Successful appeal on excise duty demand due to cancellation of orders barred by limitation.

The appeal was successful as the Tribunal held that the demand of excise duty on compensation received due to cancellation of orders by a corporation was barred by limitation. The Appellant had informed the department about the cancellations in a timely manner, and no suppression of information occurred. The Tribunal found that the demands were time-barred as all relevant information was provided in 2003, rendering the extended period of limitation invoked for the demand of excise duty unsustainable. Consequently, the demand of excise duty on compensation received was set aside, and the appeal was allowed in favor of the Appellant.

---

---

Issues involved: Appeal against demand of duty confirmed on compensation received due to cancellation of orders by a corporation, invoking Rule 6 of Central Excise Valuation Rules, 2000. Extended period of limitation invoked for demand of excise duty.

Issue 1: Demand of duty on compensation received

The Appellant, engaged in manufacturing boiler parts, entered into contracts with a corporation for supply and installation. Due to financial crisis, one contract was partly cancelled, and the other was temporarily halted. The corporation terminated the unexecuted portions of both contracts and mutually agreed on damages payable as compensation. The Appellant duly informed the department about the cancellations. However, a show-cause notice was issued after 4.5 years proposing a demand of excise duty on the compensation received. The Appellant contended that duty is not leviable on damages received due to cancellation, citing various judicial pronouncements in their favor. The Tribunal held that the demands were barred by limitation as all relevant information was provided to the department in 2003 itself, and no suppression of information occurred. Therefore, the demand of excise duty on compensation received was set aside.

Issue 2: Extended period of limitation

The Tribunal noted that the show-cause notice was issued invoking the extended period of limitation, despite the Appellant having submitted all material information to the department in 2002 and 2003 regarding the contract cancellations and the compensation received. As the information was available to the department in 2003 and no suppression occurred, the notice issued after four years was deemed unsustainable and highly barred by limitation. Without delving into the merits of the case, the Tribunal held that all demands were time-barred. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the Appellant.

---