2009 (5) TMI 402 - AT - Central Excise

Demand- Limitation- Appeal is filed by the appellant M/s. Alumeco India Extrusion Ltd. (herein after referred to as appellant No. 1) and Appeal No. 251/2008 is filed by M/s. Aquamall Water Solutions Ltd. (herein after referred to as appellant No. 2). The relevant facts that arise for consideration are appellant No. (1) herein is a manufacturer of aluminium extrusions, also known as profiles, and are registered with the Central Excise authorities. Appellant No. (1) apart from manufacture such profiles on their own account, also undertakes to manufacture such profiles/extrusions on job work basis. Appellant No. (2) herein is a manufacturer of water filters/purifiers and parts thereof, and has manufacturing unit all over India. Appellant No. (2) was procuring aluminium ingots on payment of duty and after availing Cenvat credit was sending the same to appellant No. (1) for job-work, manufacture of aluminum extrusions. For the said activity appellant No. (1) was paid agreed conversion charges. The raw materials/inputs were sent to appellant No. (1) by following the procedures provided under Notification No. 214/86-C.E., dated 25-3-1986. On the basis of the investigations conducted, it was noticed by the lower authorities that appellant No. (1) was evading the Central Excise duty, hence the show cause notice was issued to appellant No. (1) and (2). The appellants submit that when they have disclosed the relevant facts to the department at the appropriate time, longer period of limitation cannot be invoked under the proviso to Section 11A of the Central Excise Act, 1944. Held that- We find that the question of limitation will also need to be considered in this case. The Adjudicating Authority has decided the issue of limitation only on the ground that the appellant No. (1) has not informed the Revenue Authorities as regards the manufacturing and clearing of the goods from the factory premises in their returns. It is also held that the appellant No. (1) has not made true declarations and also given the false declaration.

Summary

Issues Involved:
1. Whether the aluminium extrusions/profiles manufactured by appellant No. 1 are marketable and therefore excisable.
2. Whether the demand for duty is time-barred.
3. Whether the penalties imposed on appellant No. 1 and appellant No. 2 are justified.

Detailed Analysis:

1. Marketability and Excisability of Aluminium Extrusions/Profiles:

The core issue revolves around whether the aluminium extrusions/profiles manufactured by appellant No. 1 on a job-work basis for appellant No. 2 are marketable and thus subject to excise duty. The Adjudicating Authority concluded that these products are excisable because they are specified in the First Schedule to the Central Excise Tariff Act, 1985, under Chapter Heading No. 7604. The Authority further reasoned that the definition of "manufacture" under Section 2(f) of the Central Excise Act, 1944, includes any process that results in a new article, distinct from the original raw material.

However, the Tribunal found that the Adjudicating Authority misdirected itself by not considering the marketability of the product in the condition in which it was removed. The Tribunal emphasized that marketability is an essential ingredient for a product to be excisable, as established in several Supreme Court decisions, including Moti Laminates Pvt. Ltd. v. CCE and Hyderabad Industries Ltd. v. Union of India. The Tribunal noted that the burden of proving marketability lies on the Revenue, which failed to provide evidence that the aluminium extrusions/profiles were marketable in the condition they were removed from appellant No. 1's factory.

2. Time-Barred Demand:

Appellant No. 1 argued that the demand for duty is time-barred, as all relevant records were maintained and available for inspection, and there was no suppression of facts. The Tribunal agreed, noting that appellant No. 2 had filed a declaration with the authorities on 22-1-2004, informing them about the job-work arrangement and the exemption claimed under Notification No. 214/86. This declaration was also sent to the Superintendent in charge of appellant No. 1's factory. The Tribunal found that the Revenue had ample opportunity to verify the details but failed to do so. Consequently, the extended period of limitation under Section 11A of the Central Excise Act, 1944, could not be invoked.

3. Penalties on Appellant No. 1 and Appellant No. 2:

The Adjudicating Authority imposed penalties on both appellants under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2002. The Tribunal found that since the demand itself is not sustainable on both merits and limitation, the penalties could not be justified. The Tribunal referenced the decision in Cipla Ltd. v. CCE, Bangalore, which emphasized that marketability is a prerequisite for excisability, and the burden of proof lies on the Revenue. Without evidence of marketability, the imposition of penalties was deemed unwarranted.

Conclusion:

The Tribunal set aside the impugned order, ruling that the aluminium extrusions/profiles were not proven to be marketable and thus not excisable. Additionally, the demand for duty was found to be time-barred due to the lack of suppression of facts. Consequently, the penalties imposed on both appellants were also set aside. The appeals were allowed with consequential relief.