2018 (3) TMI 346 - AT - Central Excise

Extended period of limitation - SCN was issued proposing to demand duty alleging that these cannot be considered as scrap of accessories and that duty has to be paid considering the goods to be capital goods and also allowing depreciation - Held that - The original authority has taken note of the Chartered Engineer s certificate and observing that the goods have been procured duty free under cover of CT3 certificates has dropped the proceedings upholding the payment of duty to the tune of ₹ 31,701/- and interest thereof. It is to be mentioned that the impugned goods were procured under CT3 certificate and the department was in full knowledge about such procurement as well as the exit of the appellant from EOU scheme. Therefore, the show cause notice issued invoking extended period alleging suppression of facts cannot sustain. The appellant has made out good case on limitation - demand is time barred - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability on certain items not included during debonding from EOU scheme.
2. Discrepancy in classification of items as scrap or capital goods.
3. Time limitation for issuing show cause notice.

Analysis:

Issue 1: Duty liability on certain items not included during debonding from EOU scheme
The appellants, engaged in cotton yarn manufacturing, cleared goods into DTA and for exports before exiting the EOU scheme. The dispute arose when certain items like HDPE Card Cans, Simplex Bobbins, PC Ring Tubes, and HDPE Cans, procured duty-free, were not included in the list of machineries/capital goods during debonding. The department later demanded duty on these items, alleging they were capital goods, not scrap. The original authority accepted duty payment by the appellant and dropped further proceedings. However, the Commissioner (Appeals) confirmed the duty demand, leading to the appeal before the Tribunal.

Issue 2: Discrepancy in classification of items as scrap or capital goods
The appellant argued that they had discharged duty liability based on the department's intimation to pay duty on the scrap value of the items. Subsequently, a show cause notice was issued demanding duty on depreciated value, after over a year of debonding, which the appellant contended was time-barred. The department claimed the items were accessories of capital goods, not scrap, and duty should have been paid at depreciated value during debonding. The Tribunal noted that the original authority accepted the Chartered Engineer's certificate, treating the items as scrap, and found the demand time-barred due to the department's prior intimation for scrap value payment.

Issue 3: Time limitation for issuing show cause notice
The Tribunal emphasized that the department's change in stance from requesting duty on scrap value to demanding duty on depreciated value after a significant delay rendered the show cause notice time-barred. It was observed that the appellant had promptly discharged duty based on the initial intimation, and the department was aware of the goods procured under CT3 certificates. Consequently, the Tribunal held that the appellant could not be accused of evading duty payment, especially when the duty was paid promptly upon intimation. The appeal succeeded on the grounds of limitation, and the impugned order was set aside, granting relief to the appellants.