2025 (3) TMI 957 - AT - Central Excise

Packing materials qualify for SSI exemption under Notification 8/2003-CE, extended limitation period invalid without suppression evidence

Micro Print & Pack Versus Commissioner of Central Excise, Bangalore – I, Commissionerate

The CESTAT Bangalore allowed the appeal, ruling that the appellant's packing materials (printed cartons, metal containers, HDPE woven sacks, adhesive ... Benefit of the Small Scale Industry (SSI) exemption under N/N. 8/2003-CE - applicability of amendment to Notification No.8/2003- CE dated 01.03.2003 vide Notification No.47/200-CE dated 01.09.2008 - extended period of limitation - HELD THAT:- As per the SSI Notification as amended, packing materials namely printed cartons of paper or paper board, metal containers, high density polyethylene woven sacks, adhesive tapes, stickers, pilfer proof caps, crown corks, metal labels, bearing brand name/trade name of another are exempted. Since the Adjudication authority has held that the goods manufactured by the Appellant are falling under the above category, there is no reason or justification to deny the very same benefit as per the Notification No. 24/2009-CE(NT) dated 21.10.2009, for the period from 01.04.2006 to 31.08.2008. There is a strong force in the contention raised by the Appellant that the Adjudication authority has invoked the extended period of limitation without considering the facts and circumstances in the present matter. There is no allegation of suppression of facts and demand was confirmed only on the ground that appellant has not paid excise duty for the relevant period. Moreover, longer period cannot be invoked when issue involved is interpretation of the complex provision of law as held in the matter of M/s NRC Ltd Vs. CCE, Thane-I [2006 (12) TMI 12 - CESTAT, MUMBAI]. Further the Hon’ble Supreme Court in the matter of M/s Cosmic Dye Chemicals Vs. CCE, Mumbai [1994 (9) TMI 86 - SUPREME COURT] held that intention to evade duty must be proved for invoking the proviso to Section 11A for extended period of limitation. Conclusion - i) The appellant's goods, specifically packing materials, were eligible for SSI exemption under the amended Notification No. 8/2003-CE. This exemption applied for the entire period in question, from April 2006 to August 2009, as clarified by subsequent notifications. ii) The extended period of limitation could not be applied without evidence of intentional evasion of duty. The entire demand is unsustainable on merit as well as on limitation - Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue addressed in this appeal is whether the benefit of the Small Scale Industry (SSI) exemption under Notification No. 8/2003-CE can be denied to the appellant for manufacturing packing materials for branded products. Additionally, the case examines whether the extended period of limitation for demanding duty is applicable, given the allegations of suppression of facts by the appellant.ISSUE-WISE DETAILED ANALYSISIssue 1: Eligibility for SSI ExemptionThe legal framework centers around Notification No. 8/2003-CE, which provides SSI exemption, and its amendment through Notification No. 47/2008-CE. The appellant manufactured goods such as printed cartons and other packing materials bearing brand names, typically excluded from SSI exemption unless specified otherwise. The court examined whether these goods fell under the exemption category post-amendment.The court's interpretation relied on the amendment to the notification, which included specific packing materials under the exemption. The court referenced a precedent from the Tribunal in the case of M/s Kajal Print and Pack (Pvt) Ltd., which clarified that packaging manufacturers in the small-scale sector should not be excluded from exemption merely due to the presence of brand names on their products.Key evidence included the appellant's production of packing materials during the specified period and the subsequent legislative changes. The court applied the law by acknowledging that the amendment intended to include such packing materials within the exemption scope, thus supporting the appellant's claim.Competing arguments from the respondent focused on the exclusion of branded goods from exemption, citing previous judgments like C. Ex. Trichy Vs. M/s Rukmani Packwell Traders. However, the court found these inapplicable due to the specific nature of the amendment and the appellant's activities aligning with the exempted category.The conclusion was that the appellant's goods, being packing materials, were eligible for SSI exemption for the period from September 2008 to August 2009, and by extension, for the earlier period from April 2006 to August 2008, as per Notification No. 24/2009-CE(NT).Issue 2: Applicability of Extended Period of LimitationThe extended period of limitation under Section 11A of the Central Excise Act, 1944, was invoked by the adjudicating authority based on alleged suppression of facts by the appellant. The court assessed whether the appellant's actions justified this extended period.The relevant legal framework includes the CBEC Circular No. 1053/2-2017-CX, which clarifies the conditions under which the extended period can be applied, emphasizing the need for intentional evasion of duty. The court referenced the Supreme Court's decision in M/s Cosmic Dye Chemicals, which mandates proof of intent to evade duty for invoking the extended period.The court found no evidence of fraud, collusion, or willful suppression by the appellant. The appellant's actions were deemed to be based on a reasonable interpretation of complex legal provisions, aligning with industry practice. The court noted that the demand was confirmed solely on non-payment of duty without any proven intent to evade.The conclusion was that the extended period of limitation was unsustainable due to the lack of intentional evasion, thereby rendering the entire demand for the period from April 2006 to August 2008 unsustainable.SIGNIFICANT HOLDINGSThe court held that the appellant's goods, specifically packing materials, were eligible for SSI exemption under the amended Notification No. 8/2003-CE. This exemption applied for the entire period in question, from April 2006 to August 2009, as clarified by subsequent notifications.A significant legal principle established is that amendments to exemption notifications should be interpreted to include small-scale packaging manufacturers unless explicitly excluded, recognizing the ancillary nature of their activities within the small-scale sector.The court also determined that the extended period of limitation could not be applied without evidence of intentional evasion of duty, reinforcing the necessity of proving intent for such demands.The final determination was that the demand for duty against the appellant was unsustainable both on merits and on the grounds of limitation, leading to the appeal being allowed with consequential relief as per law.