2014 (12) TMI 275 - AT - Central Excise

Demand of duty on weaving hard waste, chindi waste and selvedge waste generated during the anufacture of nylon yarn, woollen yarn and plush fabrics - Exemption from duty under Notification No. 27/95-C.E. - Invocation of extended period of limitation - Held that - Though the show cause notices demands duty on these wastes, and the same has been confirmed by the order-in-original passed by the Joint Commissioner, which has been upheld by the Commissioner (Appeals), neither the show cause notice nor the orders passed by the lower authorities mention as to under which tariff heading these wastes are classifiable and what is the rate of duty applicable to them. In our view, on this very ground only the order-in-appeal passed by the Commissioner (Appeals) merits to be set aside. Besides this, we also find that during the period of dispute, the appellant were filing classification declarations in which these wastes had been declared and the exemption under Notification No. 27/95-C.E. had been claimed. No objection has been raised by the department to the benefit of the exemption Notification No. 27/95-C.E. claimed by the appellant. In view of these circumstances, the appellant cannot be accused of having suppressed the relevant information from the department with intent to evade the payment of duty, and hence the show cause notice, dated 22-6-2000 issued for recovery of allegedly short-paid duty during the period from July, 1995 to September, 1995 is time-barred. Impugned order upholding the duty demand and imposition of penalty under Rule 173Q is not sustainable. - Decided in favour of assessee.

Summary

Issues involved:
1. Duty demand on weaving hard waste, chindi waste, and selvedges waste.
2. Applicability of longer limitation period under proviso to Section 11A(1) of the Central Excise Act, 1944.
3. Imposition of penalty under Section 11AC and Rule 173Q(1) of the Central Excise Rules, 1944.

Analysis:
1. The appellant was engaged in the manufacture of various products falling under different chapters of the Central Excise Tariff. A show cause notice was issued for demand of duty on weaving hard waste, chindi waste, and selvedges waste, alleging that these items were excisable but cleared without payment of duty. The Joint Commissioner confirmed the duty demands along with interest and imposed penalties. The appellant contended that the demand was time-barred as they had filed classification declarations during the disputed period, claiming exemption under Notification No. 27/95-C.E. The Commissioner (Appeals) dismissed the appeal, except for setting aside one penalty. The appellant argued that the duty demand was not sustainable as the department did not object to the claimed exemption during the disputed period.

2. The Tribunal observed that the duty demand lacked clarity regarding the tariff heading and applicable duty rate for the mentioned wastes. The appellant had consistently declared these items in classification declarations and claimed exemption, which was not objected to by the department. Therefore, the appellant could not be accused of suppressing relevant information to evade duty payment. The Tribunal held that the show cause notice issued for recovery of allegedly short-paid duty during the disputed period was time-barred, as the appellant had not concealed any material facts. Consequently, the order upholding the duty demand and penalty imposition was deemed unsustainable and set aside. The appeal was allowed, and the miscellaneous application for stay extension was dismissed as the appeal had been disposed of.