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TMI Blog2017 (6) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... thereunder, with an "intention to evade" payment of duty by the noticee or his agent - the defining principle for invoking the extended period of limitation is, that there should be an "intention to evade payment of duty" by the noticee or his agent. The fact is that, in so far as the subject waste and scrap is concerned, there was, for a long period of time, clearly an uncertainty, as to whether or not they were excisable goods and hence, amenable to duty as claimed by the Revenue. The mere failure to make declarations/or disclosure of the clearance of waste and scrap in the returns would not amount to suppression in the given facts and circumstances - extended period not invokable. Penalty - Held that: - the payment of penalty under Section 11AC of the CE Act would follow, only if, the finding of fact is returned that there was an escapement of duty, due to a conscious and deliberate wrong doing on the part of the Assessee. Thus, in other words, the penalty under Section 11AC would follow, as night follows day, only if, such a finding is returned. In other words, it will be mandatory to levy penalty only, if, such a finding is reached in the matter. In the instant case, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted an error of law in sustaining the duty demand to the extent it fell under the proviso to Section 11A(i) of the Central Excise Act, 1944 when in fact, the question of excisability of the waste was itself in doubt on account of conflicting views expressed by the Appellate Forum and the Tribunal and consequently the provisions of the proviso to Section 11A(i) of the Central Excise Act, 1944 would have no applicability when the same required fraud and suppression with intent to evade payment of duty? 3. We must note at the very outset that Mr.Prasad, who appears for the Assessee, has, in no uncertain terms, indicated to us that he would be pressing before us for consideration only the additional question of law framed in the Assessee's Appeal, i.e., C.M.A.No.3122 of 2005. 3.1. In other words, the learned counsel indicated to us that question Nos.1 and 2, which were framed in the Assessee's appeal vide order dated 05.10.2005 are not being pressed. 4. Therefore, we are required to deal with only one question each in the two appeals filed before us. 5. Before we proceed further in the matter, in our view, the following broad facts are required to be noticed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of the final product. Furthermore, it was submitted that the removal of waste and scrap on payment of duty in terms of Rule 57F(5)/57F(18) would be applicable only when waste/scrap arose in the process of manufacture. 7.2. It was further stated that, if, the waste fell in the category of non-excisable goods, or, was, otherwise exempted, no duty could be charged with respect to the same. In other words, the Assessee contended that Rule 57F(5)/57F(18) was not applicable to the facts of the present case. 7.3. It was also contended that, just because waste and scrap was capable of fetching some price, by recycling/or by subjecting it to other treatment, that could not form the basis of holding that an event of manufacture, as contemplated under Section 2(f) of the CE Act, had occurred. 7.4. In support of these submissions, reliance was placed by the Assessee on the following judgments: (i) Hindustan Lever Ltd. V. Collector of Central Excise, Calcutta, 1985 (22) ELT 232; (ii) Union of India V. Indian Aluminium Co. Ltd.,, 1995 (77) ELT 268 (Tribunal); (iii) Collector of Central Excise, Mehta Vegetable Products, 1997 (93) ELT 229; (iv) M/s.Modi Rubbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both conditions, as provided under Rule 57F(5) stood fulfilled, according to the Tribunal, the Assessee was liable to pay duty on waste and scrap. 10.2. The Tribunal went on to say that the argument of the Assessee that the waste and/or scrap were not manufactured was not available to it . It was the observation of the Tribunal that the benefit availed of could only come with the resultant liability. 11. As regards the other contention raised by the Assessee that the extended period of limitation was not invokable against the Assessee, was also rejected by the Tribunal. 11.1. The reason given by the Tribunal was that the subject goods, as alleged in the SCN, had been cleared without payment of duty and without disclosure of their production and clearance either by way of declarations or in the RT-12 returns. 11.2. The Tribunal, however, while passing the impugned judgment and order, reduced the penalty to ₹ 1.00 lakh, as against a sum of ₹ 7.00 lakhs imposed by the Commissioner. 12. Aggrieved by the Tribunal's order, the instant appeals have been filed. 13. Therefore, in so far as the Assessee is concerned, the issue, which arises for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a product distinct from Sulphuric Acid classifiable under Heading 28.07 and was required to be classified as excisable product under Heading 38.23? Consequently, whether the Modvat credit was rightly claimable in such cases where input is Sulphuric Acid and Spent Sulphuric Acid is a By-product of the process involved? OR Sulphuric Acid and Dilute Sulphuric Acid were essentially the same products classifiable as such under 28.07 and in the process in which the later is simply generated from the former it is required to be considered as unmanufactured product; and consequently no duty is leviable and no question of Modvat arises. (v) The Larger Bench finally delivered its judgment dated 02.07.1999, in Appeal Nos.E/1653, 1674 and 1814/91-C and put the the controversy to rest. By its judgment, the Larger Bench of the Tribunal held that Spent Sulphuric Acid was amenable to excise duty. 17. In so far as the other three products were concerned, Mr.Prasad referred to the orders passed in the Assessee's case, albeit, for different purposes, which, again, according to the learned counsel, created a doubt, as to whether or not, excise duty was payable on them. 