2018 (6) TMI 629 - AT - Central Excise

Valuation - Time Limitation - Whether the advance liences so procured by the appellants from their customers under which duty-free imports stand made by the appellants are required to be considered as an additional consideration received by the appellants from their buyers or not? - Held that - The entire issue was revenue neutral. In such a scenario, no malafide can be attributed to the assessee, so as to invoke the larger period of limitation - extended period of limitation would not be available to Revenue. Only a part of the period would fall within the limitation, the authorities below are directed to quantify the demand failing within the normal period. Penalty - Held that - on account of absence of any malafide, penalty not warranted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Valuation of Epichlorohydrin for duty-free imports - Whether advance licenses procured by appellants are additional consideration - Limitation period for demand raised.

Analysis:

Valuation of Epichlorohydrin for duty-free imports:
The dispute in the present appeal revolves around the valuation of Epichlorohydrin [ECH] cleared by the appellants to M/s. Petro Araldite Pvt Ltd. The central issue is whether the advance licenses procured by the appellants from their customers for duty-free imports should be considered as additional consideration received by the appellants from their buyers. This issue has been a subject of litigation before various authorities. The Tribunal's decision in the case of M/s. IFGL Refractories Ltd. Vs Commissioner of Central Excise, Bhubaneswar-II, which was later reversed by the Hon'ble Supreme Court, plays a significant role in determining the treatment of such advance licenses as additional consideration.

Limitation period for demand raised:
The matter was remanded to the Tribunal by the Supreme Court to determine whether the extended period of limitation was available to the department. In the subsequent remand proceedings, the Tribunal held that the demand raised was barred by limitation due to the absence of fraud, collusion, or misstatement, and the disclosure of the use of advance licenses to the Revenue. The Tribunal emphasized that in a revenue-neutral situation where the entire excise duty paid by the assessee is refundable, a larger period of limitation may not be invoked.

The learned Advocate for the appellants argued that the show-cause notice issued beyond the normal period of limitation was unjustified. She highlighted that the department was aware of the factual position, as evidenced by the agreement between the appellant and M/s. PAPL presented to the Revenue. The Advocate contended that the issue was a bona fide legal interpretation matter, and the appellant cannot be held liable for suppression or misstatements, especially considering the Tribunal's initial interpretation in favor of the assessee.

After considering the arguments, the Tribunal agreed that the major part of the demand was barred by limitation, as the law was interpreted in favor of the assessee during the relevant period. Given the revenue-neutral nature of the issue and the absence of malafide on the part of the assessee, the Tribunal ruled that the extended period of limitation would not be applicable to the Revenue. Consequently, the demand within the normal limitation period was directed to be quantified by the authorities below.

In conclusion, the Tribunal held the demand to be barred by limitation due to the absence of malafide, leading to the setting aside of the penalty. The appeal was allowed based on these findings.