2018 (1) TMI 640 - AT - Central Excise

Tribunal Allows Appeal on Limitation Grounds, Emphasizes Adherence to Statutory Limitations

M/s. Bharat Petroleum Corporation Ltd. Versus Commissioner of Central Excise, Mumbai

The Tribunal allowed the appeal on limitation grounds, finding that the demand for interest was beyond the normal limitation period prescribed under ... Demand of interest on duty payable on transit/storage loss - time limitation - Held that: - the demand pertains to a period which is more than the normal period of limitation for raising the demand under Section 11A of the Act. It is apparent that the limitation prescribed u/s 11A of the Act would be applicable to the demand of interest made under Central Excise Rules, 2002 - In the instant case the demand has been raised for the period April 2001 to December 2007. On 21.6.2007 thus, the same cannot be sustained as it is beyond the normal period of limitation prescribed under Section 11A of the Act. No element necessary for invoking extended period of limitation has been invoked in the said notice thus the notice is clearly barred by limitation. Appeal allowed. Issues:1. Demand of interest on duty payable on transit/storage loss.2. Applicability of Rule 8 of Central Excise Rules, 2002.3. Applicability of interest under Rule 20 of the Central Excise Rules.4. Validity of the second show cause notice for the same issue and period.5. Applicability of limitation prescribed under the Central Excise Act for demand of duty, interest, and penalty.6. Imposition of penalty in absence of mens rea.Analysis:Issue 1: Demand of interest on duty payable on transit/storage lossThe appellant argued that Rule 8(3) of Central Excise Rules, 2002 does not apply as the goods were not removed from the factory or warehouse as per Rule 8(1). They contended that the losses could only be determined after the product was delivered to the destination warehouse, which required a warehousing certificate within 90 days. They also cited CBEC circulars permitting condonation of duty on losses. The Tribunal noted that interest demand was for the period beyond the normal limitation under Section 11A of the Act. Citing precedents, the Tribunal held that the demand for interest was beyond the prescribed period and not sustainable.Issue 2: Applicability of Rule 8 of Central Excise Rules, 2002The appellant argued that Rule 8 did not apply to loss of goods in storage of end-products. They relied on CBEC circulars and contended that interest should start only after expiry of 90 days from the removal of goods to the warehouse. The Tribunal found that the demand for interest was raised for a period beyond the normal limitation under Section 11A of the Act, rendering it unsustainable.Issue 3: Applicability of interest under Rule 20 of the Central Excise RulesThe appellant argued that interest was not applicable under Rule 20 of the Central Excise Rules based on CBEC Circular No. 579/16/2001-CX. They contended that interest liability would start only after the expiry of 90 days from the removal of goods to the warehouse. The Tribunal found the demand for interest to be beyond the normal limitation under Section 11A of the Act, leading to the appeal being allowed on limitation grounds.Issue 4: Validity of the second show cause noticeThe appellant argued that the second show cause notice for the same issue and period was invalid, citing Tribunal decisions. The Tribunal did not delve deeply into this issue as the appeal was allowed on limitation grounds.Issue 5: Applicability of limitation prescribed under the Central Excise ActThe Tribunal extensively discussed the limitation prescribed under Section 11A of the Act, citing various judgments. It held that the demand for interest made under Central Excise Rules, 2002 for the period April 2001 to December 2007 was beyond the normal limitation period and not sustainable.Issue 6: Imposition of penalty in absence of mens reaThe appellant argued that there was no mens rea, and therefore, no penalty should be imposed. However, the Tribunal did not delve into this issue as the appeal was allowed on limitation grounds.In conclusion, the Tribunal allowed the appeal on limitation grounds, holding that the demand for interest was beyond the normal limitation period prescribed under Section 11A of the Act. The Tribunal emphasized the importance of adhering to statutory limitations while raising demands for duty, interest, and penalties under the Central Excise Act.