2018 (7) TMI 151 - AT - Central Excise

Time limitation - Excisability/marketability - manufacture of leather bags - Held that - The adjudicating authority has correctly concluded that the circumstances concerning the processes undertaken by various job workers of the principal HBQ has been in the knowledge of the department definitely from 2003 onwards and the department cannot then allege suppression with intention to evade payment of duty - there is no infirmity in the decision of the adjudicating authority that the SCN dated 3.07.2009 for the demand period of 2004-05 to 2006-07 is hit by limitation - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Determination of excise duty liability on leather goods manufactured on job work basis; Limitation period under Section 11A of the Central Excise Act, 1944.

Analysis:

1. Excise Duty Liability: The case involved the manufacturing of leather goods on a job work basis by a boutique (HBQ) through various job workers, with the finishing and branding done by another entity (AL). The department issued a show cause notice (SCN) proposing recovery of central excise duty on goods cleared by AL. The Commissioner held that the liability for duty was only at the hands of AL, not HBQ. The department contended that the duty liability was not limited to HBQ based on a clarification sought by HBQ from the department. However, the Tribunal noted that the processes undertaken by various job workers were known to the department since 2003, and there was no intention to evade duty. The Tribunal upheld the decision that the duty demand from AL was hit by limitation, as per Section 11A of the Central Excise Act, 1944.

2. Limitation Period: The Tribunal considered the clarification provided by the Range Officer in 2009, stating that certain processes at HBQ did not amount to manufacturing under the Central Excise Act. The Tribunal also highlighted statements obtained from individuals involved in the process, affirming that the activities were not manufacturing activities. Based on these findings, the Tribunal concluded that the SCN issued in 2009 for the demand period of 2004-2007 was indeed hit by limitation. The Tribunal rejected the appeals filed by the department, emphasizing that there was no merit in their arguments regarding the duty liability and limitation period.

In conclusion, the Tribunal dismissed the appeals, affirming that the duty liability for the manufactured leather goods rested with AL and that the SCN issued by the department was time-barred under Section 11A of the Central Excise Act, 1944. The judgment emphasized the importance of considering the processes involved in manufacturing activities and the knowledge of the department regarding such processes in determining duty liability and limitation periods.