2020 (2) TMI 302 - HC - Central Excise

Recovery and demand of duty from the purchaser of goods in auction - auction by the official liquidator of the manufacturing company - Recovery u/s 11A(1) of the Central Excise Act, 1944 - provisions of Section 36A of the Central Excise Act, 1944 ignored - manufacturer of goods - time limitation - penalty - HELD THAT - The Tribunal, after considering the submissions made on behalf of the respondent and considering the facts of the case, held that the assessee is neither a manufacturer of excisable goods nor purchased goods for purpose of manufacture of any product - In view of the finding of fact arrived at by the Tribunal holding that assessee is neither a manufacturer of excisable goods nor it has used purchased goods for manufacturing of other goods, no duty can be demanded under Section 11A(1) of the Act, 1994. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of Section 36A of the Central Excise Act, 1944
2. Time-barred demand of Central Excise Duty
3. Setting aside of penalties imposed against the respondents

Interpretation of Section 36A of the Central Excise Act, 1944:
The Tax Appeal was filed by the revenue challenging the order of the Customs, Excise & Service Tax Appellate Tribunal. The revenue raised substantial questions of law regarding the Tribunal's alleged error in ignoring Section 36A of the Act. The facts revolved around a respondent who participated in an auction for the sale of assets of a company in liquidation. The Central Excise Department demanded excise duty on goods purchased by the respondent in the auction. The Tribunal held that the respondent was not a manufacturer of excisable goods and dismantling the goods did not amount to manufacturing activity. Therefore, the duty liability, if any, would be against the original manufacturer, not the respondent. The Tribunal also found that the demand was time-barred as the department delayed in issuing the show cause notice. Consequently, the Tribunal set aside the demand. The High Court upheld the Tribunal's decision, stating that no duty could be demanded from the respondent under Section 11A(1) of the Act.

Time-barred demand of Central Excise Duty:
The Central Excise Department issued a show cause notice proposing a demand and recovery of Central Excise Duty on goods purchased by the respondent in an auction. Another notice was issued invoking a larger period of limitation for a higher amount. The Tribunal found that the department's delay in issuing the show cause notice rendered the demand time-barred. The High Court concurred with the Tribunal's decision, emphasizing that the demand was clearly hit by the time bar. The judgment highlighted that the department had all the relevant facts within its knowledge but delayed in issuing the notice, leading to the dismissal of the appeal.

Setting aside of penalties imposed against the respondents:
The Commissioner of Central Excise confirmed the Central Excise Duty, imposed interest and penalties, and ordered confiscation of goods. The Tribunal dismissed the revenue's appeal based on the Government's Litigation Policy. The High Court noted that the Tribunal's finding that the respondent was not a manufacturer of excisable goods was crucial. As a result, no duty could be demanded from the respondent. Since no substantial questions of law arose, the High Court dismissed the appeal, upholding the Tribunal's decision to set aside the penalties imposed against the respondents.