2017 (8) TMI 1269 - AT - Central Excise

Valuation - extended period of limitation - It appeared to the Department that the appellant was clearing Methylene Chloride with Chloroform for various industrial consumers at different rates - Held that - What is not disputed is that the entire proceedings have emanated subsequent to internal audit conducted by the department of the appellant - We find that while many of these contention of the appellant with regard to limitation have been taken note of by the adjudicating authority however they have been summarily brushed aside without any justifiable explanation. Surprisingly the adjudicating authority has made an observation that visit of officers for routine checkup and audit does not debar the invocation of larger period if new ground comes to law which was not revealed by the assessee to the department. However the adjudicating authority has not substantiated as to what new ground had come to light pursuant to audit. Higher appellate forums have consistently held that to invoke extended period the elements of suppression of facts have to be proved and that too with intent to evade payment of duty. This is certainly not the case here. The entire proceedings are hit by limitation - appeal allowed on the ground of limitation.

Summary

Issues:
1. Whether the proceedings are hit by limitation.
2. Whether the differential duty demanded by the Department is justified.
3. Whether the extended period for recovery of duty is valid.

Analysis:

Issue 1 - Limitation:
The appellant contended that the proceedings initiated by the Department were time-barred as they were issued beyond the statutory limitation period. The appellant argued that they had provided all necessary information to the Department during an internal audit in 2003, and no show cause notice (SCN) was issued until 2006. The Department claimed that the extended period was justified due to suppression of facts. The Tribunal found that the Department failed to prove suppression of facts with intent to evade duty. The Tribunal cited various decisions supporting the requirement to establish suppression of facts for invoking the extended period. As the Department delayed issuing the SCN for almost three years without any new grounds, the Tribunal held that the proceedings were hit by limitation and set aside the impugned order.

Issue 2 - Differential Duty Demand:
The Department demanded a differential duty from the appellant based on the inclusion of Customs duty, CVD, and SAD duty elements exempted under various notifications in the assessable value for clearance on deemed export basis. The appellant argued that they supplied materials at international prevailing prices to deemed export customers and did not receive any additional consideration. The Tribunal observed that the Department's demand was based on a difference in sale prices between direct sales and deemed export sales without substantial justification. The Tribunal concluded that the Department's delay in taking action and lack of evidence of intent to evade duty rendered the demand unjustified.

Issue 3 - Extended Period for Recovery:
The Department invoked the extended period for recovery of duty, alleging suppression of facts. The Tribunal noted that the appellant had been filing monthly returns and providing necessary information to the Department regularly. The Tribunal found that the Department's allegations were known during the 2003 audit and the information provided was not found to be false. The Tribunal emphasized the necessity of proving suppression of facts with intent to evade duty to justify the extended period. As the Department failed to establish such suppression, the Tribunal held that the extended period was not valid and set aside the impugned order.

In conclusion, the Tribunal allowed the appeal on the ground of limitation, emphasizing the importance of proving suppression of facts with intent to evade duty for invoking the extended period for recovery. The Tribunal found the Department's demand for differential duty unjustified and set aside the impugned order.