2022 (5) TMI 1302 - AT - Central Excise

Extended period of limitation - Debonding of an EOU - allegation of short-paid duty at the time of De-bonding - wrongful availment of duty concessions vide Central Excise Notification No. 23/2003-CE dated 31st March 2003 read with Para 6.8 of FTP - penalty - HELD THAT - The appellants have made complete declaration in respect of their finished goods as well WIP - Indigenous while making the request for de-bonding. These were examined and verified by the jurisdictional Central Excise Authorities while issuing the No Dues Certificate to the appellant. Even the figures stated in the declaration made by the appellant in their declaration, no dues certificate issued by the authorities do tally. Subsequent to issue of the no due certificate by the jurisdictional officer, the revenue could not have proceeded to issue the show cause notice dated 09.02.2016, by taking the same figures as declared by the appellant to the jurisdictional authorities as early as in 2013. These figures also are reflected in the no dues certificate issued by the jurisdictional authorities. On the basis of the No Dues Certificate issued by the concerned jurisdictional authorities, Development Commissioner has issued the Final Debonding Order. If it is the case of the revenue that No Dues Certificate was obtained by the appellant by taking recourse to suppression. misstatement, misdeclaration, fraud, connivance or in contravention of the provisions of the law, which would have led to invocation of extended period of limitation as provided for by Section 11 A of the Central excise Act, 1944, revenue ought to have informed the Development commissioner and requested for initiation of proceeding against the appellants in terms of Foreign Trade Development Act. There are no ingredients for invoking the extended period of limitation as per Section 11 A of Central Excise Act, 1944 to be present in this case. Since demand cannot be sustained on the issue of limitation we do not discuss the issue on the merits. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand of duty on Work-in-Progress (WIP) treated as finished goods.
2. Denial of concessional duty on finished goods at the time of de-bonding.
3. Invocation of extended period of limitation.
4. Imposition of interest and penalty.

Detailed Analysis:

1. Demand of Duty on WIP Treated as Finished Goods:
The Principal Commissioner confirmed a demand of Rs. 1,56,55,368/- for duty on WIP treated as finished goods. The appellant argued that WIP materials were not finished goods ready for sale, thus not subject to the same duty provisions. The Commissioner contended that the WIP goods, manufactured using both indigenous and imported raw materials, should be treated as finished goods for duty purposes. The appellant's classification of WIP as indigenous and imported was deemed incorrect, leading to a short levy of duty. The Tribunal noted that the appellant had made a full declaration of WIP and finished goods at the time of de-bonding, verified by the jurisdictional authorities, and a "No Dues Certificate" was issued. The Tribunal found that the extended period of limitation was not invocable as there was no suppression or misstatement by the appellant.

2. Denial of Concessional Duty on Finished Goods at the Time of De-bonding:
The appellant claimed entitlement to concessional duty under Notification No. 23/2003-CE for finished goods cleared at the time of de-bonding, arguing that they fulfilled the export obligations. The Commissioner denied this, stating that the benefits of concessional duty under Para 6.8 of FTP were not available to a de-bonding unit. The Tribunal observed that the appellant had paid the required duty on finished goods and obtained a "No Dues Certificate" from the authorities. The Tribunal found that the denial of concessional duty was not justified, as the appellant had complied with the necessary conditions.

3. Invocation of Extended Period of Limitation:
The Commissioner invoked the extended period of limitation under Section 11A (5) of the Central Excise Act, 1944, alleging suppression of facts by the appellant. The Tribunal noted that the appellant had made complete declarations and obtained a "No Dues Certificate" after due verification by the authorities. The Tribunal cited precedents where extended limitation was not applicable when a "No Dues Certificate" was issued after verification. The Tribunal concluded that the extended period of limitation was not invocable in this case.

4. Imposition of Interest and Penalty:
The Commissioner ordered the recovery of interest on the differential duty amount and imposed a penalty of Rs. 73,39,528/- under Rule 15(2) of the CCR, 2004, read with Section 11AC of the Central Excise Act, 1944. The Tribunal found that the imposition of interest and penalty was not justified as the demand itself was not sustainable due to the non-invocation of the extended period of limitation. The Tribunal emphasized that the appellant had not suppressed any material facts and had acted in good faith based on the "No Dues Certificate" issued by the authorities.

Conclusion:
The appeal was allowed, and the demand of Rs. 1,56,55,368/-, along with interest and penalty, was set aside. The Tribunal found that the extended period of limitation was not applicable, and the appellant had complied with all necessary conditions for de-bonding. The Tribunal emphasized the importance of the "No Dues Certificate" issued by the jurisdictional authorities, which precluded the invocation of extended limitation and subsequent demands.

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