2015 (8) TMI 998 - SC - Central Excise

Invocation of extended period of limitation - SCN issued beyond the period of 6 months - Applicability of exemption Notification No. 208/83, dated 1-8-1983 - Non fulfillment of conditions of notifications - Held that - It would be clear from the judicial journey that the issues involved in the present case remained entangled in judicial battle for quite some time and only in the year 2002, the hazy picture was clarified. In such a scenario, if the appellants took the decision that they were fulfilling the conditions mentioned in the Notification No. 208/83 and had not taken the licence under the Act, it cannot be stated that the aforesaid steps taken by the appellants were not bona fide. It is more so when the judicial opinion prevailing at that time was in favour of these persons. - When the authorities ask the appellants to take licence in the year 1983 itself and the respondents did not comply, nothing prevented the authorities to take action against the respondents immediately, rather than waiting for number of years before issuing the show cause notice. - show cause notices were time-barred and extended period of limitation was not available to the respondents - Decided in favour of assessee.

Summary

Issues:
Applicability of exemption Notification No. 208/83 - Challenge to duty demand and penalty upheld by CEGAT - Grounds of limitation for appeals.

Analysis:
The Supreme Court addressed the challenge brought by 14 appellants against the order of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) upholding duty demand and penalties. The main issue revolved around the applicability of exemption Notification No. 208/83 dated 1-8-1983. The appellants accepted the liability for excise duty but contested the appeals solely on the grounds of limitation, arguing that the show cause notices issued were beyond the six-month period, thus time-barred.

The Department invoked the proviso to Section 11A of the Excise Act, alleging misrepresentation and lack of bona fide action by the appellants, justifying the application of the extended five-year limitation period. The Court then delved into the facts surrounding the issue of limitation. The appellants engaged in manufacturing rolled products from re-rollable scraps obtained from ship breaking activities and other sources. The dispute arose from the conditions specified in Notification No. 208/83 for availing exemption, which the Department contended the appellants did not fulfill.

The Court highlighted the historical judicial journey of conflicting opinions and litigations regarding the classification of inputs and the duty exemption under the said Notification. Notably, until 2002, the prevailing judicial opinion favored the appellants' stance. Considering the circumstances and prevailing legal interpretations, the Court found the appellants' actions to be bona fide, especially as they were instructed to obtain a license under the Excise Act in 1983, which they did not do based on their understanding of the exemption.

The CEGAT's judgment exhibited a split opinion on the issue of limitation, with one member finding in favor of the appellants and another against, leading to a referral to a third member. The Court disagreed with the majority's view that the appellants' failure to obtain a license was not bona fide, emphasizing that the authorities could have taken immediate action in 1983 if non-compliance was an issue. Ultimately, the Court sided with the minority view, holding that the show cause notices were time-barred, and the extended limitation period was not applicable.

In conclusion, the appeals were allowed, determining that the show cause notices were indeed time-barred, and the extended limitation period was not justified. No costs were awarded in this matter.