2015 (1) TMI 77 - HC - Central Excise

Appeal challenges Tribunal's order on duty & penalty based on limitation and marketability of product

The Civil Miscellaneous Appeal challenged the Final Order by the Tribunal on the justification of vacating duty and penalty demand based on limitation. ... Validity of Tribunal's order - Whether the first respondent is justified in vacating the demand of duty and penalty on the ground of limitation and allowed the appeal - Marketability of sugar syrup - Bar of limitation - Held that:- Tribunal, to come to the above conclusion, was guided by the fact that the Department has knowledge about the product as early as 1994 when all the material facts were placed before the Department. The Tribunal relied upon the letter of the assessee dated 08.9.1995, which clearly shows that the Department was aware that sugar syrup was an intermediate product emerged in the process of manufacture of the final product. - there is substantial merit in the reasoning of the Tribunal and there is no case of suppression of fact for invoking the extended period of limitation under proviso to Section 11A(1) of the Central Excise Act. The issue relating to limitation is distinct and separate and there cannot be a demand if there is a clear finding that there is no case of suppression falling under proviso to Section 11A(1). We, therefore, confirm the order of the Tribunal answering the questions of law in favour of the assessee and against the Revenue. - Decided against Revenue. Issues:1. Justification of vacating demand of duty and penalty on the ground of limitation.2. Correctness of the Tribunal's finding on the levy of Central Excise Duty and limitation.3. Correctness of the Tribunal's finding on the levy being barred by limitation due to suppression of manufacturing.Analysis:Issue 1:The Civil Miscellaneous Appeal challenged the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Regional Bench at Chennai. The substantial questions of law included the justification of vacating the demand of duty and penalty on the ground of limitation. The case revolved around the manufacturing of mango fruit pulp-based drinks and aerated waters by the assessee, with a focus on the marketability of an intermediate product called 'sugar syrup'. The Department contended that the sugar syrup was dutiable under the Central Excise Tariff Act, leading to a demand of duty and penalty. However, the assessee argued that the sugar syrup was not marketable and hence not liable for duty.Issue 2:Regarding the correctness of the Tribunal's finding on the levy of Central Excise Duty and limitation, the Tribunal accepted the plea of limitation raised by the assessee for the period in question. The Tribunal noted that the Department had knowledge about the product as early as 1994, as evidenced by documents and correspondence. The Tribunal considered the fluctuation of views within the Department over time, including conflicting circulars issued by the Central Board of Excise and Customs (CBEC) regarding the marketability of sugar syrup. Based on these factors, the Tribunal vacated the demand of duty and penalty on the ground of limitation, ruling in favor of the assessee.Issue 3:In evaluating the correctness of the Tribunal's finding on the levy being barred by limitation due to suppression of manufacturing, it was observed that the Tribunal upheld the marketability of the intermediate product but ruled in favor of the assessee on the plea of limitation. The Tribunal highlighted the absence of suppression of facts for invoking the extended period of limitation under the Central Excise Act. The judgment emphasized that if there is no suppression falling under the proviso to Section 11A(1), there cannot be a demand. Consequently, the Tribunal's decision in favor of the assessee was confirmed, dismissing the Civil Miscellaneous Appeal.In conclusion, the judgment focused on the intricate details of the manufacturing process, marketability of the intermediate product, Department's knowledge timeline, and the impact of conflicting circulars on the case. The ruling ultimately favored the assessee based on the grounds of limitation and absence of suppression of facts, leading to the dismissal of the appeal.