2001 (10) TMI 790 - AT - Central Excise

Tribunal affirms time-barred demand decision in tax case with no evidence of deliberate evasion

The Tribunal upheld the Commissioner's decision in a case involving time-barred demands, suppression of facts, and entitlement to Modvat credit. The ... Demand - Limitation Issues Involved:1. Time-barred demands.2. Suppression of facts and intention to evade duty.3. Entitlement to Modvat credit.Detailed Analysis:1. Time-barred Demands:The Commissioner of Central Excise, Hyderabad, upheld the assessee's plea that the demands raised in the show cause notice were hit by time bar, as there was no suppression in the matter and no intention to evade payment of duty. The Commissioner cited the Supreme Court's judgment in CCE, Hyderabad v. Chemphar Drugs and Liniments, which established that to sustain a demand for excise duty beyond six months and up to five years under Section 11A of the CE and Salt Act, 1944, it must be shown that the duty was not paid due to fraud, collusion, willful misstatement, or suppression of facts with intent to evade payment of duty. The Commissioner found no evidence of deliberate suppression of production value with intent to evade duty, thus invoking the proviso to sub-section (1) of Section 11A was not justified. The demand covering the period from September 1991 to January 1993 was time-barred as the show cause notice was issued on 7-4-1994, beyond the six-month period.2. Suppression of Facts and Intention to Evade Duty:The Commissioner noted that Decent Enterprises, a job worker, showed the value of clearances as Rs. 60,000/- representing only job charges and not the actual value of the goods manufactured and cleared. The assessee contended that they were under the bona fide belief that they needed to indicate only the value in their invoices, which were prepared for job charges received. Upon realizing that the cost of raw materials should be added to job charges for valuation, they took out registration and started paying duty. The Commissioner found no evidence to substantiate allegations of deliberate suppression or misdeclaration with intent to evade duty. The Commissioner concluded that Decent Enterprises, being a small-scale unit and job worker, were unaware of the requirement to include the value of raw materials in the assessable value. Therefore, the entire demand was barred by time limitation.3. Entitlement to Modvat Credit:The Commissioner upheld the assessee's alternative contention that they were entitled to Modvat credit in respect of duty on inputs, referencing judgments such as Chamundi Steels Re-rolling Mills v. CCE, Bangalore, Vivek Re-rolling Mills & Ors. v. CCE, Chandigarh, and Hindustan Lever Ltd. v. CCE, Bombay-III. The Commissioner noted that the Modvat credit admissible in respect of granules was more than sufficient to discharge the duty liability on the polythene film. Since the demand was time-barred, the Commissioner refrained from commenting further on the Modvat credit issue.Revenue's Appeal:The Revenue contended that the assessee should have declared all figures in the declarations filed for the years 1991-92 and 1992-93, including the value of inputs used in manufacturing the final product. The Revenue argued that the act of filing declarations with irreconcilable figures was malafide, indicating an intention to evade payment of duty. The Revenue sought confirmation of the demand by setting aside the impugned order.Assessee's Cross-Application:The assessee argued that the Department itself was unaware of the requirement for job workers to disclose the value of raw materials until the issue was contested in Ujjagar Prints Ltd. They contended that they were doing job work for APDDCF Ltd., and the duty would have been reimbursed by APDDCF Ltd. They maintained that there was no statutory duty to declare the value of inputs or raw materials and that the Commissioner rightly held there was no intention to evade duty and the demand was time-barred. The assessee cited several judgments supporting the grant of Modvat credit.Tribunal's Conclusion:The Tribunal, after reviewing the submissions and judgments, upheld the Commissioner's order, finding it correct in law. The Tribunal agreed with the Commissioner that the Revenue failed to prove the intention to evade duty, as required by the Supreme Court's judgments. The Tribunal noted that the assessee's bonafide belief and the potential benefit of Modvat credit negated any intention to evade duty. The Tribunal also observed that the Revenue did not challenge the availability of Modvat credit in their appeal. Consequently, the Tribunal rejected the Revenue's appeal, affirming the Commissioner's findings and the time-barred nature of the demand.