2009 (5) TMI 186 - AT - Central Excise

Demand limitation - we find that the assessees had filed declaration in terms of sub-rule (3A) of Rule 173C regarding their market pattern. They had also filed worksheets showing item wise details of dispatch, value, forwarding charges and differential duty along with RT-12 Returns filed every month. In the worksheet, they had; indicated quantity sent for conversion and the rate adopted. Thus it is clear that the department was aware that the assessees were sending cotton yarn to job worker for conversion and selling hosiery fabrics at a particular value. Hence all the relevant information was available with the department. If the department was of the view that the value adopted by the assessees for clearances to job worker was much lesser than the value adopted for sales made from depot to other customers, show-cause notice alleging undervaluation and proposing to recover differential duty should have been issued within the normal period of limitation. We, therefore, agree with the finding in the impugned order that the extended period of limitation is not available to the department and that the demand is time barred.

Summary

Issues:
1. Undervaluation of goods leading to differential duty demand.
2. Application of the extended period of limitation.
3. Compliance with declaration requirements under Rule 173C of Central Excise Rules, 1944.

Undervaluation of Goods and Differential Duty Demand:
The case involved the respondents, engaged in cotton yarn manufacturing, who cleared their production on a stock transfer basis to a depot and consignment agents, with final sales from the depot. Discrepancy arose as the value adopted for clearances to job workers was lower than sales to other customers. A show-cause notice proposed recovery of differential duty and penalty. The Additional Commissioner upheld the demand and penalty, which was partially modified by the Commissioner (Appeals). The department alleged suppression due to non-filing of a declaration under Rule 173C. However, the respondents had submitted declarations regarding their market pattern and provided detailed worksheets with monthly returns, indicating the quantity sent for conversion and rates adopted. The Tribunal noted that all relevant information was available to the department, and if there was an issue with valuation, a show-cause notice should have been issued within the normal limitation period. Consequently, the Tribunal upheld the decision that the demand for the period before a certain date was time-barred, rejecting the appeal by the Revenue.

Application of the Extended Period of Limitation:
The department contended that the extended period of limitation should apply due to alleged suppression by the assessees. However, the Tribunal found that the assessees had complied with the requirements by filing declarations and providing detailed information in their worksheets and returns. As the department had access to all relevant data regarding the transactions, including values and quantities, the Tribunal concluded that the extended period of limitation was not applicable in this case. Therefore, the demand for the period prior to a specific date was deemed time-barred, leading to the rejection of the appeal by the Revenue.

Compliance with Declaration Requirements under Rule 173C:
The issue of compliance with declaration requirements under Rule 173C was raised by the department, alleging suppression by the assessees. However, the Tribunal observed that the assessees had indeed filed declarations regarding their market pattern and provided detailed worksheets and monthly returns, clearly outlining the quantity sent for conversion and the rates adopted. This ensured that all relevant information was available to the department, indicating no intentional suppression by the assessees. Consequently, the Tribunal upheld the decision that the demand for a specific period was time-barred, thereby rejecting the appeal by the Revenue.

In conclusion, the Tribunal's judgment focused on the lack of grounds for the application of the extended period of limitation due to the assessees' compliance with declaration requirements and provision of detailed information, ultimately leading to the rejection of the Revenue's appeal.