2006 (12) TMI 285 - AT - Central Excise

Tribunal upholds decision on time-bar grounds, criticizes revenue dept delay.

The Tribunal upheld the Commissioner (Appeals) decision to set aside demands on time-bar grounds due to the revenue department's inaction and delay in ... Demand - Limitation - Suppression Issues:1. Benefit of Modvat credit and duty confirmation.2. Imposition of penalty and interest.3. Interpretation of repacking as manufacturing.4. Delay in demanding duty.5. Time-bar for demands.Analysis:1. Benefit of Modvat credit and duty confirmation:The original authority allowed Modvat credit and confirmed duty amounts. The appellant received chemicals from a supplier, repacked them, and sold them to customers. The Commissioner (Appeals) set aside demands due to inaction by the revenue department for over two years, despite the assessee voluntarily applying for Central Excise Registration. The Tribunal had remanded the case for de novo proceedings to decide on Modvat credit and other issues.2. Imposition of penalty and interest:Penalties were imposed under Section 11AC and interest under Section 11AB. Additionally, a penalty was imposed on the supplier for supplying chemicals. The Tribunal found no intention to evade duty by the assessee and criticized the revenue department for delayed action in demanding duty.3. Interpretation of repacking as manufacturing:Repacking of bulk mining chemicals was considered manufacturing from April 1, 1997, due to amendments in Chapter 38. The assessee applied for Registration Certificate on September 24, 1997, and clearances made before that date were without duty payment. The Commissioner (Appeals) noted the department's awareness of the duty non-payment and set aside demands due to the department's inaction.4. Delay in demanding duty:The Tribunal highlighted the inordinate delay by the revenue department in demanding duty, despite knowing the facts and the assessee's compliance post-registration. The delay of over two years led to the setting aside of demands on time-bar grounds.5. Time-bar for demands:The Apex Court's judgment in Nizam Sugar Factory v. CCE. A.P. was cited, emphasizing that departmental inaction and delay in demanding duty, especially when aware of all facts, could warrant setting aside demands on time-bar grounds. The Tribunal rejected the revenue's appeal, upholding the Commissioner (Appeals) decision to set aside demands due to the department's delay and lack of grounds for invoking the larger period.This comprehensive analysis of the judgment covers the various issues involved and the reasoning behind the decisions made by the Tribunal.