2018 (11) TMI 6 - AT - Central Excise

Excise duty judgment: Rs. 11.93 lakhs upheld, director fined Rs. 1 lakh. Manufacturing activities constitute levy.

The judgment confirms excise duty of Rs. 11.93 lakhs against M/s. Nityanand Engineering Pvt. Ltd., with interest and penalty. A penalty of Rs. 1 lakh is ... Extended period of limitation - doubt arising from reference to Larger Bench - manufacturing activity and excisable goods - penalty on assessee and directorExtended period of limitation - doubt arising from reference to Larger Bench - Demand confirmed under the extended period is barred by limitation where the issue was not free from doubt and had been referred to the Larger Bench. - HELD THAT: - The Tribunal noted that the excise demand arose from the contention that processes such as drilling, cutting, bending and welding resulted in emergence of excisable products. Earlier Tribunal decisions on the point produced conflicting outcomes and the question had been referred to a Larger Bench. The appellate practice and Supreme Court decisions (including Continental Foundation Jt. Venture and Kiran Ispat Udyog) establish that where the correctness of earlier Tribunal decisions is in doubt and the matter has been referred to a Larger Bench, the revenue cannot invoke the extended period of limitation. Applying that principle to the present facts, where the show-cause notice covered the period 1994-95 to 1995-96 and the issue was not free from doubt, the invocation of the extended period by the revenue is impermissible and the demand is therefore time-barred. [Paras 5, 6]The demand confirmed by invoking the extended period is barred by limitation and set aside.Penalty on assessee and director - consequential relief upon failure of demand - Penalties imposed on the company and its director consequential to the demand are not sustainable and are set aside. - HELD THAT: - Since the impugned duty demand was held to be barred by limitation, the consequential orders imposing interest and penalty equivalent to the duty on the company, and a separate penalty on the director, could not be sustained. The Tribunal therefore quashed the penalty orders in view of the primary infirmity in the demand. [Paras 1, 6]Penalties confirmed by the impugned order are set aside and consequential relief granted to the appellants.Final Conclusion: The appeals are allowed: the duty demand for 1994-95 to 1995-96 confirmed under the extended period is held time-barred and set aside, and the consequential interest and penalties on the company and penalty on the director are quashed. Issues:Confirmation of excise duty, interest, and penalty against a company; Imposition of penalty on the director of the company; Whether the activities undertaken by the assessee amount to manufacturing activity for the levy of excise duty; Whether the demand is barred by limitation.Confirmation of Excise Duty, Interest, and Penalty:The judgment confirms the duty of excise amounting to Rs. 11.93 lakhs against M/s. Nityanand Engineering Pvt. Ltd., along with interest and imposition of an equivalent penalty. Additionally, a penalty of Rs. 1 lakh is imposed on the director of the company. The duty is confirmed based on various activities like drilling, cutting, bending, welding, etc., undertaken by the assessee for manufacturing parts of towers, resulting in excisable products. The demand is confirmed by invoking the extended period of limitation.Manufacturing Activity and Levy of Excise Duty:The issue revolves around whether the activities undertaken by the assessee constitute manufacturing activity for the purpose of levying excise duty on the products. The Tribunal, in a previous case, referred a similar issue to the Larger Bench, which held that the activity is a manufacturing process and the resultant product is dutiable goods. The matter was sent back to the original bench for disposal of the appeal, where the demand within the limitation period was upheld, granting the benefit of the extended period due to doubts and confusion in the field.Limitation Period and Judicial Precedents:The appellant argues that since the demand was raised through a show-cause notice dated 07.10.1998 for the period 1994-95 to 1995-96, the entire demand is time-barred. The advocate relies on decisions of the Hon’ble Supreme Court, emphasizing that when the correctness of earlier decisions is doubted and the matter is referred to the Larger Bench, the extended period of limitation should not be invoked. Citing judgments like Continental Foundation Jt. Venture and Kiran Ispat Udyog, it is established that when an issue is entangled in a judicial battle and clarity emerges later, the extended period cannot be invoked.Judgment and Conclusion:Considering that the extended period was invoked by the revenue and the issue was not free from doubt as it was referred to the Larger Bench, the demand is held to be barred by limitation. Consequently, the impugned order confirming the demand and imposing penalties is set aside, and both appeals are allowed with consequential relief.