2019 (5) TMI 214 - AT - Central Excise

Manufacturing taking place or not? - appellant was buying Galvanized Iron Strips falling under Chapter No. 7210 49 00 which they were converting through a two stage process into corrugated ducts or hollow pipes classifiable under Chapter heading 7306 - HELD THAT - Clearly, the inputs were GI Strips while the final products were GI Ducts of non-circular cross section. Thus, they fall under different Tariff headings, the final products being under 7306 69 00. It is also evident that a distinct marketable commodity as known in the market and as is sold in the market under a different name comes into existence. It is immaterial for levy of excise duty that the appellant themselves were not marketing these products. Whether the goods get exempted by virtue of the fact that they were manufacturing these products at site? - HELD THAT - The SCN was restricted only to the extent where goods were manufactured by them in their factory and transported under the cover of delivery challans. Therefore, the question of any onsite manufacture in the demand raised does not arise. Whether the goods in question need to be welded for them to fall under 7306 69 00? - HELD THAT - A plain reading of the Tariff heading does not say so. It is true that there are other Tariff headings such as 7306 40 00 and 7306 50 00 which covered only welded products. However, the main four digit heading 7306 includes nonwelded products or open seam products. Therefore, the product in question gets squarely covered by 7306 69 00. Whether this heading existed during the entire period of limitation? - HELD THAT - During the period 2006-07, Chapter heading 7306 69 00 did not exist at all but it was introduced subsequently. Since the demand is under this heading, the demand to the extent it pertains to prior to 2007-08 has to fail. The amount has to be accordingly re-quantified. Whether the prayer portion of the appeal by the department before the first appellate authority being incomplete adversely affects the demand? - HELD THAT - although the prayer part of the appeal by the department does not cover the issue of manufacture of excisability, these issues were clearly covered in Para 12 of their appeal before the first appellate authority. Therefore, we find no force in this argument by the appellant. CENVAT Credit - HELD THAT - It is beyond the scope of show cause notice and if the appellant is entitled to the benefit of Cenvat Credit, they may take so after following due process as applicable during the relevant period. Time Limitation - HELD THAT - There is nothing on record to show that the appellant had declared their activity before the Central Excise department or taken registration or filed returns or has disclosed their activities in any other manner before the authorities. Therefore, suppression of facts is evident in this case. Sec.11A of the Central Excise Act provides for invocation of extended period where duty has not been paid or has been short paid or has not been levied or short levied by reason of (a) fraud or (b) collusion or (c) any wilful misstatement or (d) suppression or facts or (e) contravention of any provisions of this Act or of the Rules made there under with an intent to evade the payment of duty. The suppression of facts is evident in this case and therefore, extended period of limitation can be invoked. The entire demand needs to be re-quantified since the demand for the period 2006-07 is not sustainable. Therefore, the demand, interest and consequently penalty for the period 2006-07 need to be set aside - Appeal allowed by way of remand.

Issues Involved:
1. Whether the appellant was engaged in manufacturing goods.
2. Applicability of Central Excise duty on the goods manufactured by the appellant.
3. Whether the goods manufactured by the appellant are covered under Chapter heading 7306 69 00.
4. Applicability of exemption notification 03/2005.
5. Validity of the demand raised for the period 2006-07.
6. Invocation of extended period of limitation.
7. Entitlement to Cenvat Credit.
8. Imposition of penalty under Sec. 11AC of the Central Excise Act.

Detailed Analysis:

1. Whether the appellant was engaged in manufacturing goods:
The Tribunal examined whether the appellant was manufacturing goods. The inputs used were Galvanized Iron (GI) Strips, and the final products were GI Ducts of non-circular cross-section, falling under Chapter heading 7306 69 00. The Tribunal concluded that the process resulted in a distinct marketable commodity, thus constituting manufacturing.

2. Applicability of Central Excise duty on the goods manufactured by the appellant:
The appellant argued that the goods were fabricated at the site of work and thus exempt under exemption notification 03/2005. However, the Tribunal noted that the show cause notice was limited to goods manufactured at the appellant's factory premises and transported under delivery challans. Therefore, the exemption did not apply, and Central Excise duty was applicable.

3. Whether the goods manufactured by the appellant are covered under Chapter heading 7306 69 00:
The appellant contended that their products were not welded and thus did not fall under Chapter heading 7306 69 00. The Tribunal clarified that Chapter heading 7306 includes both welded and non-welded products. Therefore, the goods in question were correctly classified under 7306 69 00.

4. Applicability of exemption notification 03/2005:
The appellant argued that they were covered by exemption notification 03/2005, which exempts goods fabricated at the site of work for use in construction work. The Tribunal found that the goods in question were manufactured at the appellant's factory and not at the construction site, making the exemption inapplicable.

5. Validity of the demand raised for the period 2006-07:
The Tribunal found that Chapter heading 7306 69 00 did not exist during the period 2006-07. Since the demand was raised under this heading, the Tribunal set aside the demand for the period 2006-07 and directed re-quantification for the period 2007-08.

6. Invocation of extended period of limitation:
The Tribunal upheld the invocation of the extended period of limitation, noting that the appellant had not taken Central Excise registration, filed returns, or disclosed their manufacturing activities to the authorities. This constituted suppression of facts, justifying the extended period under Sec. 11A of the Central Excise Act.

7. Entitlement to Cenvat Credit:
The Tribunal ruled that the issue of Cenvat Credit was beyond the scope of the show cause notice. However, the appellant could claim Cenvat Credit by following the due process as applicable during the relevant period.

8. Imposition of penalty under Sec. 11AC of the Central Excise Act:
The Tribunal found that suppression of facts warranted the imposition of penalties. Consequently, penalties under Sec. 11AC, along with interest, were sustained for the period 2007-08, while those for 2006-07 were set aside.

Conclusion:
The appeal was allowed by way of remand to the original authority for re-quantification of the demand, interest, and penalties for the period 2007-08, while setting aside the same for the period prior to 2007-08.

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