The original authority and Commissioner (Appeals) upheld the demand, leading to the current appeal.

2. The appellant argued that the goods declared as "finished goods" in their financial statements were actually inputs and work in process, not eligible for deemed credit. They contended that until goods are packed and cleared from the factory, they retain the nature of inputs or semi-finished goods. The department's presumption that these were finished products based on the Profit & Loss account was challenged. The appellant provided a Chartered Accountant's certificate supporting their claim, which was not accepted by the authorities.

3. In terms of limitation, the appellant highlighted that the show cause notice issued in 2007 for the period of March 2003 was beyond the normal limitation period. They argued that all relevant documents were within the department's knowledge, and the allegation of suppression of facts was unfounded. The appellant contended that since they had declared all necessary details and the department was aware of the deemed credit declaration, the extended limitation period invoked was unjustified.

4. The department maintained that the appellant had mis-declared the finished goods in stock, leading to the excess deemed credit availed. They argued that the discrepancy in the description of goods was identified later through the appellant's records, justifying the extended limitation period for issuing the show cause notice. However, the Tribunal found that the department failed to establish suppression of facts or willful misstatement by the appellant. Citing relevant case laws, the Tribunal held that the demand was hit by limitation and set aside the impugned order, allowing the appeal solely on the ground of limitation.

This detailed analysis of the judgment addresses the issues of incorrect deemed credit, mis-declaration of finished goods, and the applicability of the limitation period for issuing the show cause notice, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.