2016 (12) TMI 272 - AT - Central Excise

Levy of duty - soap stock, During the course of processing cotton seed into refined cotton seed oil, waste emerges which is called as soap stock - Held that - The facts of this case present an interesting as well as pathetic situation faced by the assessee/appellant. The appellant stopped paying duty on the letter issued by department in 2011 directing the appellant not to pay duty on the waste/soap stock and also informing that he is liable to reverse the CENVAT Credit availed on inputs. Thereafter, department has issued show cause notice not only demanding payment of duty from 2011-2012 but also alleging suppression of facts with intent to evade payment of duty. The facts by itself make it candid that there was no suppression of facts with intent to evade payment of duty on the part of the appellant. Before I part, I cannot refrain from stating that adjudication officers of the department should bear in mind that after 06.08.2014 the assessee is required to make mandatory pre-deposit for filing appeal before the Commissioner (Appeals) and Tribunal. Therefore, they should be more cautious and apply mind reasonably while conduct of adjudication and not blanketly confirm the demand in the show cause notice. The appellant has been able to establish a case in their favour and the show cause notice issued invoking the extended period of limitation cannot sustain on the evidence presented by the case - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability on soap stock during the refining process.
2. Validity of show cause notice invoking extended period.
3. Allegation of suppression of facts with intent to evade payment of duty.
4. Confirmation of demand, interest, and penalty.

Analysis:

Issue 1: Duty liability on soap stock during the refining process
The appellants, manufacturers of refined cotton seed oil, were initially exempted from paying duty on soap stock emerging during the refining process. Following a departmental letter in 2006, they started paying duty on soap stock but ceased in 2011 based on another departmental letter. The department later issued a show cause notice for non-payment of duty on soap stock from 2011 to 2012, alleging suppression of facts. The tribunal noted the appellant's reliance on departmental directions and the absence of intent to evade duty, ultimately ruling in favor of the appellant due to lack of suppression of facts.

Issue 2: Validity of show cause notice invoking extended period
The appellant contested the show cause notice invoking an extended period, arguing it lacked legal or factual basis as they followed departmental instructions regarding duty on soap stock. The tribunal found the notice to be invalid, emphasizing that the appellant's actions were based on the department's directives, and there was no evidence of intentional evasion of duty, leading to the dismissal of the notice.

Issue 3: Allegation of suppression of facts with intent to evade payment of duty
The department alleged suppression of facts by the appellant to evade duty payment, leading to the issuance of a show cause notice. However, the tribunal found no evidence supporting this allegation, highlighting that the appellant acted in accordance with departmental instructions and did not exhibit any intent to evade duty. Consequently, the tribunal ruled in favor of the appellant on this issue.

Issue 4: Confirmation of demand, interest, and penalty
The original authority confirmed the demand, interest, and imposed a penalty on the appellant, a decision upheld by the Commissioner (Appeals). However, the tribunal overturned this decision, considering the appellant's compliance with departmental instructions and the absence of intentional evasion of duty. The tribunal emphasized the need for adjudication officers to exercise caution and reason in confirming demands, ultimately setting aside the impugned order and allowing the appeal with any consequential reliefs.

This detailed analysis of the judgment highlights the key issues addressed by the tribunal, focusing on duty liability, the validity of the show cause notice, allegations of suppression, and the confirmation of demand, interest, and penalty.