2018 (9) TMI 171 - AT - Central Excise

Manufacture - process of galvanization of seamless steel tubes and parts of steel structure, on job work basis - assessee paid Service tax on the above activity - Revenue entertained a view that the appellants are required to pay duty of excise on the galvanized pipes, inasmuch as galvanization amounts to manufacture in terms of the Chapter note 4 of Chapter 73 of CETA, 1985 - malafide intent or not? - Extended period of limitation. Held that - The appellants were admittedly paying service tax on the said process and were reversing the credit of Zinc and Furnace Oil, which facts was being reflected by them in the ER-1 Returns - When admittedly the appellant was paying service tax and was reflecting said payment in the returns filed by them and was also reversing the Cenvat credit, it cannot be said that such an act of the assessee was with a mala fide mind to evade payment of duty of excise - extended period not invocable. The Tribunal in the case of M/s K. R. Packaging vs. Commissioner of Central Excise & Service Tax, Meerut-I, 2017 (2) TMI 893 - CESTAT NEW DELHI has dealt with an identical issue and has held that where the activity amounted to manufacture and was required to pay duty of excise but the assessee paid the service tax and regularly filed the service tax returns without any objection by the Revenue, the demand of duty of excise would not be sustainable. The demand of duty is not sustainable as the same is barred by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether galvanization of steel tubes amounts to manufacture under Chapter 73 of CETA, 1985.
2. Whether the appellants are liable to pay duty of excise on galvanized pipes due to the exemption status of the principal manufacturers.
3. Whether the demand raised for the period April 2007 to September 2009 is within the extended period of limitation.
4. Whether the payment of service tax instead of excise duty constitutes an act of deception warranting the invocation of a longer period for demand of duty.

Issue 1:
The tribunal considered whether the process of galvanization of steel tubes amounts to manufacture under Chapter 73 of CETA, 1985. It was noted that as per Chapter note 4 of Chapter 73, galvanization of items in Chapter 73 shall amount to manufacture. The tribunal found that the appellants were not entitled to the benefit of job work Notification No. 214/86-CE as the suppliers of the material were not paying Central Excise duty on their final product. The tribunal held that galvanization indeed amounts to manufacture, supporting the Revenue's view.

Issue 2:
The tribunal examined whether the appellants were required to pay duty of excise on galvanized pipes due to the exemption status of the principal manufacturers. It was found that the demands were raised for the period April 2007 to September 2009 by invoking the extended period of limitation. The appellants argued that they had been transparent with the Revenue by reversing Cenvat credit and paying service tax on the process. The tribunal observed that the appellants' payment of service tax instead of excise duty was not deceptive, as they were reflecting the payments in their returns.

Issue 3:
The tribunal assessed whether the demand raised for the period April 2007 to September 2009 fell within the extended period of limitation. The appellants contended that they had informed the Revenue about the relevant facts during this period. The tribunal found that the demand was not sustainable as it was barred by limitation, leading to setting aside the impugned order and allowing the appeals with consequential relief to the appellants.

Issue 4:
The tribunal analyzed whether the payment of service tax instead of excise duty constituted an act of deception warranting the invocation of a longer period for the demand of duty. The tribunal disagreed with the Revenue's assertion that the appellants' actions were deceptive. It was highlighted that the appellants were paying service tax, reflecting the payments in their returns, and reversing Cenvat credit. The tribunal cited precedents where similar situations did not warrant the demand of excise duty, emphasizing that the appellants' actions did not exhibit mala fide intentions to evade payment.

Conclusion:
The tribunal ruled in favor of the appellants, holding that the demand of duty was not sustainable due to being barred by limitation. The impugned order was set aside, and both appeals were allowed with consequential relief to the appellants.