2009 (5) TMI 144 - AT - Central Excise

Demand is for the period from January 2002 to March 2003. The show cause notice raising this demand was issued on 29-11-2005. - for the recovery of any amount from the manufacturer in terms of Rule 6(3)(b) the procedure laid down under Rule 11A should mutatis mutandis be followed. Where the amount to be recovered is for a period beyond the normal period of limitation it is necessary that the ingredients for invoking the longer period of limitation under Section 11A should be alleged in the show-cause notice and established by the Revenue. The show-cause notice in question does not mention any of these ingredients (collusion fraud wilful misstatement of facts wilful suppression of facts etc.) Held that demand is time barred

Summary

Issues:
1. Challenge against demand under Rule 12 of CENVAT Credit Rules, 2002.
2. Applicability of Notification No. 83/94-C.E. for clearance of goods.
3. Use of common inputs in manufacturing goods.
4. Invocation of Rule 6(3)(b) and Rule 12 for recovery and penalty.
5. Challenge on the ground of limitation under Section 11A of the Central Excise Act, 1944.

Analysis:

1. The appeal challenges the demand of Rs. 3,46,606/- under Rule 12 of the CENVAT Credit Rules, 2002. The lower appellate authority held the assessee liable to pay 8% of the price of goods cleared without duty payment. This demand was for the period from January 2002 to March 2003. The show cause notice was issued on 29-11-2005. The original authority dropped the demand, but the appellate authority upheld it, citing the use of common inputs and lack of separate accounts for dutiable and job worked goods. Rule 6(3)(b) and Rule 12 were invoked for recovery and penalty, leading to the impugned demand in this appeal.

2. The appellant challenged the demand on the ground of limitation under Section 11A of the Central Excise Act, 1944. The show cause notice was issued beyond the normal period of limitation without alleging necessary elements for invoking the extended period. The Assistant Commissioner considered the amount as 'duty of excise,' incorrectly invoking Section 11A. However, the demand was recoverable under Rule 6(3)(b) and Rule 12, subject to the procedure under Section 11A. The show cause notice failed to mention ingredients like collusion or fraud required for invoking the extended period of limitation, as highlighted in case law.

3. The judgment emphasized that for recovery beyond the normal limitation period, the department must allege fraud or collusion in the show cause notice, as established by the Revenue. The absence of such allegations renders the demand time-barred. Citing precedent, the judgment clarified that invoking the extended limitation period necessitates specific allegations in the notice. As the show cause notice lacked these essential elements, the demand was held to be time-barred, resulting in the appeal being allowed on this ground.

This detailed analysis outlines the issues raised in the judgment, including the challenge against the demand under specific rules, the application of relevant notifications, the use of common inputs, and the crucial aspect of challenging the demand based on the ground of limitation under the Central Excise Act, 1944.