2019 (4) TMI 321 - AT - Central Excise

Dismissed appeal upholds duty demand, interest, penalty. Extended limitation period applies due to suppression of clearance value. Penalty and interest upheld.

Tex-Fab Fabricators Versus Commissioner of Central Excise, Belapur

The appeal was dismissed, confirming the demand of duty, interest, and penalty as per the majority view of Member (Technical) Sanjiv Srivastava and Third ... Time Limitation - Classification of goods - tanker trailer - Waste and Scrap of iron and steel generated - filing of declaration - suppression of facts or not - difference of opinion - Held that:- As there is difference of opinion, the matter is placed before the Hon’ble President for reference to third Member to decided the following issue: Whether the appeal is to be rejected as held by learned Member (Technical) upholding the entire duty and interest as also penalty imposed upon them? Issues Involved:1. Classification of products.2. Confirmation of Central Excise duty.3. Recovery of interest.4. Imposition of penalty.5. Denial of Small Scale Exemption Notification No. 8/2003-CE.6. Invocation of extended period of limitation.Issue-wise Detailed Analysis:1. Classification of Products:The Additional Commissioner of Central Excise Belapur classified the product 'tanker trailer' under subheading 87163100 and 'Waste and Scrap of iron and steel' under subheading 72044900/72042190 of the Central Excise Tariff Act, 1985 (CETA’85).2. Confirmation of Central Excise Duty:The Additional Commissioner confirmed a Central Excise duty of Rs. 28,47,871 under Section 11A(2) of the Central Excise Act, 1944 (CEA’44), which was upheld by the Commissioner (Appeals). The demand was confirmed after denying the benefit of Small Scale Exemption Notification No 8/2003-CE, as the appellant's aggregate value of clearances crossed the prescribed limit.3. Recovery of Interest:Interest at the appropriate rate was also ordered to be recovered under Section 11AB of the Central Excise Act, 1944.4. Imposition of Penalty:A penalty of Rs. 28,47,871 was imposed under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of the Central Excise Rules, 2002.5. Denial of Small Scale Exemption Notification No. 8/2003-CE:The appellant was denied the benefit of the Small Scale Exemption Notification No 8/2003-CE on the grounds that the aggregate value of clearances exceeded the limit prescribed by the notification. The appellant argued that they were under the bona fide belief that the value of the chassis supplied by the principal manufacturer was not to be included in the aggregate value of clearances. The Tribunal found that the appellant had suppressed the value of the goods by not including the value of the raw material/chassis supplied free of cost by the principal manufacturer, and thus, the extended period of limitation was correctly invoked.6. Invocation of Extended Period of Limitation:The Tribunal examined whether the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944, was applicable. The appellant argued that they had filed the requisite declarations and were under a bona fide belief that the value of the chassis was not to be included. However, the Tribunal held that the appellant's belief was not bona fide, as established legal principles required the inclusion of free-supplied raw material in the assessable value. The Tribunal cited various judgments to support the view that bona fide belief must be based on reasonable measures and cannot be a blind belief.Separate Judgments Delivered by Judges:Member (Judicial) - Archana Wadhwa:Archana Wadhwa disagreed with the majority view and held that the demand beyond the normal period of limitation was barred. She emphasized that the appellant had filed regular declarations and there was no suppression of facts. She argued that the appellant's bona fide belief, as acknowledged by the Adjudicating Authority, should prevent the invocation of the extended period. Consequently, she upheld only the demand within the normal period of limitation, amounting to Rs. 1,41,345, and set aside the penalty.Member (Technical) - Sanjiv Srivastava:Sanjiv Srivastava upheld the entire duty, interest, and penalty, rejecting the appellant's claim of bona fide belief. He concluded that the appellant had suppressed the correct value of clearances and the extended period of limitation was rightly invoked.Third Member (Judicial) - Dr. D.M. Misra:Dr. D.M. Misra agreed with the view of the Member (Technical) and held that the appellant had suppressed the correct aggregate value of clearances by not including the value of free issue material and chassis. He concluded that the extended period of limitation was applicable, and the demand, interest, and penalty were justified.Final Order:The appeal filed by the appellant was dismissed, confirming the demand of duty, interest, and penalty as per the majority view.