2012 (12) TMI 426 - AT - Central Excise

Demand of duty - Period of limitation - imposition of penalty on the appellant under Section 11AC alleged that assessee have been clearing zinc dross and ash without payment of duty, but the same has not been shown in the ER-I Returns of the respective months Held that - When the appellant had declared the clearances of zinc dross and ash in the monthly ER-6 returns regarding Cenvat credit taken and utilized they can not be accused of having suppressed the fact regarding manufacture and sale of zinc dross & ash from the department, even if the production and sale of zinc dross/ash was not mentioned in the ER-I Returns - extended period cannot be applied for the recovery of non-duty paid and only the normal period of limitation would be applicable - penalty under Section 11AC since the criteria for invoking extended period under proviso to Section 11A(1) is identical to the criteria for imposition of equal penalty under Section 11AC and since extended period is not applicable, there would be no justification for imposition of penalty on the appellant under Section 11AC - duty demand would survive only for the normal limitation period.

Issues:
Interpretation of provisions of Central Excise Act, 1944 regarding marketability of zinc dross and ash, applicability of duty, interest, and penalty under Sections 11A(1), 11AB, 11AC, and Rule 26 of the Central Excise Rules, 2002.

Analysis:
1. The Appellant, engaged in manufacturing Galvanised Transmission Line Towers, faced a dispute regarding the classification of zinc dross and ash generated during the galvanization process. The Department argued that since the material was regularly sold by the Appellant, it was deemed marketable and, therefore, excisable under the Central Excise Tariff Act.

2. Show cause notices were issued for recovery of non-paid duty, interest, and penalty. The Adjudicating Authority confirmed the duty demands, imposed penalties, and dropped proceedings against an individual. Appeals to the Commissioner of Central Excise (Appeals) were dismissed, leading to the filing of further appeals.

3. The main contention revolved around the interpretation of marketability under the Central Excise Act. The Appellant argued that despite being covered by the Tariff, zinc dross and ash were not marketable as per Supreme Court precedents. The Department, however, relied on the legal fiction created by an explanation added to Section 2(d) post-amendment, deeming any material capable of being sold as marketable.

4. The Tribunal analyzed the criteria for marketability pre and post-amendment to Section 2(d). While acknowledging the Appellant's sales of zinc dross and ash, the Tribunal considered the legal fiction introduced by the amendment. It cited a High Court ruling that upheld the marketability of similar materials, concluding that the goods in question were indeed marketable and excisable.

5. Additionally, the Tribunal noted that international trade catalogues and e-commerce platforms listing zinc dross and ash prices supported the marketability argument. It also addressed the issue of limitation and penalty imposition, ruling that the extended period could not be applied due to the Appellant's disclosure in ER-6 Returns, leading to the setting aside of penalties under Section 11AC.

6. Ultimately, the Tribunal held that while the zinc dross and ash were chargeable to duty, penalties were not justified. It directed the Original Adjudicating Authority to quantify duty demands only for the normal limitation period, setting aside demands beyond that period.

This detailed analysis of the legal judgment highlights the key issues, arguments presented by both sides, relevant legal interpretations, and the final decision rendered by the Tribunal.

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