2009 (8) TMI 482 - AT - Central Excise

Demand-Limitation- Notification No. 09/2001- appellant is engaged in the manufacture of various products like Tooth Paste, Shaving Cream, Medicaments and other Cosmetic items. During the period Jan 2001 to March 2002, the appellant was availing the benefit of small scale Notification No. 09/2001. during the investigations it was found that since the tooth paste carrying the brand name of Fresh Moments was under the contract with M/s. Modicare Limited, who were the owner of the said brand name, the benefit of Notification was not available to them. Accordingly, proceedings were initiated by way of issuance of show cause notice, which culminated into the impugned order passed by Original Adjudicating Authority confirming the duty demand along with confirmation of interest and imposition of penalty of identical amount. Appeal against the above order did not succeed before the Commissioner (Appeals). Held that- if appellants would have cleared such branded products on full payment of duty instead of availing concessional rate of duty, they would have entitled to more clearances of their own products at concessional rates, which they had cleared on full rate of duty after crossing the exemption limit of Rs.one crore. As such, we agree with the appellants that by adopting such route they have ended up paying more duty than what was required to be paid. This fact also lends credence to their submissions that there could be no mala fide on their part inasmuch as, they had crossed the limit of Rs.one crore and had cleared their goods on payment of full rate. Thus, we find no merits in the impugned order confirming the demand of duty, imposing penalty and the same is required to be set aside. Both the appeals are allowed with consequential relief to the appellants.

Summary

Issues:
1. Barred by limitation - Duty demand raised for the period Jan 2001 to Mar 2002.
2. Availment of concessional rate of duty.

Analysis:

Issue 1: Barred by limitation - Duty demand raised for the period Jan 2001 to Mar 2002
The appellant contended that the demand raised on 18-2-2004 for the mentioned period was time-barred as they had intimated the Revenue about manufacturing toothpaste under the brand name 'Fresh Moments' at the time of filing the classification declaration. They argued that the use of the term 'contract basis' in their communication indicated that the goods were not manufactured by them but under contract for another person. The Tribunal agreed with the appellant, stating that the disclosure in the letter, though not explicit, indicated that the goods were manufactured under a contract and the brand name 'Fresh Moments' belonged to the contracting party. The Tribunal emphasized that any doubts should have been clarified by the Revenue, and the appellant could not be accused of suppression or misstatement to evade duty payment. Consequently, the Tribunal found no malafide intention on the part of the appellant to justify invoking an extended period of limitation.

Issue 2: Availment of concessional rate of duty
The appellant argued that they had initially availed the concessional rate of duty under the small-scale exemption notification until reaching the clearance value of Rs. one crore, after which they paid the full duty rate for their products and 'Fresh Moments' toothpaste. They contended that if the duty on 'Fresh Moments' toothpaste had to be confirmed now, the clearance value of the same should not be included in the total clearance value of Rs. one crore. They presented a chart indicating that they would be entitled to a refund of excess duty paid if the duty on 'Fresh Moments' toothpaste was considered separately. However, the lower authorities rejected this argument, citing that the excess duty could be claimed as a refund and referring to a Supreme Court judgment prohibiting simultaneous benefit of modvat credit and exemption. The Tribunal disagreed with the lower authorities, stating that the appellant would have been entitled to more clearances at concessional rates if they had paid full duty for the branded products initially. The Tribunal found merit in the appellant's argument and set aside the impugned order, allowing both appeals with consequential relief to the appellants.