2018 (9) TMI 1430 - AT - Central Excise

Extended period of Limitation - the period involved in the present case is from 01/04/2002 to 31/03/2005 whereas the show-cause notice was issued on 24/01/2008 - Bonafide intent - cutting of aluminium profile into doors and windows - activity amounting to manufacture or not? Held that - The period involved in the present case is 01/04/2002 to 31/03/2005 whereas the show-cause notice was issued on 24/01/2008 which is clearly barred by limitation. During the impugned period, there were decisions favourable to the assessee holding that the activities carried out by the assessee does not amount to manufacture. But the authorities below have relied upon the decision in the case of Mahindra and Mahindra Ltd. which subsequently held that the structure in the movable state will be subject to duty - when there are conflicting decisions, the appellant has a bona fide belief and no suppression can be alleged against the appellant and extended period of limitation cannot be invoked in such a situation. Also, the facts were within the knowledge of the Department in 2005 itself but showcause notice was issued on 24/01/2008. Therefore, demand is barred by limitation. Appeal allowed on limitation itself.

Issues:
- Appeal against rejection of appeal by Commissioner(Appeals)
- Applicability of excisability to doors, windows, frames
- Burden of proof on Department to establish manufacture
- Limitation period for issuing show-cause notice

Analysis:

1. Appeal against Rejection of Appeal by Commissioner(Appeals):
The appellant challenged the impugned order that rejected their appeal and upheld the Order-in-Original. The appellant contended that the activity of cutting aluminum profiles into doors and windows did not constitute manufacture as it did not give separate identity to the goods. They argued that the frames made were fixed to structures and became part of immovable property, thus not excisable under the Central Excise Act. The appellant relied on legal precedents like Quality Steel Tubes (P) Ltd. Vs. CCE and CCE Vs. United Phosperous Ltd. to support their position. Additionally, they highlighted that conflicting decisions existed during the relevant period, leading to a bona fide belief on their part, and extended period of limitation could not be invoked.

2. Applicability of Excisability to Doors, Windows, Frames:
During the period in question, the issue of excisability concerning doors, windows, and frames forming part of immovable structures favored assesses in various decisions. However, a Larger Bench ruling in Mahindra and Mahindra Ltd. Vs. CCE held that structures in their movable state would be subject to duty, even if permanently fixed. The appellant argued that due to conflicting decisions and subsequent references to Larger Bench, their actions were bona fide, and extended period of limitation was not applicable. They cited various decisions to support their stance, emphasizing the evolving nature of legal interpretations during the relevant period.

3. Burden of Proof on Department to Establish Manufacture:
The appellant pointed out that the burden to prove manufacture always rested with the Department, as established in the case of Hindustan Coal. They contended that the Department failed to properly appreciate the facts and the law, leading to an unsustainable impugned order. The appellant's counsel argued that the Department's reliance on specific decisions did not consider the evolving legal landscape and the genuine belief held by the appellant based on prevailing interpretations.

4. Limitation Period for Issuing Show-Cause Notice:
The Tribunal observed that the show-cause notice issued on 24/01/2008, concerning the period from 01/04/2002 to 31/03/2005, was clearly barred by limitation. Despite statements being recorded earlier and search operations conducted in 2005, the notice was issued beyond the prescribed timeframe. The Tribunal noted that the Department had knowledge of the facts well before issuing the notice, indicating a lack of diligence. Consequently, the entire demand in the case was deemed barred by limitation, leading to the allowance of the appeal solely on this ground without delving into the merits of the case.

In conclusion, the Tribunal allowed the appeal based on the limitation issue, emphasizing the importance of adhering to statutory timelines for issuing show-cause notices. The judgment highlighted the significance of legal precedents, burden of proof, and evolving interpretations in determining excisability and liability under the Central Excise Act.

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