2019 (2) TMI 744 - AT - Central Excise

Parts of Electric Motors cleared to various zones of the Railways for use as spare parts - benefit of N/N. 67/86-CE dated 10/02/1986 - Department was of the view that the appellant will not be entitled to the benefit of this Notification, in respect of the parts of Electric Motors cleared to various zones of the Railways for use as spare parts - Held that - In respect of the parts of motors cleared outside the appellant s factory for use in various zones of the Railways, we are of the view that the benefit of N/N. 67/86 will not be available in asmuchas the benefit can be extended only to parts which are used in the factory of production as component parts. The Adjudicating Authority is directed to quantify the demand, if any, which survives within the normal time limit in respect of SCN dt. 03/08/1992 - Penalty set aside - appeal allowed in part.

Summary

Issues involved:
Interpretation of Notification No. 67/86-CE regarding exemption for parts of electric motors, Captive consumption vs. clearance to Railway Zones, Allegation of suppression, Extended period of limitation under Section 11A, Imposition of penalty under Rule 173Q.

Analysis:
The case involved a dispute regarding the applicability of Notification No. 67/86-CE to parts of electric motors cleared by a unit of the Central Government under the Ministry of Railways to various Railway Zones for use as spare parts. The appellant argued that such clearance should be considered as captive consumption and thus eligible for the exemption under the notification. The Department, however, contended that the exemption could not be extended to parts cleared outside the factory for use in Railway Zones. Show Cause Notices were issued covering different periods, invoking the suppression clause and demanding payment of Central Excise Duty.

Upon hearing both parties, the Tribunal noted that the appellant, being a unit of the Ministry of Railways, could not be considered to have suppressed facts to evade duty payment. The Tribunal also highlighted that once a Show Cause Notice invoking the suppression clause is issued, the Department cannot issue another notice for the same period under the longer time limit. Citing a Supreme Court decision, the Tribunal emphasized the limitation on multiple notices for the same period.

Regarding the merits of the case, the Tribunal held that the benefit of the notification could only be extended to parts used as component parts in the factory of production, not to those cleared outside for use in Railway Zones. Consequently, the demand raised in the Show Cause Notice dated 04/02/1991 was set aside as no demand survived within the normal time limit. For the subsequent notice dated 03/08/1992, the demand beyond the normal time limit was also set aside.

The Tribunal directed the Adjudicating Authority to quantify any demand remaining within the normal time limit from the second Show Cause Notice. In light of the circumstances, the Tribunal found no grounds to impose a penalty and thus set aside the penalty imposed under Rule 173Q. The judgment emphasized the importance of correctly interpreting the scope of exemptions under relevant notifications and adhering to statutory limitations on issuing multiple notices for the same period.