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 57A(4) had not been considered by the Commissioner of Central Excise (Appeals). It further held that the said waste product was classifiable under Chapter 71.12 of the Central Excise Tariff Act, 1985. Consequently, the Tribunal, via the very same judgment, directed the Commissioner of Central Excise (Appeals) to consider the Assessee's case for exemption under Rule 57AC [which was subsequently, renumbered as 57F(4)] of the Central Excise Rules, on account of the fact that platinum extracted from the Spent Catalyst by Hindustan Platinum had been returned to the Assessee's factory. 19.2. Apparently, on remand, the Commissioner of Central Excise (Appeals) vide order dated 06.08.2003, held as follows: i) no duty was payable on Spent Pacol Catalyst because it is a non-excisable product; ii) no duty is payable because it has not been removed from the factory but instead it was ultimately exported in the form of Platinum Sponge. 19.3. In this behalf, the Assessee relied upon Rule 57F(4) of the 1944 Rules. Furthermore, it was held that no duty was payable by the Assessee, because the platinum so extracted was ultimately exported out of the Country in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression returned by the Commissioner, which was affirmed by the Tribunal is in order and need not, therefore, be disturbed by the Court. 23.2. In support of his submission, learned counsel relied upon the judgment of the Division Bench of this Court in CEE V. NEPC India Limited, 2016 (341) ELT 33 (Mad); Pure Drinks Ltd. V. Union of India, 2012 (281) ELT 51 (Del.), to which one of us (Rajiv Shakdher,J.) was a party. 24. We have heard the learned counsels for the parties and perused the records filed before us. 25. In order to decide as to whether the extended period of limitation could be invoked, we would have to advert to the provisions of Section 11A of the CE Act, as it was then in place on the Statute book. Section 11A Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. (1)When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of such refund. 26. A perusal of the said Section would show that the duty of excise, which was, as either not levied or paid or had not been short levied or short paid or erroneously refunded, the Central Excise Officer may, within six months from the relevant date, serve a show cause notice for any of the aforesaid purposes on the Assessee to call upon him to pay the requisite amount, as may be specified therein. 26.1. As is evident upon a plain reading of Section 11A of the CE Act, that the proviso incorporated therein empowers the Central Excise Officer to serve the SCN within the extended period of five years, albeit, from the relevant date, in case, any of the circumstances provided for in the main part of the Section, to which we have made a reference above, arose on account of the reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder, with an intention to evade payment of duty by the noticee or his agent. 26.2. Therefore, the defining principle for invoking the extended period of limitation is, that there should be an intention to evade payment of duty b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience, the observations made in paragraph 8 of the said judgment, being apposite, are extracted hereafter. 8....... We are unable to accept this position canvassed on behalf of the revenue. As mentioned hereinbefore, mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract section 11-A of the Act. In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellants believing that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licenced, would not attract the penal provisions of section 11-A of the Act. If the facts are otherwise, then the position would be different....... (Emphasis is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the given facts and circumstances. 29. Our view is fortified by the fact that the Tribunal has simply affirmed the view of the Commissioner without examining the matter in detail. As a matter of fact, the Commissioner has not discussed the matter at all as to whether the extended period could be invoked qua the Assessee. The discussion, which is rather cryptic, is in paragraph 21, where the aspect of penalty is adverted to. Qua this aspect, the failure of the Assessee to declare the waste and scrap in the returns has been taken as the basis for directing imposition of penalty. This aspect will be discussed the latter part of the judgment. 29.1. Therefore, according to us, the SCN, being beyond limitation, is not sustainable in law. 29.2. Since, this issue has been answered in favour of the Assessee, logically, the other issue may not arise, which is, with regard to reduction in the imposition of penalty by the Tribunal. 30. We may only indicate that the judgment of the Division Bench of this Court passed in the matter of CEE V. NEPC India Limited, 2016 (341) ELT 33 (Mad) is distinguishable on facts, as in that case, the Assessee had cleared waste and scrap witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11AC to the period after 28/9/96. I find that the duty amount for the period after this date works out to ₹ 7,41,499/-. I therefore impose a penalty of ₹ 7,41,499/- (Rupees Seven lakhs forty one thousand four hundred and ninety nine only) under Section 11 AC of the Central Excise on M/s TPL. 33.1. Clearly, the reasoning is deficient and does not accord with the position, which, according to us, prevails in law. 34. Therefore, for the foregoing reasons, we are inclined to answer the additional and the only surviving question of law, framed in the Assessee's appeal, in favour of the Assessee and against the Revenue. 35. As regards the question framed in the Revenue's appeal is concerned, our answer to that, is, that the payment of penalty under Section 11AC of the CE Act would follow, only if, the finding of fact is returned that there was an escapement of duty, due to a conscious and deliberate wrong doing on the part of the Assessee. Thus, in other words, the penalty under Section 11AC would follow, as night follows day, only if, such a finding is returned. In other words, it will be mandatory to levy penalty only, if, such a finding is reached in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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