2004 (8) TMI 259 - AT - Central Excise

Demand - Limitation - Cenvat/Modvat - HELD THAT - In my considered opinion, the provisions of Section 11AC for imposition of penalty and the provision of Section 11AB for demanding duty are not applicable to the facts of this case. Further, the inputs were still lying in the factory when the show cause notice for demanding duty was issued to them, though the components were written off in the books of account. In such a situation, credit cannot be denied on the presumption that input cannot be used when there was no time limit for consumption. In this connection, I respectfully follow the judgment rendered by the Bangalore Bench in the matter of Bharat Heavy Electricals Ltd. 2002 (2) TMI 1322 - CESTAT BANGALORE . I do not find any evidence whatsoever that there was suppression of facts and therefore, I have no hesitation in concluding that no penalty can be imposed u/s 11AC and no interest can be demanded u/s 11AB ibid. I, therefore, respectfully following the above said judgments of this Tribunal, allow their appeal and set aside the impugned order demanding penalty u/s 11AC and demanding interest u/s 11AB.

Summary

Issues involved: Challenge against invocation of Sections 11AC and 11AB of the Central Excise Act, 1944.

The appellant challenged the invocation of Sections 11AC and 11AB of the Central Excise Act, 1944, in response to an Order-in-Appeal confirming a duty demand. The appellant did not contest the duty demand itself but disputed the application of the aforementioned provisions.

The appellant's submission highlighted that the components in question were written down in the books of account and were cleared after being deemed obsolete. They had applied for remission of duty on these components, which were received under Chapter X procedure, but no action was taken by the jurisdictional Commissioner. The appellant argued that since the balance sheet information was publicly available, the allegation of suppression was not sustainable, and thus, the extended period under Section 11A(1) should not be invoked.

The learned Counsel referred to relevant judgments, including one by CEGAT, Northern Bench, New Delhi, and another by the Bangalore Bench of the Tribunal, to support the argument that if demand is based on information in the balance sheet, the extended period of limitation cannot be invoked. Additionally, it was emphasized that denial of Modvat credit on inputs still present in the factory, even if written off in the books, was not justified without a time limit for consumption.

The learned JDR contended that the appellant had not declared obsolete items to the department, which was revealed during scrutiny of the balance sheet. It was argued that the appellant had suppressed this fact from the department, warranting the rejection of the appeal and upholding of the impugned order.

After examining the records and submissions, the Member found that the appellant had applied for remission of duty and disposed of the obsolete components after a considerable waiting period. The Member relied on the judgment by the Northern Bench, Delhi, and the Bangalore Bench to conclude that the extended period could not be invoked due to the publicly available nature of the balance sheet information. It was further held that no penalty under Section 11AC and no interest under Section 11AB could be imposed, as there was no evidence of suppression of facts. Consequently, the appeal was allowed, and the impugned order demanding penalty and interest was set aside.