2018 (3) TMI 992 - AT - Central Excise

Extended period of limitation - the appellant mainly contended that in absence of suppression, misstatement, fraud etc, the extended period of limitation cannot be invoked, for confirmation of the duty demand - Held that - the process of debonding initiated by the appellant was known to the Department on 26/12/2007 and upon satisfaction that the appellant deserved for debonding of its unit, the Authorities have recommended positively for issuance of the NOC - it cannot be said that the appellant had indulged into the activities of suppression, fraud etc., with the intent to defraud the Government revenue. It is manifestly clear that the appellant had no fraudulent intention in depriving the Government revenue - in this case the SCN should have been issued within the normal period of the date of knowledge regarding debonding of the unit by the appellant. Since, SCN was issued beyond the period of one year, the same is barred by limitation of time. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability on finished goods in stock after exiting EOU scheme.
2. Invocation of extended period of limitation for duty demand confirmation.
3. Applicability of penalty under Section 11AC of the Central Excise Act, 1944.
4. Knowledge of debonding process by the Central Excise Department.

Analysis:
1. The appellant, a 100% EOU engaged in manufacturing wooden furniture, applied to exit the EOU scheme and debond its unit. The Central Excise Department audited the unit and found duty liability on finished goods in stock. Duty demand of ?3,51,426 was confirmed along with interest and penalty under Section 11AC. The Commissioner (Appeals) upheld the duty demand but dropped the penalty due to the department's knowledge of the debonding process.

2. The appellant argued that since the department knew about the debonding process on 26/12/2007 and recommended debonding, the show cause notice (SCN) issued on 12/08/2009 was time-barred. Citing relevant case laws, the appellant contended that without suppression or fraud, the extended period of limitation cannot be invoked. The Tribunal agreed, stating that the appellant had no fraudulent intent to evade duty payment, and the SCN should have been issued within the normal period of knowledge, rendering the duty demand time-barred.

3. The Tribunal noted that the Central Excise Authorities positively recommended debonding based on the appellant's application and records. It found no evidence of suppression or fraud by the appellant to evade duty payment. The Commissioner (Appeals) also concluded that there was no deliberate suppression of facts. As a result, the duty demand confirmation on the appellant was deemed unsustainable due to the limitation of time.

4. In the absence of fraudulent intent or suppression, the Tribunal ruled in favor of the appellant, setting aside the duty demand confirmation. The appeal was allowed, emphasizing that the duty demand could not be sustained on the grounds of limitation. The judgment was pronounced on 20/03/2018 by the Tribunal.