2011 (2) TMI 642 - AT - Central Excise

Tribunal rules duty demand sustainable but rejects extended recovery period, sets aside penalty.

GRASIM INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

The Tribunal held that the duty demand was sustainable on merits, but the extended period for recovery was not available. Consequently, the duty demand ... Imposition of penalty - The Hon’ble Supreme Court in the case of CCE v. Chemphar Drugs & Liniments (1989 -TMI - 42413 - SUPREME COURT OF INDIA) has held that something positive other than mere inaction or failure on the part of manufacture or producer or conscious and deliberate withholding of information when the manufacturer knew otherwise, is required before he is saddled with the liability invoking longer limitation period - On the basis of the above criteria prescribed by the Apex Court for invoking the extended limitation period under proviso to Section 11A(1) of Central Excise Act, 1944, we find that in view of the facts disclosed above, there is hardly any ground for invoking the extended period- -In view of the above discussion, we hold that while on merits, the duty demand would be sustainable, extended period for recovery of short paid duty under proviso to Section 11A(1) of Central Excise Act is not available to the department and as such the entire duty demand is time barred - In view of this the impugned order confirming the duty demand and imposing penalty under Section 11AC is not sustainable and the same is set aside. The appeal is allowed. Issues Involved:1. Determination of assessable value for captive consumption under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975.2. Alleged short payment of duty and imposition of penalty.3. Applicability of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.Issue-Wise Detailed Analysis:1. Determination of Assessable Value for Captive Consumption:The primary issue was whether the appellant correctly determined the assessable value of Caustic Soda lye cleared for captive consumption to related units. The appellant had two methods for determining the assessable value:- For clearances to the Fibre Division at Nagda, the appellant used the average price of sales to independent buyers during the previous month, a practice approved by the Jurisdictional Assistant Commissioner.- For clearances to the units at Harihar, Kosamba, and Alibagh, the appellant used the average purchase price of Caustic Soda lye by these units from other unrelated buyers.The Department contended that the assessable value for all clearances should have been based on the average price to independent buyers during the previous month, as per Rule 6(b)(i) of the Valuation Rules, 1975. The Tribunal upheld the Department's view, stating that Rule 6(b)(i) did not permit the use of the purchase price from unrelated buyers and that the appellant should have used the average price to independent buyers for all clearances.2. Alleged Short Payment of Duty and Imposition of Penalty:The Department issued a show cause notice for the recovery of allegedly short-paid duty amounting to Rs. 51,48,439/- with interest and proposed a penalty under Section 11AC of the Central Excise Act, 1944. The Commissioner confirmed the entire duty demand and imposed an equal amount of penalty. The Tribunal found that the appellant had indeed short-paid the duty by not using the correct assessable value for clearances to the units at Harihar, Kosamba, and Alibagh.3. Applicability of Extended Period of Limitation:The appellant argued that the demand was time-barred as the show cause notice was issued on 23rd April 2003 for the period from April 1998 to June 2000. The appellant provided evidence that the Department was aware of their valuation practice through price declarations and RT-12 returns, which included details of clearances to all units. The Tribunal referred to the Supreme Court's rulings in Continental Foundation Jt. Venture v. CCE and CCE v. Chemphar Drugs & Liniments, which stated that 'suppression' must involve a deliberate act to evade duty. The Tribunal concluded that the Department had not proven suppression of facts with intent to evade duty. Therefore, the extended period for recovery under the proviso to Section 11A(1) was not applicable, and the entire duty demand was time-barred.Conclusion:The Tribunal held that while the duty demand was sustainable on merits, the extended period for recovery was not available. Consequently, the entire duty demand and the penalty imposed were set aside, and the appeal was allowed.(Order pronounced in the open court on 25-2-2011)