2019 (5) TMI 130 - AT - Central Excise

Levy of penalty and extended period of limitation - Clearance of Specially designed Transformers to some of the manufacturers of Wind Operated Electricity Generating (WOEG) Systems - benefit of N/N. 6/2006-CE dated 01.03.2006 - Rule 6 (3) of the Cenvat Credit Rules, 2004 - HELD THAT - Discernably, the adjudicating authority himself has confirmed the fact of the appellants having made atleast three attempts in writing to obtain clarifications from July 2006 to August 2007. The receipt of these communications have also been acknowledged by the adjudicating authority. When this is the case, the department cannot steamroll demand for the extended period, alleging suppression or mis-statement of facts with intent to evade payment of duty. Evidently, none of the ingredients for invocation of extended period of limitation are present in this case. By implication, none of the ingredients which will allow for imposition of penalty under Section 11 AC are present. The demand of duty can be sustained only for the normal period of limitation ie., within one year from the date of issue of SCN - there cannot be any imposition of penalty under Section 11 AC ibid - for the limited purpose of arriving at the net duty liability for the portion of demand that survives for the normal period of limitation, the matter is remanded to the adjudicating authority - Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Eligibility for exemption under Notification No. 6/2006-CE dated 01.03.2006.
2. Limitation period for demand of duty.
3. Imposition of penalty under Section 11 AC of the Central Excise Act, 1944.

Analysis:

1. Eligibility for Exemption under Notification No. 6/2006-CE:
The case involved the appellants, engaged in manufacturing transformers, who cleared "Specially designed Transformers" to manufacturers of "Wind Operated Electricity Generating Systems" without duty payment, claiming exemption under Notification No. 6/2006-CE. The department alleged that the clearances were not eligible for exemption for a specific period, leading to duty liability. The Commissioner, in the impugned order, confirmed a portion of the duty liability and imposed penalties. During the hearing, the appellant's advocate highlighted that the appellant had sought clarifications regarding eligibility from Central Excise authorities in 2006 and 2007, but received no response. The Commissioner acknowledged this fact in the order. The Tribunal found merit in the appellant's assertions, emphasizing the department's failure to respond to the appellant's inquiries, leading to the conclusion that the demand for the extended period was unjustified. Consequently, the demand of duty was upheld only for the normal limitation period, and the imposition of penalty under Section 11 AC was rejected.

2. Limitation Period for Demand of Duty:
The Tribunal noted that the appellant had made multiple attempts to seek clarifications from the authorities regarding their eligibility for exemption under the relevant notification. The Commissioner acknowledged the appellant's efforts, highlighting the department's failure to respond within the prescribed time frame. As a result, the Tribunal concluded that the demand for duty could only be sustained within the normal limitation period of one year from the date of the Show Cause Notice (SCN). Therefore, the Tribunal ordered the matter to be remanded to the adjudicating authority to determine the net duty liability for the portion within the normal limitation period.

3. Imposition of Penalty under Section 11 AC:
Since the Tribunal found that the demand for the extended period was not justified due to the department's inaction on the appellant's inquiries, it also held that there were no grounds for imposing penalties under Section 11 AC. The Tribunal ordered that there should be no imposition of penalty under this section, aligning with its decision on the limitation period for the demand of duty.

In conclusion, the appeal was partly allowed, and the matter was remanded to the adjudicating authority to determine the net duty liability for the appellant within the normal limitation period. The Tribunal emphasized the importance of timely responses from authorities in such matters and clarified the grounds for imposing penalties under Section 11 AC.