2006 (2) TMI 364 - AT - Central Excise

Tribunal Finds Excise Duty Demand Time-Barred; Upholds Fine on Seized Goods; Waives Penalty Due to Genuine Doubt.

The Tribunal concluded that the demand for excise duty was time-barred due to the issuance of the demand notice beyond the standard limitation period, ... Demand notice u/s 11 - Period of limitation - seizure of goods - Confiscation - Show cause notice issued - Suppression of facts - Imposition of Penalty - HELD THAT:- The decision of the Hon’ble Supreme Court in the case of Jaiprakash [2002 (11) TMI 92 - SUPREME COURT] is applicable in the instant case as there were conflicting, on the issue and the demand notice dt. 4-12-1989 was clearly issued beyond 6 months of the relevant period which was May, 1986 to January, 1989. Hence, we are of the view that the demand of an amount of Rs. 3,55,81,610.71 is hit by limitation. We also observe that the jurisdictional authorities did come to know of the activities of the appellants during their visit on 12-1-1988 and therefore, they could have issued demands within the normal period of limitation at least for the period 6 months prior to that date till January, 1989 which does not appear to have been done. Thus, it is necessary that the departmental authorities issue demands within the normal period of limitation to protect the revenue interest particularly in cases where there are contrary decisions of Tribunal/Court. As regards the other Show Cause Notice dt. 18-7-1988, We are of the view that in respect of seized goods, there is no requirement of confirmation of a separate demand notice u/s 11 of the Central Excise Act, 1944 and that in the event of such goods being confiscated, the duty amount automatically becomes payable on redemption of the same. In other words, on confiscated goods redemption fine and duty must be paid before the same can be redeemed. Hence, we find no infirmity in the order of the adjudicating Commissioner imposing redemption fine of Rs. 20 Lakhs and directing payment of the duty of Rs. 16,11,030.19/-. Penalty - The learned Advocate for the appellants has contested the penalty amount on two grounds. He has submitted that since the excisability of goods was in doubt on account of conflicting decisions and the appellants had a bona fide relief regarding non-excisability of the same, no penalty can be imposed. He also argues that since the earlier order in respect of the Show Cause Notice dated 4-1-1989 imposed a penalty of Rs. 10 lakhs against which the appellants filed a writ petition in the Hon’ble Patna High Court and the case was remanded for re-decision, no higher penalty can be imposed on de novo adjudication when the department has not gone in appeal against the same. After considering all aspects of the case, and particularly taking into account the fact that on excisability of the impugned goods, there were divergent decisions of the Tribunal/Court, we do not think it to be a fit case for imposition of penalty. Hence, we set aside the same. Issues:1. Applicability of extended period of limitation in excise duty case.2. Imposition of redemption fine and penalty in relation to seized excisable goods.3. Imposition of penalty on the appellant.Issue 1: Applicability of extended period of limitation in excise duty caseThe judgment pertains to a dispute regarding excise duty liability on certain goods for the period from May 1986 to January 1989. The appellant challenges the order on the grounds of non-applicability of the extended period of limitation of five years. The appellant argues that due to conflicting judicial views on the excisability of the goods, they were under a bona fide belief that the goods were outside the purview of excise law. The appellant cites various decisions, including those of the Honorable Supreme Court, to support their argument that the extended period of limitation should not apply in cases where there is a genuine doubt about the excisability of goods. The Tribunal, after considering arguments from both sides, holds that the demand for the amount in dispute is hit by limitation as the demand notice was issued beyond the relevant period. The Tribunal emphasizes the need for the department to issue demands within the normal period of limitation, especially in cases where there are conflicting decisions of the Tribunal or Court.Issue 2: Imposition of redemption fine and penalty in relation to seized excisable goodsRegarding a Show Cause Notice dated 18th July 1988 related to seized excisable goods, the adjudicating Commissioner imposed a redemption fine of Rs. 20 lakhs and a demand of duty amounting to Rs. 16,11,030.19. The Tribunal opines that in cases of seized goods, there is no requirement for a separate demand notice under Section 11 of the Central Excise Act, 1944. The duty amount becomes payable automatically on redemption of the confiscated goods. Therefore, the Tribunal finds no fault in the imposition of the redemption fine and the direction for payment of duty in relation to the seized goods.Issue 3: Imposition of penalty on the appellantThe adjudicating Commissioner had imposed a penalty equivalent to the duty amount in dispute, totaling Rs. 3,71,92,640.90. The appellant contests the penalty on the grounds that there was a genuine doubt regarding the excisability of the goods and that a lower penalty had been imposed in an earlier order. The Tribunal, considering the conflicting decisions on excisability and the appellant's bona fide belief, decides that it is not a suitable case for the imposition of a penalty. Consequently, the Tribunal sets aside the penalty imposed on the appellant.This judgment addresses the issues of the applicability of the extended period of limitation in excise duty cases, the imposition of redemption fine and penalty in relation to seized excisable goods, and the imposition of penalty on the appellant. The Tribunal's analysis reflects a careful consideration of the legal arguments presented by both sides and emphasizes the importance of clarity and consistency in excise duty matters, especially in cases involving conflicting judicial views.