2013 (4) TMI 216 - HC - Central Excise

Manufacture - Marketability - levy of duty of excise - Sale of the paper waste and plastic waste and scraps - Extended period of limitation - Held that - In the present appeal, the appellant/department relied on various judicial pronouncements in which the tests of marketability have been laid down by the courts. However, we find it not necessary to delve into that aspect, when in our view the Tribunal was justified in holding that merely because no classification list was filed, that by itself was no ground for invocation of longer period of limitation. As stated above, the assessee was agitating his case before the Excise authorities resting on the belief that the paper and plastic wastes in question were not excisable items, by contending that they were not marketable. There was neither a willful misstatement nor suppression of facts with intent to evade payment of duty. The demand was, therefore, clearly time barred under section 11A(1) of the Act. - Decided against the revenue.

Summary

Issues Involved:
1. Whether demand of duty on paper waste and plastic waste is sustainable?
2. Whether demand of duty is barred by limitation?

Analysis:

Issue 1: Demand of Duty on Paper Waste and Plastic Waste

The case involved a dispute regarding the demand of duty on paper waste and plastic waste generated during the manufacturing process of toilet soaps. The department contended that these wastes were excisable items attracting duty under the Central Excise Tariff Act. The Addl. Commissioner issued a show cause notice demanding duty for the period from May 1996 to December 1999, alleging clandestine sale of waste without payment of duty. The adjudicating authority confirmed the demand, but the appellant appealed to the CESTAT, which allowed the appeal on merits. The CESTAT held that the wastes were not marketable commodities and, therefore, not excisable items. The Tribunal based its decision on the fact that the wastes were not manufactured for sale and were not marketable. The appellant department relied on tests of marketability laid down by courts in previous cases, but the Court found it unnecessary to delve into that aspect. Ultimately, the Court upheld the Tribunal's decision, stating that the demand notice was time-barred and there was no willful misstatement or suppression of facts by the assessee to evade duty.

Issue 2: Limitation of Demand of Duty

The second issue in the case was whether the demand of duty was barred by limitation. The relevant provision under section 11A of the Act allows for recovery of duties not levied or paid within a specified period. The show cause notice in this case was issued on 20.02.2001 for the period from March 1996 to December 1999. The limitation period for such cases was six months, extendable to one year in case of fraud, collusion, or willful misstatement. The Tribunal found that the demand was beyond the limitation period as there was no malafide intention on the part of the assessee to evade duty. The Court agreed with the Tribunal's reasoning, holding that the demand was time-barred under section 11A(1) of the Act. As a result, the Court dismissed the appeal on the basis of limitation, without delving into the merits of the first question raised.

In conclusion, the High Court of Gujarat upheld the decision of the CESTAT, ruling in favor of the assessee on both issues. The demand of duty on paper waste and plastic waste was deemed unsustainable, and the demand was found to be barred by limitation due to the absence of any malafide intent on the part of the assessee.