2022 (6) TMI 706 - AT - Central Excise

Tribunal allows appeal, finding no suppression of facts, unsustainable demand under extended limitation period

AMBICA ENGINEERING WORKS Versus C.C.E. & S.T. -SURAT-I

The tribunal set aside the impugned order, allowing the appeal with consequential relief, as there was no suppression of facts or intention to evade duty. ... Benefit of exemption - Bonafide belief - Manufacture of textile machineries - Applicability of N/N. 06/2002 dated 01.03.2002 - Relax Drum washer Machine - extended period of limitation - proviso to section 11A of the Central Excise Act, 1944 - HELD THAT:- As regard the merit of the case that whether the appellant is eligible for exemption Notification No 06/2006-CE or otherwise, the issue attained finality as per the tribunal’s order in the case of COMMISSIONER OF CENTRAL EXCISE & ST., SURAT AND OTHERS VERSUS M/S. BHAGYAREKHA ENGINEERS PVT. LIMITED AND OTHERS [2014 (8) TMI 778 - CESTAT AHMEDABAD] against the appellant - It was held in the said case that all the machines specified in each of the heading of List 6 or List 2 respectively of Notification No. 6/2002-CE and 6/2006-CE convey only those machine which carried out a specific activity. Accordingly, Sr. No. 6(5) and 2(5) of the relevant exemption notifications has to be considered to be applicable only to the categories of drying machines. As the machine manufactured by the manufacturers is not a drying machine, therefore the benefit of above exemption notifications is not available to the impugned manufacturers. As regard the appellant’s belief whether it is the bona fide or otherwise it is observed that it is not only the appellant but there are other manufacturers also who were under the bona fide belief that the goods in question is covered under the exemption Notification No 06/2006-CE . It is evident from the case of M/S ACCURATE TRANS HEAT PVT. LTD. SHRI KEDARMAL MANGILAL DERGER VERSUS COMMISSIONER OF CENTRAL EXCISE, SURAT [2018 (7) TMI 973 - CESTAT AHMEDABAD], in that case also the assessee for the same machine were claiming the exemption notification - From the verification report, it is clear without any doubt that the range superintendent has verified the manufacturing activity physically and thereafter given the report that the product which is manufactured by the appellant is eligible for exemption under notification No. 06/2006-CE. The appellant thereafter filed ER- 1 return on 27.02.2008 therefore, all the information regarding the nature of goods claimed for exemption notification was within the knowledge of the department. Extended period of limitation - suppression of facts or not - HELD THAT:- Once an assessee claim exemption notification and the same is in the knowledge of the department, the department firstly to do the proper verification to ascertain whether the goods on which exemption is claimed is covered under the notification or otherwise. The belief of an assessee may be right or wrong but it is incumbent on the department to ascertain the correctness of the eligibility of the exemption notification. Therefore, by declaring the goods under exemption there cannot be a charge of suppression of fact on the part of the appellant. In the identical case, this tribunal in the case of M/S ACCURATE TRANS HEAT PVT. LTD. SHRI KEDARMAL MANGILAL DERGER VERSUS COMMISSIONER OF CENTRAL EXCISE, SURAT [2018 (7) TMI 973 - CESTAT AHMEDABAD] held that there is no suppression of fact and the demand of extended period was set aside - The present case is on better footing on the ground that the superintendent has carried out the verification and specific report in respect of the claim of exemption notification No 06/2006-CE was reported. Thus, there is no suppression of fact with intent to evade payment of duty on the part of the appellant. In the present case the demand for the period 15.04.2004 to February 2008 was raised by the Show cause notice dated 06.04.2009 hence the entire demand is prior to normal period of one year, therefore the same is hit by the limitation - the demand raised in the SCN and confirmed by the Adjudicating Authority is not sustainable being time barred. Appeal allowed - decided in favor of appellant. Issues Involved:1. Applicability of the extended period under proviso to section 11A of the Central Excise Act, 1944.2. Allegation of wilful misdeclaration or suppression of facts.3. Eligibility for exemption under Notification No. 06/2006-CE and subsequent notifications.4. Verification and knowledge of the department regarding the nature of goods and exemption claims.Detailed Analysis:1. Applicability of the Extended Period under Proviso to Section 11A of the Central Excise Act, 1944:The core issue in this case is whether the extended period under proviso to section 11A of the Central Excise Act, 1944, applies in the absence of evidence of wilful misdeclaration, suppression of facts, or intention to evade payment of duty. The appellant argued that the entire demand was raised by invoking the extended period, but there was no wilful misstatement or suppression of facts. The appellant had described the machine as 'Relax Drum for Relaxation of fabrics' in the sales invoices and applied for Central Excise Registration upon crossing the turnover limit. The tribunal found that the appellant's belief regarding the exemption was bona fide and shared by other manufacturers, as evidenced by the case of Accurate Trans Heat Pvt Ltd. The tribunal concluded that there was no suppression of facts or intention to evade duty, making the invocation of the extended period of limitation incorrect.2. Allegation of Wilful Misdeclaration or Suppression of Facts:The appellant contended that there was no wilful misdeclaration or suppression of facts, as the goods were described accurately in the invoices, and the appellant had applied for and obtained Central Excise Registration. The verification report by the Range Superintendent confirmed that the goods were covered under the exemption Notification No. 06/2006-CE. The tribunal noted that the department was aware of the nature of the goods and the exemption claim, and it was incumbent on the department to verify the correctness of the exemption. Therefore, the tribunal held that there was no suppression of facts or malafide intent on the part of the appellant.3. Eligibility for Exemption under Notification No. 06/2006-CE and Subsequent Notifications:The tribunal observed that the issue of eligibility for exemption under Notification No. 06/2006-CE had attained finality in the case of Bhagyarekha Engineers Pvt Ltd, where it was decided against the appellant. However, the tribunal focused on the limited issue of whether the invocation of the extended period was correct. The appellant believed that the machines were covered under the exemption Notification No. 06/2006-CE and subsequently cleared the goods on payment of applicable duty under Notification No. 06/2007-CE. The tribunal found that the appellant's belief was bona fide and supported by the verification report of the Range Superintendent.4. Verification and Knowledge of the Department Regarding the Nature of Goods and Exemption Claims:The tribunal emphasized the importance of the verification report by the Range Superintendent, which confirmed that the goods were covered under the exemption Notification No. 06/2006-CE. The report indicated that the department was aware of the manufacturing activity and the exemption claim. The tribunal held that once the department had knowledge of the exemption claim, it was responsible for verifying its correctness. The tribunal also referenced the case of Accurate Trans Heat Pvt Ltd, where it was held that there was no suppression of facts, and the demand for the extended period was set aside. The tribunal concluded that the demand raised in the show cause notice was time-barred and not sustainable.Conclusion:The tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with the law. The tribunal held that there was no suppression of facts or intention to evade duty, and the demand raised by invoking the extended period of limitation was not sustainable. The verification report by the Range Superintendent played a crucial role in establishing the bona fide belief of the appellant and the knowledge of the department regarding the exemption claim.