2019 (3) TMI 34 - AT - Central Excise

Process amounting to manufacture or not - uncoiling the sheets, cutting them to sizes and corrugating them into form to be used as roofs - excisability - extended period of limitation - confiscation - penalties - Held that - As the appellant is bringing into existence a new commodity as known in the market, there is no hesitation in holding that the appellant has indeed manufactured the profiles from the sheets - the process amounts to manufacture - demand of excise duty upheld. Time Limitation - Held that - Appellant would not have gained much by evading any excise duty as the overwhelming part of the cost is of sheets on which they are entitled to CENVAT credit paid by the suppliers anyway. They are also paying service tax on corrugation element on it. So what is escaping tax is the small profit margin between the purchase price of the sheets and the sale price of the sheets. If the appellant is required to pay excise duty they will be entitled the CENVAT credit - the revenue has not made out a case to invoke extended period of limitation. The entire demand in the show cause notice is beyond the normal period of limitation and therefore, the demand and interest do not sustain - confiscations and penalties also do not sustain - appeal allowed.

Issues:
1. Whether the activity of uncoiling, cutting, and corrugating steel sheets amounts to manufacture.
2. Liability of the appellant to pay excise duty on the said activity.
3. Validity of raising a demand invoking extended period of limitation.
4. Sustainability of confiscation of goods from the appellants.
5. Imposition of penalties on the appellants.

Issue 1 - Activity Amounting to Manufacture:
The appellant, engaged in trading of steel sheets, uncoils, cuts, and corrugates them before selling. The department alleged that this process creates a new commodity, distinct from the original sheets. Citing the Proflex Systems case, the Tribunal held that corrugated sheets for roofs are indeed distinct commodities. Thus, the appellant's activity amounts to manufacture as per legal precedents.

Issue 2 - Liability to Pay Excise Duty:
The appellant argued that they were paying service tax on the corrugation process as business auxiliary services. They contended that the department was aware of this activity, and they were not evading any duty. However, the Tribunal found that the appellant's failure to pay excise duty on the manufactured profiles was a deliberate act to evade payment. The liability to pay excise duty on the manufactured profiles was upheld.

Issue 3 - Extended Period of Limitation:
Regarding the extended period of limitation, the Tribunal noted that the appellant was registered with the Central Excise department and paying service tax on the corrugation activity. The Tribunal found that the department should have been aware of the nature of the activity through the service tax returns. As the demand exceeded the normal limitation period, it was deemed unsustainable, leading to the dismissal of the demand, interest, confiscation, and penalties.

Issue 4 - Sustainability of Confiscation:
Since the demand itself was found to be beyond the normal limitation period and unsustainable, the confiscation of goods from the appellants was also deemed unsustainable by the Tribunal.

Issue 5 - Imposition of Penalties:
As the demand and interest were found to be unsustainable due to the lapse in the limitation period, the Tribunal concluded that the imposition of penalties on the appellants was not justified.

In conclusion, the Tribunal allowed the appeals, setting aside the impugned orders and ruling in favor of the appellants based on the issues discussed and analyzed in detail during the proceedings.

← Previous Next →