2019 (1) TMI 57 - AT - Central Excise

Dutiability - sales tax deferment scheme - foreclosure of the scheme at a discounted rate of 6.5% of the NPV offered by the Government of Andhra Pradesh - whether the demand for Central Excise Duty on the appellant on the amount which has been extended as discount by the Government of Andhra Pradesh on foreclosure of sales tax deferment scheme is dutiable or otherwise? - Held that - The demands which have been raised by the show cause notice dated 07.05.2010 for the period 2001-02 to 2004-05 is blatantly beyond the mandate given under first proviso to Section 11A(1) of the Central Excise Act, 1944. The said section mandates demand of duty from the assessee, in the case of misstatement or suppression or fraud or collusion even in evasion of Central Excise Duty for the period 5 years from show cause notice. In the case in hand, none of these ingredients appeared to have been brought out in the show cause notice. Be that as it may, since the mandate of first proviso of Section 11A(1) of Central Excise Act only contemplates for the demand up to 5 years from the date of show cause notice, the demands raised on the amount extended as discount by the Government of Andhra Pradesh for the period 2001-02 to 2004-05 is hit by limitation. Demand for the period 2005-06 - Held that - There is nothing on record which indicates that the appellant herein had wilfully violated the provisions of Central Excise Act and Rules made there under with an intention to evade payment of duty, as it is on record that appellant had during the period filed periodical returns with the authorities - appellant could have entertained a bonafide belief that the discount which has been offered by the Government of Andhra Pradesh on foreclosure of the deferred sales tax scheme is not an additional consideration as during the relevant period - the impugned order is liable to be set aside only on the ground of being hit by limitation. Appeal allowed.

Summary

Issues:
- Central Excise Duty demand on discount extended by Government of Andhra Pradesh on foreclosure of sales tax deferment scheme.
- Applicability of Circulars issued by CBEC.
- Barred by limitation under Sec.11A(1) of Central Excise Act, 1944.

Analysis:

Central Excise Duty Demand:
The appeal challenged the Order-in-Appeal confirming Central Excise Duty demands on discount offered by the Government of Andhra Pradesh for the period 2001-02 to 2005-06. The appellant contended that Circulars issued by CBEC supported their case, citing precedents where Central Excise Duty was not levied on similar discounts. The department representative referred to a Supreme Court judgment to argue in favor of including the discount in the valuation of manufactured goods. The Tribunal examined the submissions and records to determine the dutiability of the discount. It was established that the demands for the period 2001-02 to 2004-05 were beyond the statutory limitation period under Sec.11A(1) of the Central Excise Act, thus holding them as time-barred. However, for the period 2005-06 falling within the limitation period, the Tribunal analyzed the appellant's intent and belief regarding Central Excise Duty evasion. Ultimately, the Tribunal set aside the impugned order, allowing the appeal on limitation grounds.

Applicability of Circulars:
The appellant argued that Circulars issued by CBEC favored their position, emphasizing that no excise duty was payable on the sales tax deferred under the scheme introduced by State Governments. Citing specific Circulars and judicial decisions, the appellant contended that the discount offered by the Government of Andhra Pradesh should not attract Central Excise Duty. The Tribunal considered these arguments alongside the department representative's reference to a Supreme Court judgment. After thorough evaluation, the Tribunal focused on the statutory provisions and legal precedents to determine the applicability of the Circulars in the present case. The Tribunal's analysis led to the conclusion that the demands raised beyond the limitation period were untenable, irrespective of the Circulars' content.

Barred by Limitation:
A critical issue addressed in the appeal was whether the demand for Central Excise Duty was time-barred under Sec.11A(1) of the Central Excise Act, 1944. The appellant argued that the demands for the period 2001-02 to 2004-05 exceeded the statutory limitation period of 5 years from the date of the show cause notice. The Tribunal examined the provisions of Sec.11A(1) and the mandate for raising demands within the prescribed timeframe. By analyzing the absence of elements like misstatement, suppression, fraud, or collusion in the show cause notice, the Tribunal concluded that the demands for the earlier period were hit by limitation. However, for the subsequent period of 2005-06, falling within the limitation period, the Tribunal considered the appellant's belief and intent regarding Central Excise Duty liability. Ultimately, the Tribunal ruled in favor of the appellant on the ground of limitation, setting aside the impugned order.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD provides a comprehensive understanding of the issues involved, the arguments presented by the parties, and the Tribunal's legal reasoning leading to the final decision in the appeal.