2018 (11) TMI 295 - AT - Central Excise

Validity of second SCN - Extended period of limitation - sale through various consignment agents - Appellant were discharging their duty liability at the factory gate price - demand of differential duty - Held that - Admittedly the appellant was issued with a show cause notice earlier on 27.04.2010 and as such subsequent show cause notices issued by invoking the longer period of limitation are not sustainable. However, a part of the demand covered by the show cause notice dated 26.03.2012 and the entire demand covered by the second show cause notice dated 08.01.2012 falls within the limitation period. As such while setting aside the demand for the longer period, the original adjudicating authority is directed to quantify the demand falling within the limitation period. Appeal allowed by way of remand.

Summary

Issues:
- Duty liability calculation based on factory gate price versus consignment agents' selling price
- Show cause notices for differential duties issued for specific periods
- Contestation on limitation grounds for the demands raised
- Legal interpretation regarding suppression of facts and limitation periods
- Decision on setting aside demands falling within the limitation period and penalties imposition

Analysis:
1. The case involved a dispute regarding the duty liability calculation by a company engaged in the manufacture of Ethyl Acetate and N-Butyl Acetate. The company was selling its final products through consignment agents, but was discharging duty liability at the factory gate price, contrary to the provisions of section 4 read with Central Excise Valuation Rules, 2000.

2. Two show cause notices were issued to the company for the periods April 2007 to March 2011 and April 2011 to June 2011, raising demands for the differential duties. The company contested the notices on both merit and limitation grounds, but the demands amounting to ?7,99,810/- and ?14,440/- were confirmed.

3. The company's legal representative did not dispute the duty liability issue but contested the demands on limitation grounds. It was argued that a previous show cause notice had been issued in 2010 for identical demands, making the subsequent notices time-barred. The Revenue acknowledged that previous demands were raised on the same issue.

4. The legal position on the limitation issue was clarified by referring to the decision of the Hon'ble Supreme Court in the case of Nizam Sugar Factory v. Commissioner of Central Excise, A.P. It was established that when all relevant facts are known to the authorities through the first notice, subsequent notices invoking longer limitation periods are not valid.

5. The Tribunal found that since the company was previously issued a show cause notice, the subsequent notices invoking longer limitation periods were unsustainable. However, a portion of the demand covered by the notices fell within the limitation period. The Tribunal directed the original adjudicating authority to quantify the demand within the limitation period and set aside penalties due to the issue being a bona fide legal interpretational matter.

6. Ultimately, the Tribunal disposed of the appeal by setting aside demands falling within the limitation period and relieving the company of penalties, emphasizing the importance of known facts in determining the validity of subsequent notices invoking longer limitation periods.