2012 (10) TMI 729 - AT - Central Excise

Whether exemption for captive consumption under Notification No. 67/95-C.E., is available to ingots cleared by the assessees but used in the manufacture of final products viz. CTD bars after opting out for compounded levy scheme Held that - Demand raised in the show-cause notice dated 22-3-2001 on ingots cleared on 31-8-1997 is barred by limitation for the reason that it was the practice of the assessees to raise an invoice for captive consumption of a large quantity of ingots and debiting the same in the RG 1 Register and used in the manufacture of final products not on the same date of their issue but on subsequent dates, and although the factory was not equipped to manufacture final products using such large quantity of ingots, no objection was raised to the issue of large quantity of ingots right from the commencement of the factory in 1995. Undisputedly, the assessee was manufacturing MS Ingots in the Induction Furnace Unit and other products in the Roll Mill Area . There is no indication about actual date of removal from the bonded store room if any of the Induction Furnace Unit . The assessees have also produced evidence to show that on earlier occasions also they were issuing more than or equal to 200 MTs on a single date. Their claim that when they issued the goods for captive consumption on 31-8-1997, they were under a bona fide belief that they were entitled to the benefit of exemption merits acceptance. - demand is barred by limitation in favor of assessee

Summary

Issues Involved:
1. Availability of exemption for captive consumption under Notification No. 67/95-C.E., dated 16-3-1995.
2. Whether the demand raised in the show-cause notice dated 22-3-2001 is barred by limitation.
3. Interpretation of the date of removal and its implications on duty liability.
4. Application of the extended period of limitation.

Detailed Analysis:

1. Availability of Exemption for Captive Consumption:
The core issue in dispute is whether the exemption for captive consumption under Notification No. 67/95-C.E., dated 16-3-1995, is available to 291.3 MTs of ingots cleared by the assessees on 31-8-1997 but used in the manufacture of final products, viz., CTD bars, after opting out of the compounded levy scheme from 1-9-1997. The initial ruling held that the demand raised in the show-cause notice dated 22-3-2001 was barred by limitation. The assessees had a practice of raising an invoice for captive consumption of a large quantity of ingots and debiting the same in the RG 1 Register, using them in the manufacture of final products on subsequent dates. This practice was not objected to since the factory's commencement in 1995. Therefore, the demand was held to be barred by limitation, and the appeal was rejected without recording any finding on the merits of the issue.

2. Barred by Limitation:
The Vice-President held that the demand raised in the show-cause notice dated 22-3-2001 was barred by limitation. The assessees had a consistent practice of issuing large quantities of ingots for captive consumption, which was known to the department. Therefore, the demand was considered time-barred, and the appeal was rejected.

3. Date of Removal and Duty Liability:
The Technical Member disagreed with the Vice-President's order, arguing that the lower appellate authority's decision was based on incorrect findings. The department's evidence showed that the impugned goods were cleared on 1-9-1997, 2-9-1997, and 3-9-1997, not on 31-8-1997. Therefore, the conclusion that the goods cleared on 31-8-1997 were eligible for duty exemption under Notification No. 67/95 was erroneous. The goods were subject to duty under Notification No. 50/97, which prescribed a duty rate of Rs. 600/- per MT for ingots manufactured before 1-9-1997 but cleared on or after that date. The exemption for captive consumption under Notification No. 67/95 became inapplicable for ingots cleared on or after 1-9-1997, as the final products were subjected to compounded levy.

4. Extended Period of Limitation:
The Technical Member held that the extended period of limitation was applicable. The respondents had knowledge of the change in the scheme of levy of excise duty at least one month in advance. The entry made in the RG-1 Register on 31-8-1997 was not accurate, as 216 MTs out of the 291.13 MTs were actually cleared on 1-9-1997, 2-9-1997, and 3-9-1997. The erroneous entry and non-payment of duty at the special rate indicated an intention to evade payment of duty. Therefore, the extended period of limitation of five years was applicable, and the demand was within the limitation period.

Majority Decision:
The matter was referred to a third member due to the difference of opinion. The third member concurred with the Vice-President's opinion that the demand was barred by limitation. The final decision, by majority order, rejected the Revenue's appeal and upheld that the demand raised in the show-cause notice dated 22-3-2001 was time-barred.

Conclusion:
The appeal of the Revenue was rejected, and the demand raised in the show-cause notice dated 22-3-2001 was held to be barred by limitation. The exemption for captive consumption under Notification No. 67/95 was deemed applicable, and the extended period of limitation was not invoked. The cross-objection filed by the respondents was dismissed.