2012 (11) TMI 873 - AT - Central Excise

Invocation of Extended Period of Limitation - Penalty - Suppression of Facts - held that - It cannot be gainsaid that the classification of the goods was a vital fact to be disclosed by the assessee to the department in the context of claiming the benefit of exemption under Sl. No. 31 of Notification No. 6/2006-CE ibid. The Superintendent s letter dated 27.10.2006 clearly acknowledged the fact that the appellant cleared the power cords to M/s XL Telecom Ltd. at nil rate of duty on the basis of Annexure-45 issued by the said company. A copy of Annexure-45 had been supplied by the assessee to their Range officer in June 2006 which described the goods as parts, components and accessories of mobile handsets including cellular phones fixed wireless phones and specified the item as power cord. This shows that the fact that the appellant had cleared power cords as parts/components/accessories of mobile handsets/cellular phone/fixed wireless telephone to M/s XL Telecom Ltd. during June to October 2006 claiming nil rate of duty under Notification No. 6/2006-CE dated 1.3.2006 (Sl. No. 31) was very much disclosed by the assessee to the department as early as in June 2006 and this fact was clearly acknowledged by their Range officer in his letter dated 27.10.2006. The relevant monthly returns also described the goods as power cords in the relevant column. There was no justification for the department to allege in the show-cause notice dated 5.2.2010 that the appellant had suppressed that fact with intent to evade payment of duty. In other words, the extended period of limitation was not reasonably or justifiably invoked in this case. The plea of limitation succeeds, and so is the plea against the penalty imposed under Section 11AC of the Act - Demand of duty is set aside on the ground of limitation and penalty imposed under Section 11AC of the Central Excise Act is also set aside - appeal is allowed.

Issues Involved:
1. Demand of duty on goods cleared.
2. Demand of interest on duty.
3. Imposition of penalty under Section 11AC of the Central Excise Act.
4. Invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act.

Detailed Analysis:

1. Demand of Duty on Goods Cleared:
The appellant challenged the demand of duty amounting to Rs. 4,46,248/- for goods cleared to M/s XL Telecom Ltd. from June to October 2006. The demand arose from the denial of the benefit of Notification No. 6/2006-CE dated 1.3.2006 (Sl. No. 31). The appellant had cleared Power Cords without payment of duty to M/s XL Telecom Ltd., claiming exemption under the said notification. However, the jurisdictional Superintendent of Central Excise found that separate accounts were not maintained for inputs used in the manufacture of dutiable and exempted goods, leading to the demand under Rule 6(3)(b) of the CENVAT Credit Rules, 2004. The Assistant Commissioner later issued a show-cause notice demanding duty and proposing penalties.

2. Demand of Interest on Duty:
The Assistant Commissioner confirmed the demand of interest on the duty amount under Section 11AB of the Central Excise Act. The interest amount of Rs. 18,545/- paid by the appellant was appropriated towards the interest confirmed. The appellant contested this, arguing that they had disclosed all material facts to the department, and thus, the demand for interest was unjustified.

3. Imposition of Penalty under Section 11AC:
The Assistant Commissioner imposed a penalty equal to the duty confirmed under Section 11AC of the Central Excise Act. The appellant argued that they did not suppress any material facts with intent to evade duty and that the penalty was wrongly imposed. The Commissioner (Appeals) upheld the penalty, but the appellant continued to challenge it on the grounds that all relevant information had been disclosed to the department.

4. Invocation of the Extended Period of Limitation:
The appellant contested the invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act. They argued that they had disclosed all material facts, including the classification of goods and the basis for claiming exemption, to the department as early as June 2006. The show-cause notice alleging suppression of facts was issued only on 5.2.2010, which the appellant claimed was unjustified.

Judgment:
The Tribunal found that the appellant had indeed disclosed all relevant information, including the classification of the goods and the basis for claiming exemption, to the department in June 2006. The Superintendent's letter dated 27.10.2006 acknowledged the clearance of Power Cords at nil rate of duty based on Annexure-45 issued by M/s XL Telecom Ltd. The relevant monthly returns also described the goods and mentioned the applicable notification and its serial number.

The Tribunal concluded that there was no justification for alleging suppression of facts with intent to evade duty. Consequently, the extended period of limitation was not reasonably invoked. The demand of duty was set aside on the ground of limitation, and the penalty imposed under Section 11AC was also set aside. The appeal was allowed in terms of these findings.

Order:
(a) The demand of duty is set aside on the ground of limitation.
(b) The penalty imposed under Section 11AC of the Central Excise Act is also set aside.
(c) The appeal is allowed in terms of (a) and (b) above.

(Pronounced and dictated in open court)

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