2019 (6) TMI 624 - AT - Central Excise

Invocation of extended period of Limitation - Valuation - inclusion of Product Development Charges (PDC) received in the value of the goods sold to the customers - suppression of facts or not - change of opinion - HELD THAT - Such PDC receipts have been received and properly accounted for and duly disclosed since 2007-2008, which period was audited in the earlier audit conducted in November, 2008. However, no such objection was taken by the Revenue at that time. Thus, the present show cause notice, pursuant to the subsequent audit, is only by way of change of opinion on the part of the Revenue. The invocation of extended period of limitation is not available to the Revenue on the basis of the change of opinion on the same facts and circumstances - the show cause notice is held to be not maintainable for invocation of extended period of limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the show cause notice is bad for invoking the extended period of limitation.

Analysis:
The appeal revolved around the issue of whether the show cause notice was valid for invoking the extended period of limitation. The appellant, a manufacturer of explosives, had disclosed receiving "Product Development Charges" under "other receipts" in their final accounts. The Revenue contended that duty was payable on these charges, which the appellant disputed. The Revenue alleged that the appellant suppressed facts regarding these charges during audits, leading to the show cause notice. The appellant argued that they had accounted for the charges in their books and that the notice was based on a change of opinion by the Revenue. The Tribunal noted that the charges had been properly recorded and disclosed since 2007-2008, with no objection raised during an earlier audit in November 2008. Therefore, the Tribunal held that the extended period of limitation could not be invoked based on a change of opinion, ruling the show cause notice invalid on this ground.

The Revenue relied on the findings in the impugned order and the Audit Report of 2010 to support the invocation of the extended period of limitation. The Revenue argued that the charges came to light during the audit, justifying the extended period. Additionally, the Revenue cited a Supreme Court ruling to emphasize that the extended period of limitation cannot be avoided merely because units are periodically audited. However, the Tribunal found that the Revenue's reliance on the subsequent audit for the show cause notice was a change of opinion, not a valid basis for invoking the extended period of limitation.

In conclusion, the Tribunal held that the show cause notice was not maintainable for invoking the extended period of limitation. The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The decision highlighted that the extended period could not be invoked based on a change of opinion by the Revenue, especially when the transactions in question had been properly recorded and disclosed earlier without objection.