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2019 (7) TMI 901 - AT - Central ExciseValuation - related party transaction - Job-work or supply on principal to principal basis - price for levy of Central Excise duty on the clearance effected by the appellant to M/s. Zydus Wellness Ltd. - time limitation - HELD THAT - The appellants have been filing their ER 1 return regularly before the Department and declaring the price which have been charged by them from M/s. Zydus Wellness Ltd., on the invoices and the price on which the Central Excise duty has been paid. The Department has not challenged the authenticity, genuineness of such invoices neither they have proved that the appellants have received any other consideration other than the price which is indicated on the invoices for clearance of excisable goods. The ingredients which are the pre-requisite for invoking the extended time proviso under section 11A (4) of the Central Excise Act, 1944 are absent in the facts of this case. Thus, in the absence of element of mens area, the appellant‟s conduct cannot be construed to fall within the five elements as required for invoking the extended time proviso - the charges of willful suppression or mis-statement of facts cannot be invoked The SCN is barred by limitation - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Nature of the transaction between the appellant and M/s Zydus. 2. Applicability of Rule 10A of the Central Excise Valuation Rules. 3. Invocation of the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944. 4. Allegations of suppression or mis-declaration of facts by the appellant. Detailed Analysis: 1. Nature of the Transaction: The core issue was whether the transaction between the appellant and M/s Zydus was a principal-to-principal sale or a job work. The Tribunal had previously determined that the appellant manufactured and supplied goods to M/s Zydus under a "Manufacturing Agreement," and the transactions were in the nature of job work as outlined in Rule 10A of the Central Excise Valuation Rules. The Tribunal noted that the appellant was required to manufacture goods exclusively for M/s Zydus using their specifications and technical know-how, which were supplied by M/s Zydus. This arrangement satisfied the conditions under Rule 10A, thus classifying the appellant as a job worker. 2. Applicability of Rule 10A: The Tribunal upheld that the appellant's transactions fell under Rule 10A because: - The appellant manufactured goods using inputs supplied by suppliers identified by M/s Zydus. - The pricing did not include all elements of cost, indicating it was not a principal-to-principal transaction. - The goods were to be valued based on the price at which M/s Zydus sold them from their depot, as per Rule 10A. 3. Invocation of Extended Period of Limitation: The appellant contested the invocation of the extended period under Section 11A(4) of the Central Excise Act, 1944, arguing that they had regularly filed ER-1 returns and disclosed all facts to the Department. The Tribunal initially did not address this issue, leading to a Miscellaneous application for rectification. Upon reconsideration, the Tribunal examined whether the extended period could be invoked, requiring proof of fraud, collusion, willful mis-statement, or suppression of facts with intent to evade duty. 4. Allegations of Suppression or Mis-declaration: The appellant argued that there was no suppression or mis-declaration as all transactions were transparent and disclosed in ER-1 returns. The Tribunal reviewed several judicial precedents, including: - CCE vs. Chemphar Drugs & Liniments: Emphasized that extended period requires proof of positive action like fraud or willful suppression. - Cosmic Dye Chemical vs. CCE: Stressed that suppression or mis-statement must be willful with intent to evade duty. - Uniworth Textiles Ltd. vs. CCE: Clarified that mere non-payment of duties does not equate to willful suppression. - Continental Foundation Jt. Venture vs. CCE Chandigarh: Highlighted that omission to give correct information is not suppression unless deliberate. The Tribunal found that the Department had not proven any willful suppression or mis-statement by the appellant. The appellant's conduct was deemed transparent, and the extended period of limitation was not applicable. Conclusion: The Tribunal upheld the classification of the appellant's transactions under Rule 10A but set aside the demand for Central Excise duty due to the bar of limitation. The show cause notice was deemed legally unsustainable, and the appeal was allowed on the ground of limitation. The operative part of the order was pronounced in open court.
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