2010 (2) TMI 412 - HC - Central Excise

Demand Limitation - Whether conversion of pipe/tube of oxygen lancing pipe amounts to manufacture within the meaning of Section 2 (f) of the Central Excise Act, 1944? Whether the Extended period of limitation can be invoked in respect of the period of 07.07.1992 to March 1994 when a doubt has been entertained with regard to the exigibility of lancing oxygen pipes? Held that assessee s plea about their doubt was acceptable. It cannot be said that there was fraud or suppression of facts or willful mis-statement for invoking extended . It cannot be said that there was fraud or suppression of facts or willful mis-statement for invoking extended period of limitation, moreover as it was not department s case that assessee had not paid duty on account of fraud, suppression of facts or willful mis-statement of facts.

Summary

Issues Involved:
1. Extended period of limitation under Section 11A of the Central Excise Act.
2. Whether conversion of pipe/tube into oxygen lancing pipe amounts to 'manufacture' under Section 2(f) of the Central Excise Act, 1944.

Detailed Analysis:

1. Extended Period of Limitation:
The primary issue was whether the extended period of limitation could be invoked for the period from 07.07.1992 to March 1994. The appellant argued that there was a genuine doubt regarding the duty liability on oxygen lancing pipes, which was supported by an internal communication dated 02.01.1995 from the Assistant Collector (Technical) expressing uncertainty about the duty liability and contemplating a reference to the Board for clarification. The appellant also pointed to a Circular dated 27.03.1996 from the Central Board of Excise & Customs, which clarified that the conversion of steel pipes/tubes into oxygen lancing pipes amounts to "manufacture."

The court noted that as per Section 11A of the Central Excise Act, the normal period for raising a demand is six months, but this can be extended to five years in cases involving fraud, collusion, or willful misstatement. The appellant contended that the presence of doubt about the duty liability negated any inference of fraud or willful misstatement. The court agreed, referencing the Supreme Court's decision in Padmini Products vs. Collector of Central Excise, which held that mere inaction or failure to pay duty does not constitute fraud or suppression of facts unless there is a positive act of concealment.

The court concluded that the extended period of limitation was wrongly invoked because there was genuine doubt about the duty liability on oxygen lancing pipes. Therefore, the first question was answered in favor of the appellant, and the extended period of limitation could not be applied.

2. Manufacture Definition:
Given that the appellant succeeded on the first issue, the court found it unnecessary to address the second issue regarding whether the conversion of pipe/tube into oxygen lancing pipe amounts to 'manufacture' under Section 2(f) of the Central Excise Act, 1944.

Conclusion:
The appeal was allowed, and the orders dated 13.08.2008 and 05.12.2008 were quashed. The court held that the extended period of limitation could not be invoked due to the genuine doubt about the duty liability on oxygen lancing pipes, thus ruling in favor of the appellant.