2022 (6) TMI 911 - AT - Central Excise

Invocation of extended period of limitation - non-inclusion of differential cost of Sponge Iron in the cost of MS Ingots consumed captively for manufacture of MS Round cleared on transaction value during the disputed period - applicability of Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - violation of principles of natural justice - time limitation - HELD THAT - The show cause notice demands major part of Central Excise duty liability for the period beyond five years from the date of the show cause notice and the Adjudicating authority has also confirmed the same, which has been further upheld by the Ld.Commissioner(Appeals). It is found that the show cause notice is issued on 31.10.2011 while the demands have been confirmed for the period from 01.04.2004 to 31.10.2006 - the provisions of Section 11A of the Central Excise act, 1944 mandates recovery of the tax not paid/short paid for a period of up to five years by invoking extended period. The show cause notice dated 31.10.2011 definitely cannot demand Central Excise duty liability for the period prior to October 2006. To that extent, demand of Central Excise duty liability which is confirmed for the period from 01.04.2004 to 31.09.2006 is liable to be set aside. Remaining demand for the period i.e. October 2006 falling under five years of limitation and beyond one year of limitation - HELD THAT - Apart from the general aversion, there is no evidence to show that duty has not been paid by way of fraud or suppression of facts with intention to evade payment of duty. The case has been booked on the basis of audit objection by scrutinizing the financial records of the Appellant. It is well settled law and as held by the Tribunal in the case of ADITYA COLLEGE OF COMPETITIVE EXAMINATIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, VISAKHAPATNAM 2009 (4) TMI 134 - CESTAT, BANGALORE and M/S. MEGA TRENDS ADVERTISING LTD. VERSUS COMMR. OF CENTRAL EXCISE SERVICE TAX, LUCKNOW 2019 (5) TMI 1027 - CESTAT ALLAHABAD that extended period of five years cannot be invoked in the case of audit objection. There is no evidence in respect of mala fide intention on the part of the Appellant hence the present show cause notice is barred by limitation. The impugned order is not sustainable and the same is set aside - Petition allowed.

Summary

Issues Involved:
1. Time-barred demand.
2. Invocation of extended period of limitation.
3. Applicability of Rule 8 of the Central Excise Valuation Rules.
4. Merits of the demand.
5. Interest and penalty.

Detailed Analysis:

1. Time-barred Demand:
The appellant argued that the demand is time-barred as the show cause notice was issued on 31.10.2011, covering the period from 01.04.2004 to 31.10.2006. According to Section 11A of the Central Excise Act, 1944, the department can only raise the demand for a period of five years if it can prove that the duty was not paid with the intention to evade payment. The Tribunal found that the demand for the period from 01.04.2004 to 30.09.2006 is unsustainable and should be set aside.

2. Invocation of Extended Period of Limitation:
The appellant contended that the extended period of five years cannot be invoked as there was no evidence of suppression of facts or willful misstatement with the intent to evade duty. The Tribunal agreed, noting that the case was based on an audit objection and not on any deliberate action by the appellant. The Tribunal referenced several case laws, including Uniworth Textiles Ltd. Vs. CCE, Raipur, and Aditya College of Competitive Exam. Vs. CCE, Visakhapatnam, to support the view that the extended period cannot be invoked based on audit objections.

3. Applicability of Rule 8 of the Central Excise Valuation Rules:
The appellant argued that Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, was incorrectly applied. Rule 8 is applicable only when goods are exclusively captively consumed, which was not the case here. The appellant had sold some MS Ingots and captively consumed others for manufacturing MS Round. The Tribunal did not delve into the merits of this argument as the demand was already found to be time-barred.

4. Merits of the Demand:
The appellant argued that the demand on merits is not sustainable because the prices of MS Round were determined by market conditions and not influenced by the cost of sponge iron. The Tribunal did not address the merits of the case, as it had already concluded that the demand was time-barred.

5. Interest and Penalty:
The appellant submitted that since the duty demand is not sustainable, the interest and penalty should also be set aside. The Tribunal agreed, noting that there was no intention to evade payment of duty and thus the interest and penalty are also liable to be set aside.

Conclusion:
The Tribunal concluded that the impugned order is not sustainable and set it aside. The appeal filed by the appellant was allowed with consequential relief. The Tribunal refrained from addressing the merits of the case, as the demand was found to be time-barred. The decision was pronounced in the open court on 17 June 2022.