2018 (11) TMI 6 - AT - Central Excise

Process amounting to manufacture - various activities like drilling, cutting, bending, welding etc. - demand of Excise duty with Interest and penalty - invocation of extended period of limitation - Held that - There is no doubt about the fact that the matter was not free from doubt and inasmuch as the earlier decisions were in favour of the assessee, the matter was referred to Larger Bench - Hon ble Supreme Court in the case of Kiran Ispat Udyog 2015 (8) TMI 998 - SUPREME COURT wherein it was held that inasmuch as the issue was entangled in judicial battle and hazy picture was clarified only subsequently, the extended period cannot be held to be invocable. Inasmuch as in the present case admittedly, the extended period stands invoked by the revenue and admittedly, the issue was not free from doubt having been referred to the Larger Bench, the demand barred by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of excise duty, interest, and penalty against a company; Imposition of penalty on the director of the company; Whether the activities undertaken by the assessee amount to manufacturing activity for the levy of excise duty; Whether the demand is barred by limitation.

Confirmation of Excise Duty, Interest, and Penalty:
The judgment confirms the duty of excise amounting to ?11.93 lakhs against M/s. Nityanand Engineering Pvt. Ltd., along with interest and imposition of an equivalent penalty. Additionally, a penalty of ?1 lakh is imposed on the director of the company. The duty is confirmed based on various activities like drilling, cutting, bending, welding, etc., undertaken by the assessee for manufacturing parts of towers, resulting in excisable products. The demand is confirmed by invoking the extended period of limitation.

Manufacturing Activity and Levy of Excise Duty:
The issue revolves around whether the activities undertaken by the assessee constitute manufacturing activity for the purpose of levying excise duty on the products. The Tribunal, in a previous case, referred a similar issue to the Larger Bench, which held that the activity is a manufacturing process and the resultant product is dutiable goods. The matter was sent back to the original bench for disposal of the appeal, where the demand within the limitation period was upheld, granting the benefit of the extended period due to doubts and confusion in the field.

Limitation Period and Judicial Precedents:
The appellant argues that since the demand was raised through a show-cause notice dated 07.10.1998 for the period 1994-95 to 1995-96, the entire demand is time-barred. The advocate relies on decisions of the Hon’ble Supreme Court, emphasizing that when the correctness of earlier decisions is doubted and the matter is referred to the Larger Bench, the extended period of limitation should not be invoked. Citing judgments like Continental Foundation Jt. Venture and Kiran Ispat Udyog, it is established that when an issue is entangled in a judicial battle and clarity emerges later, the extended period cannot be invoked.

Judgment and Conclusion:
Considering that the extended period was invoked by the revenue and the issue was not free from doubt as it was referred to the Larger Bench, the demand is held to be barred by limitation. Consequently, the impugned order confirming the demand and imposing penalties is set aside, and both appeals are allowed with consequential relief.