2025 (3) TMI 117 - AT - Central Excise

Invocation of Extended period of limitation - suppression of fact of receipt of raw material free of cost from the supplier - fact of non-inclusion of the value of the said raw material in the value of final products manufactured by them suppressed from the knowledge of the department with intent to evade payment of central excise duty - HELD THAT - The respondent were manufacturing ZDF for the specific needs of Nuclear Fuel Complex Hyderabad a unit of Department of Atomic Energy Government of India who manufactures Zirconium Alloy Tubes which are further used for making Nuclear Fuel Bundles containing Uranium Oxide pellets and are used in the Nuclear Reactors by the Nuclear Power Corporation managed by Government of India for generation of power. Further it is found that as per the purchase order the respondent were only paying the central excise duty on the job work charge and not including the free supply of sand made by Nuclear Fuel Complex Hyderabad and as per the department the said free supply should be included in the transaction value for the purpose of payment of duty. The learned Commissioner after analyzing all the submissions of the party vide detailed impugned order has confirmed the demand only for the normal period and has come to the conclusion that extended period of limitation cannot be invoked as the respondent had a bona fide belief that the levy on free supply is not to be included in the transaction value. Further it is also found that the invocation of extended period of limitation is totally unwarranted in the present case because the Revenue has not been able to establish any of the ingredients mentioned in Section 11A(1) of the Act for invoking the extended period of limitation. Further the respondent had acted bona fidely as per the clauses of the purchase orders received by them from the Regional Director HRPU Nuclear Fuel Complex Hyderabad a unit of the Department of Atomic Energy Government of India and there was no wilful act or omission of any kind whatsoever on their part leading to mens rea for invoking the penal provisions. Conclusion - The invocation of extended period of limitation is totally unwarranted in the present case because the Revenue has not been able to establish any of the ingredients mentioned in Section 11A(1) of the Act for invoking the extended period of limitation. There is no infirmity in the impugned order - appeal of Revenue dismissed.

The present appeal before the Appellate Tribunal, CESTAT Chandigarh, involved the Revenue challenging an order passed by the Commissioner of Central Excise, Chandigarh-I. The Commissioner had confirmed a demand for the normal period but dropped the demand for the extended period against the respondent, who was engaged in the manufacture of Zirconium Washed Dried Frit (ZDF) and Zirconium Sulfate. The core issue revolved around whether the respondent had suppressed material facts with intent to evade payment of central excise duty by not including the cost of raw materials supplied free of cost in the transaction value of their final product.The key legal questions considered in this case were:1. Whether the respondent had a bona fide belief that the value of free material supplied did not need to be included in the transaction value for central excise duty purposes.2. Whether the Revenue could establish suppression of material facts by the respondent with intent to evade payment of duty, warranting the invocation of the extended period of limitation.The Revenue argued that the respondent's ignorance of the requirement to include the value of free material supplied could not excuse them from paying taxes, and that the respondent's actions demonstrated an intent to evade payment of duty. The Revenue relied on various judgments to support their position, emphasizing the need for a bona fide belief to be based on a sincere attempt to understand the issue.On the other hand, the respondent contended that the demand for duty was unjustified as the ZDF they manufactured was not dutiable under the Central Excise Act, 1944, as it was specifically tailored for the Nuclear Fuel Complex's needs and not marketable. The respondent also argued that the extended period of limitation was not applicable as there was no evidence of fraud, collusion, or wilful misstatement to warrant its invocation.After considering the submissions of both parties, the Tribunal found that the respondent had a bona fide belief that the free supply of material should not be included in the transaction value for duty calculation. The Tribunal also noted that the Revenue failed to establish any grounds for invoking the extended period of limitation, as there was no evidence of wilful suppression of facts or intent to evade duty by the respondent. The Tribunal highlighted that the show cause notice was issued based on information provided by the respondent and that the respondent had acted in good faith based on the purchase orders received.Ultimately, the Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal. The Tribunal concluded that there was no infirmity in the impugned order and that the respondent had not engaged in any wilful misconduct or suppression of facts to evade duty. The decision was based on the absence of mens rea on the part of the respondent and the lack of grounds to invoke the extended period of limitation.In summary, the Tribunal's decision centered on the respondent's bona fide belief regarding the inclusion of free material in the transaction value and the absence of evidence supporting the Revenue's allegations of suppression and intent to evade duty. The Tribunal's ruling underscored the importance of good faith actions and the lack of mens rea in determining liability for central excise duty.

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