2004 (1) TMI 145 - AT - Central Excise

Demand - Invocability of the extended period of limitation for demanding Central Excise duty - HELD THAT - In the present matter, the show cause notice has been issued on 31-3-1994 for demanding duty on crushed stones from the period 1989 to 1994. Firstly, we do not find substance in the contention of the learned Advocate that the show cause notice did not mention that there was an intent to evade payment of duty in view of the fact that it is specifically mentioned in para 2(iii) of the show cause notice that duty is being demanded by invoking the extended period of limitation as they had manufactured the impugned goods without obtaining Central Excise licence/registration and cleared the same without payment of duty and without observing other procedure which amounted to suppression of facts. But the question remains as to whether there was suppression of facts on the part of the appellants with an intent to evade payment of duty. It has been held by the Supreme Court in Cosmic Dye Chemical v. C.C.E., 1994 (9) TMI 86 - SUPREME COURT that it is not correct to say that there can be suppression or misstatement of fact which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful. The Supreme Court considered the aspect of invocability of proviso to Section 11A in similar facts in the case of Jaiprakash Industries Ltd., 2002 (11) TMI 92 - SUPREME COURT wherein also the appellants were engaged in construction activities and as part of their business they crushed boulders into bajri which is then used in the construction work. They did not consider the activities of crushing boulders into bajri to be a manufacturing activity. The Appellate Tribunal also, in the case of Hindustan Construction Co. 1996 (9) TMI 156 - CEGAT, COURT NO. II, NEW DELHI , while upholding the excisability of crushed stones under Heading 25.05, did not uphold the invocation of extended period of limitation as the issue cannot be said to have been free from doubt. In Larsen Toubro case 1999 (9) TMI 268 - CEGAT, NEW DELHI , the Tribunal set aside the demand for the period beyond six months. Thus, we hold that the larger period of limitation for demanding duty cannot be invoked as there is nothing to suggest that the appellants had not taken the Central Excise Licence/Registration or did not pay the duty on the impugned goods on account of any wilful suppression of facts. We, therefore, allow the appeal on the basis of demand being time-barred without considering any other issue.

Summary

Issues involved:
The issues involved in the judgment include the invocability of the extended period of limitation for demanding Central Excise duty, the question of whether the activity of crushing stones amounts to 'manufacture' under Section 2(f) of the Central Excise Act, and the applicability of penalty under specific circumstances.

Extended Period of Limitation Issue:
The appeal was filed against an Order-in-Original for demanding Central Excise duty on manufactured goods. The appellant argued that the extended period of limitation was not applicable due to lack of intent to evade payment of duty. Citing relevant case law, the appellant contended that mere failure to pay duty without fraud or suppression of facts does not warrant the extended period. The Tribunal agreed, emphasizing the need for evidence of wilful intent to evade duty for the extended period to apply. The Tribunal found that the demand for duty was time-barred as there was no evidence of wilful suppression of facts by the appellants.

Manufacture of Crushed Stones Issue:
The Commissioner did not address whether the activity of crushing stones into smaller pieces constituted 'manufacture' under the Central Excise Act. The appellant argued that the Commissioner failed to prove the dutiability of the goods and did not consider the issue of excisability as directed by the Tribunal. Citing precedent, the appellant contended that crushing stones into smaller pieces may not amount to manufacture. The Tribunal held that the Commissioner's failure to address the manufacturing aspect and the excisability of the goods rendered the decision unsustainable in law.

Penalty Applicability Issue:
The Commissioner imposed penalties on the appellants without fully adjudicating the matter as directed by the Tribunal. The appellant argued that the Commissioner's decision to retain the penalty amount without addressing all aspects of the case was incorrect. Citing relevant case law, the appellant contended that penalties should be imposed only after establishing the manufacture of dutiable goods. The Tribunal agreed with the appellant, holding that the Commissioner failed to discharge the burden of proving the dutiability of the goods and the imposition of penalties.

This judgment highlights the importance of proving wilful intent to evade duty for the invocation of the extended period of limitation, the necessity of addressing all aspects of a case as directed by the Tribunal, and the requirement to establish the dutiability of goods before imposing penalties.