2018 (7) TMI 994 - AT - Central Excise

Excisability - SSI Exemption - Appellants engaged in the business of running Hotels throughout the country also operate a small bakery within the premises of the Hotel at Bangalore wherein Pastries Cakes Biscuits Cookies Chocolates and Confectionary are made for consumption in the Hotel and also for sale from the sales counter of the pastry shop located in the Hotel premises itself - whether the Bakery items manufactured and sold by the appellants are excisable? - whether the value of exempted goods can be taken into account for the purposes of arriving at the exemption claimed vide N/N. 8/2003-CE? - Extended period of Limitation. Held that - It appears that the appellants are attempting to create a confusion between nil rate of duty and excisability of goods. There is no ambiguity in the wordings of the Notification - the department is in its right to demand duty on these items. Method to arrive at the value of clearances in the previous year in terms of Notification No.8/2003 (as amended) - Held that - The appellants contentions are misplaced. It appears that the appellants are attempting to create a confusion between nil rate of duty and excisability of goods. There is no ambiguity in the wordings of the Notification - The department was correct in calculating the eligibility limit. Extended period of limitation - Held that - It is a fact that the appellants have not obtained registration and have not paid the tax during relevant time. However in the absence of a positive act of suppression of fact collusion with intent to evade duty we find that extended period cannot be invoked - The department was aware of the budgetary changes from time to time and there was nothing to stop them from visiting the appellants in even time and demand duty. The fact that all the Five Star Hotels make and sell such bakery items is invariably known / acknowledged and is not certainly a fact which could have been unearthed only after investigation or audit. - extended period cannot be invoked - the demand is liable to be restricted to one year i.e. 2005-06 - penalty u/s 11AC also set aside. The original authority is directed to quantify the duty for normal period i.e. 23.3.2006 to 22.3.2007 and to appropriate the same towards the duty already paid and to refund the balance amount - appeal allowed by way of remand.

Summary

Issues:
1. Excisability of bakery items manufactured and sold by the appellant.
2. Consideration of value of exempted goods for claiming exemption under Notification No.8/2003-CE.
3. Justification for invoking the extended period for demanding duty.

Analysis:

Excisability of Bakery Items:
The appellant, engaged in hotel activities, argued that the items made in their kitchens do not amount to "manufacture" under the Central Excise Act. They relied on legal precedents to support their claim that the items made in their kitchens do not undergo a transformation to become new articles with distinct names, characters, and uses. However, the department contended that the bakery items such as Cookies, Pastries, Cakes, and Chocolates fall under the Central Excise Tariff Act and are chargeable to duty. The Tribunal held that the items manufactured by the appellant are indeed excisable, rejecting the appellant's argument.

Consideration of Value of Exempted Goods:
The dispute also revolved around the method of calculating the value of clearances in the previous year for exemption purposes under Notification No.8/2003-CE. The appellant's contentions regarding the eligibility limit were deemed misplaced by the Tribunal. It was clarified that there is no ambiguity in the notification's wordings, and the department was correct in calculating the eligibility limit as per the applicable legal precedents.

Invoking Extended Period for Demanding Duty:
Regarding the invocation of the extended period for demanding duty, the Tribunal considered the appellant's argument that there was no suppression of facts or intent to evade duty. The Tribunal noted that the appellants had provided all requisite information to the department and promptly paid duty when required. Citing relevant case laws, the Tribunal concluded that the show-cause notice was barred by limitation. As a result, the demand was restricted to one year, and the penalty under Section 11AC was set aside.

In conclusion, the Tribunal allowed the appeal by remanding the case to the original authority to quantify the duty for the normal period and to refund any excess amount paid by the appellant. The judgment highlighted the importance of compliance with excise regulations, interpretation of legal provisions, and the limitations on invoking the extended period for demanding duty.