2019 (8) TMI 955 - AT - Central Excise

Demand of duty - Manufactured goods or supply of bought out items - Fitting and Points Crossings - case of respondents is that Fittings and PCs were not manufactured item but the same were various bought out and were transferred to the site, where the same were used for making the Fittings and PCs. HELD THAT - The main ground for dropping the demand by the Adjudicating Authority is that there are no goods called Fitting and Points Crossings. The same refer to the fabrications done in the rail tracks by various types of items, which facilitate the smooth movement of the rails. We note that subsequent to the demand order, the report of the Superintendent, Central Excise, Meerut, obtained by the adjudicating authority is to the clear effect that the respondents had purchased the various items like Flats, Bars, Rounds, Squares, Shapes and Sections, Fish Plates, Sheets, Channels, Angles, Nuts and Bolts, Washers, Clips etc. of different shape and size during the period in question, which stands reflected in their books of accounts. As per the Assessee the said goods stand further transferred to railways under their delivery challans accompanying the invoices which refer to the said items collectively as fittings. Admittedly, duty cannot be demanded on the items not manufactured by the Assessee and in the absence of any facts indicating that Fittings as also Points Crossings are items or refer to any goods, mere mention of the same in the invoices, while clearing the various items collectively meant for such fittings etc, the demand cannot be upheld on the same. Further, the Revenue s objection that the Tribunal only remanded the matter for supply of the report of the Assistant Commissioner, in which case it was not open to the Adjudicating Authority to go to the merits of the case cannot be appreciated inasmuch as there is no debarring in the Tribunal s order to consider the merits of the case and to re-decide the same. It is only that on the first principle of violation of principles of natural justice that the matter was remanded. It cannot be held to be a restricted remand and we fully agree with the learned advocate appearing for the respondents that the Adjudicating Authority was within his rights to deal with the merits of the case after supplying the report of the Assistant Commissioner. As such the Revenue has no case on merits. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of duty liability for goods supplied to Railways.
2. Consideration of manufacturing process for duty imposition.
3. Applicability of limitation period for raising demands.

Issue 1: Interpretation of duty liability for goods supplied to Railways

The case involved a dispute regarding duty liability on items supplied to Railways by the respondent, who primarily manufactured Switch Expansion Joints. The Revenue contended that certain items, such as Fittings and Points & Crossings (PCs), were not being subjected to Central Excise duty by the respondent. The Commissioner had raised a demand of &8377; 2,73,66,512 for the period 2005-06 to 2008-09, which was confirmed in the Order-in-Original. However, the Tribunal, in an earlier order, observed that the respondent did not manufacture Fittings and PCs but purchased them from suppliers for use in railway track construction. The Tribunal remanded the matter, citing lack of supply of certain reports to the respondent, leading to the current proceedings.

Issue 2: Consideration of manufacturing process for duty imposition

In the subsequent remand proceedings, the Adjudicating Authority analyzed the nature of items supplied by the respondent, including SEJs, Fittings, and PCs. The Authority determined that the respondent engaged in processes like bending, cutting, and drilling of items but did not undertake manufacturing activities. It was noted that the Revenue failed to prove that the goods in question were manufactured items or specified in the Central Excise Tariff. The Adjudicating Authority also highlighted the absence of evidence supporting the demand and held it to be time-barred based on previous tribunal decisions. The Revenue challenged these findings, but the Tribunal upheld the Authority's decision, emphasizing the lack of evidence and the absence of manufacturing processes.

Issue 3: Applicability of limitation period for raising demands

The Revenue contested the dropping of the demand by the Adjudicating Authority, arguing that the respondent was aware of the excisability of goods based on their duty payments from October 2008 onwards. However, the Tribunal found the Revenue's arguments weak, noting that the earlier tribunal decision in favor of the respondent and the absence of evidence of mala fide intent to evade duty. The Tribunal held that the Revenue's knowledge of duty payments from 2008 undermined their case for raising demands in 2010, ultimately ruling that the demand was barred by limitation.

In conclusion, the Tribunal rejected the Revenue's appeal, finding no merit in their arguments regarding duty liability, manufacturing processes, and the limitation period for raising demands. The judgment emphasized the lack of evidence supporting duty imposition and the respondent's compliance with accounting practices, ultimately leading to the dismissal of the Revenue's appeal.