2020 (6) TMI 355 - AT - Central Excise

Extended period of Limitation - suppression of facts or not - SCN based on change of opinion of Department - As the appellant was required to manufacture finished goods for supply to Railways out of scrap supplied by Railways, it appeared to Revenue that the inputs (copper rod) were never used in the manufacture of final product and the credit have been taken on the basis of documents only without receipt of inputs - HELD THAT - The appellant have maintained proper books of accounts and records of their transactions. Admittedly, the whole demand is for the extended period of limitation. The Revenue has only made a bald allegation of suppression of facts, alleging the non disclosure of actual sale value of the scrap received from the Railways. There is no obligation cast on the appellant to intimate the Department on each and every transaction. The appellant have filed regular returns with the Department and have maintained proper records. Further, the appellant have obtained statement of cost of production‟ duly certified by the Cost Accountant, who have considered various elements of cost like raw material, salary and wages, direct expenses and work overheads, quality control cost, administrative overheads, packing cost etc. as required under the Central Excise Valuation Rules read with CAS-4 guidelines (Cost Accounting Standards) as adopted by the Government of India for Central Excise purposes. The elements of suppression, mis-statement, fraud, etc. are not coming out from the facts and circumstances. The show cause notice is only based on change of opinion of Department - the extended period of limitation is not attracted and thus the show cause notice is not maintainable. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Valuation of goods manufactured and supplied under job work arrangement for Indian Railways; Allegations of suppression of facts and non-disclosure of actual sale value of scrap received from Railways; Demand of Central Excise duty short paid and penalty imposed under Section 11AC of the Act; Interpretation of Section 11AC in relation to intent to evade payment of duty.

Valuation of goods for Indian Railways:
The appellant, engaged in manufacturing dutiable goods for Indian Railways, utilized raw materials supplied by Railways for production. The Revenue contended that the assessable value should consider the market sale price of copper scrap instead of the price mentioned in the purchase order for Bank Guarantee. Rulings of the Supreme Court were cited to support the valuation method for goods manufactured on a job work basis. The appellant was alleged to have short paid Central Excise duty due to undervaluation of finished goods. The dispute centered on the correct valuation method as per the Central Excise Act and relevant Valuation Rules.

Allegations of suppression of facts:
The Revenue accused the appellant of suppressing facts by not disclosing the actual sale value of scrap received from Railways and clandestinely clearing the same. Extended period of limitation was invoked, and penalties were proposed under Section 11AC of the Act. The appellant defended, arguing that there was no suppression as they maintained proper records, filed returns, and obtained cost certificates from a Cost Accountant. The issue revolved around whether there was intentional suppression or mere change of opinion by the Department.

Demand of Central Excise duty and penalties:
A show cause notice was issued, demanding Central Excise duty for the alleged short payment during a specific period. The appellant contested the liability, emphasizing the utilization of copper rods received from manufacturers for production. The adjudicating authority confirmed the duty demand and imposed penalties under Section 11AC. The appellant challenged the order, citing interpretational issues and reliance on the Cost Accountant's certificate for cost calculation.

Interpretation of Section 11AC:
The appellant argued that the demand and penalties were not justified as there was no suppression of facts and the issue was interpretational. They highlighted the requirement of intent to evade duty for invoking penalties under Section 11AC. The appellant relied on a Supreme Court ruling to support their stance that mere change of opinion or different possible interpretations do not constitute suppression. The case hinged on the correct interpretation of Section 11AC and the presence of intentional evasion in the appellant's actions.

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