2018 (8) TMI 316 - AT - Central Excise

Method of Valuation - Toffees - goods not intended for retail sale - Section 4 or 4A of CEA - Department took the view that the subject goods were not intended to be sold in retail, were not required to be affixed with M.R.P. as they are exempted under Rule 34(b) of the Standard of Weights and Measures (Packaged Commodity) Rules, 1977 (SWM (PC) Rules); that the jars/pouches are admittedly a wholesale pack, hence, these goods merited valuation in terms of Section 4 of the Act only - Extended period of Limitation. Held that - The issue of whether the plastic jars/pouches containing individual toffees, which weigh around 2-2.5 gms, which are required to be assessed to Central Excise Duty under Section 4/4A of the Act, has been mired in litigation for quite some time. In fact, there were contradicting judgments by the Tribunal - The law has finally been settled only by the judgment of the Hon ble Apex Court in Central Arecanut & Cocoa Marketing & Processing Co-Op. Ltd. 2008 (9) TMI 506 - SUPREME COURT - Hence, certainly, before this date, the ratio laid down by the Hon ble Apex Court in Continental Foundation Joint Venture case 2007 (8) TMI 11 - SUPREME COURT OF INDIA will apply on all fours to the facts of this appeal, where it was held that Demand raised by the department has been quashed on the ground of adjudication beyond the normal period of limitation and non-availability of the extended period of limitation. The proceedings initiated by way of the Show Cause Notice 06/2007 dt. 26.03.2007 for the period 01.03.2002 to 31.03.2006 will be hit by limitation beyond the normal period of limitation. Hence, only the periods covered by the other SCNs dated 24.04.2007, 14.03.2008, 21.08.2008 and 30.04.2009 within the normal period alone will survive. Penalties - Held that - Discernibly the entire dispute is one of interpretation of manner of assessment, whether under 4 or 4A of the Act and as mentioned earlier, there was considerable confusion in the matter till it was settled by the Hon ble Apex Court - the penalties imposed are unwarranted and we set aside the same. Appeal allowed in part.

Summary

Issues:
Assessment under Section 4/4A of the Central Excise Act, 1944, extended period of limitation, interpretation of legal provisions, imposition of penalty.

Analysis:

Assessment under Section 4/4A:
The appellants sold toffees in jars/pouches, and the Department contended that these goods were not intended for retail sale and should be valued under Section 4 of the Act. The Department initiated proceedings culminating in demands and penalties. The appellant argued that the goods were correctly valued under Section 4A. The issue was previously unsettled with conflicting Tribunal decisions. However, the Supreme Court's judgment in a related case clarified that such goods do not fall under Section 4A. The Tribunal found merit in the appellant's plea that the demands for the period prior to the Supreme Court's judgment were time-barred. Hence, only demands within the normal period survived.

Extended Period of Limitation:
The appellant contended that the demands for the period preceding the Supreme Court's judgment were barred by limitation. Citing legal precedents, the Tribunal agreed that doubts about differing legal interpretations could preclude the application of the extended period of limitation. The law was only conclusively settled by the Supreme Court's judgment, and hence demands beyond the normal period were deemed time-barred.

Interpretation of Legal Provisions:
The dispute centered on the interpretation of whether the goods should be assessed under Section 4 or 4A of the Act. The Tribunal acknowledged the confusion in the matter until the Supreme Court's definitive ruling. Considering the complexity and unsettled nature of the legal provisions, the penalties imposed were deemed unwarranted and set aside.

Imposition of Penalty:
Given the nature of the dispute revolving around the assessment methodology and the subsequent legal clarity provided by the Supreme Court's judgment, the Tribunal concluded that the penalties imposed were unjustified. Therefore, the penalties were overturned.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the appellant on the issues of limitation, penalties, and assessment methodology. The judgment emphasized the importance of legal clarity in interpreting provisions and the impact on limitation periods and penalty imposition.