2023 (7) TMI 762 - AT - Central Excise

Levy of Excise Duty - additional consideration or not - compensation received as a result of cancellation of orders by West Bengal Power Development Corporation - Extended period of limitation - HELD THAT - In this case, the show-cause notice has been issued by invoking extended period of limitation as the facts that the appellant has submitted all the material information to the Department through their letter dated 10.05.2002 about non-receipt of two contracts and thereafter, vide their subsequent letter dated 19.03.2003, which was submitted on 25.03.2003, the appellants informed the Assistant Commissioner of Central Excise, Durgapur Division about the final cancellation of the contracts by the customer and appended the orders of cancellation of contracts issued by the customer along with the final MOU. As per the said MOU, the appellant received the payment. As the show-cause notice has been issued to the appellant on 10.10.2007 by invoking the extended period of limitation, in that circumstances, it is held that as all the information were available to the Department in 2003 itself and no information has been suppressed by the appellants, in that circumstances also, the show-cause notice issued after the period of four years of the information gathered is not sustainable and is highly barred by limitation. All the demands are barred by limitation - Appeal allowed.

Summary

Issues involved: Appeal against demand of duty confirmed on compensation received due to cancellation of orders by a corporation, invoking Rule 6 of Central Excise Valuation Rules, 2000. Extended period of limitation invoked for demand of excise duty.

Issue 1: Demand of duty on compensation received

The Appellant, engaged in manufacturing boiler parts, entered into contracts with a corporation for supply and installation. Due to financial crisis, one contract was partly cancelled, and the other was temporarily halted. The corporation terminated the unexecuted portions of both contracts and mutually agreed on damages payable as compensation. The Appellant duly informed the department about the cancellations. However, a show-cause notice was issued after 4.5 years proposing a demand of excise duty on the compensation received. The Appellant contended that duty is not leviable on damages received due to cancellation, citing various judicial pronouncements in their favor. The Tribunal held that the demands were barred by limitation as all relevant information was provided to the department in 2003 itself, and no suppression of information occurred. Therefore, the demand of excise duty on compensation received was set aside.

Issue 2: Extended period of limitation

The Tribunal noted that the show-cause notice was issued invoking the extended period of limitation, despite the Appellant having submitted all material information to the department in 2002 and 2003 regarding the contract cancellations and the compensation received. As the information was available to the department in 2003 and no suppression occurred, the notice issued after four years was deemed unsustainable and highly barred by limitation. Without delving into the merits of the case, the Tribunal held that all demands were time-barred. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the Appellant.