2018 (12) TMI 149 - AT - Central Excise

Time limitation - Removal of waste and scrap without payment of duty - this scrap was lying in stock as on 31/08/1997, prior to the introduction of compounded levy w.e.f. 01/09/1997 - benefit of N/N. 49/1997 dated 01/08/1997 - Held that - It is not in dispute that such waste and scrap has arisen during a period when the appellant was not paying the duty under the compounded levy scheme introduced under Section 3A w.e.f. 01/09/1997. In terms of clarification issued by the CBEC dated 01/08/1997 it is clear that the waste and scrap lying in stock as on 31/08/1997 will be liable to payment of duty and will not be eligible for the benefit of the N/N. 49/1997. Time limitation - Held that - The demand pertaining to the period August 1997 has been raised by issue of Show Cause Notice, dt. 01/09/2002 by invoking the extended period of limitation available to Revenue in terms of Section 11A of the Central Excise Act, 1944 - there is no single act on the part of the appellant of collusion or suppression. No specific fact or omission thereof has been cited in the Show Cause Notice - the fact of clearance of waste and scrap lying in stock on 31/07/1997 was within the knowledge of the Department - demand is hit by time-bar. Appeal allowed - decided in favor of appellant.

Summary

Issues: Liability for payment of duty on waste and scrap arising during manufacture; Allegation of suppression in Show Cause Notice; Ground of limitation raised by the appellant

Liability for payment of duty on waste and scrap arising during manufacture:
The dispute in this case revolves around the clearance of waste and scrap by the appellant, which was lying in stock on 31/08/1997. The appellant cleared the waste and scrap without payment of duty, claiming the benefit of Notification No. 49/1997 dated 01/08/1997. However, the Revenue contended that the appellant wrongly claimed this benefit as the waste and scrap was in stock prior to the introduction of the compounded levy scheme under Section 3A of the Central Excise Act, 1944. The issue was whether the appellant was liable to pay duty on the waste and scrap. The Tribunal referred to a previous case to establish that waste and scrap lying in stock as on 31/08/1997 would be liable for duty payment and not eligible for the exemption under Notification No. 49/1997.

Allegation of suppression in Show Cause Notice:
The appellant argued that the Show Cause Notice, issued after a gap of five years, did not allege any specific act of suppression on their part. The appellant had sought clarification from the department regarding the liability for payment of duty on the waste and scrap in question, but no response was received. The Revenue justified the notice based on clarifications issued by the CBEC, stating that waste and scrap under the compounded levy scheme would be liable for duty payment. However, the Tribunal found that there was no evidence of suppression by the appellant in the case.

Ground of limitation raised by the appellant:
The appellant contested the duty payment primarily on the ground of limitation. The demand for duty pertaining to August 1997 was raised through the Show Cause Notice issued in September 2002, invoking the extended period of limitation under Section 11A of the Central Excise Act, 1944. The Tribunal noted that there was no specific act of collusion or suppression by the appellant mentioned in the notice. Due to confusion arising from the postponement of the introduction of the compounded levy scheme, the appellant had sought clarification from the department, which was not provided. The Tribunal concluded that the demand was time-barred and set aside the impugned order, allowing the appeal.