2025 (6) TMI 1262 - AT - Central Excise

Tribunal allows duty adjustment for branded goods clearance values under Notification 08/2003-CE, rejects extended limitation period

Commissioner of Central Excise & Service Tax, Guntur Versus Safe Parentals Ltd And Commissioner of Central Excise & Service Tax, Guntur Versus Safe Formulations Ltd

The Tribunal ruled in favor of respondents on all key issues regarding duty computation under Notification No. 08/2003-CE. The court held that clearance ... Correctness of computation of demand of duty by the department - interpretation of N/N. 08/2003 - existence of scope for invocation of extended period, as sought by the department or otherwise. Computation of demand of duty - HELD THAT:- The issue has already attained finality in terms of Tribunal’s Order dt.04.07.2013 and neither party has challenged the mode of computation of demand, which is based on interpretation adopted by the department. However, as far as the issue of adjustment is concerned, it is still in their favour and if there is any further adjustment required in terms of even this appeal, the same principle has to be adopted by the adjudicating authority. Time limitation - HELD THAT:- The Commissioner has referred to the details furnished by the respondents in their ER-1s where clearly they have provided clearance value in respect of other branded goods cleared to different brand name owners. The SCN is perused where the only ground for invoking extended period was non-disclosure of clearance value in respect of clearances to category 3 i.e., other brand name owners. Therefore, it is obvious that in the absence of any other cogent and positive evidence on record, this ground has already been considered and it was found that they have already disclosed these details to department in their ER-1s. Thus, on the ground of limitation, department would not succeed and order of the adjudicating authority has to be upheld. The matter has already been referred to the original adjudicating authority and therefore, to that extent, the matter remanded back for deciding the quantum of duty and as held in the Tribunal’s Order dt.04.07.2013, whatever duty they have already paid will have to be adjusted against the total demand, if any. Moreover, since the scope of extended period is not available in the facts of the case, the mandatory penalty is also not imposable in the matter. The adjudicating authority shall work out the correct demand in the aforesaid manner. Conclusion - i) The department's computation excluding clearance values under other brand names is incorrect. ii) Respondents are entitled to adjustment of duty already paid. iii) Extended period of limitation cannot be invoked due to absence of concealment. iv) Mandatory penalties cannot be imposed. Appeal disposed off by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal are:- Whether the department's computation of the demand of duty under Notification No. 08/2003-CE dated 01.03.2003 is correct, particularly with respect to inclusion or exclusion of clearance values of goods cleared under other brand names for the purpose of aggregate clearance calculation.- Whether the respondents are entitled to adjust the duty already paid on branded goods against the total demand.- Whether the extended period of limitation can be invoked by the department for demanding duty beyond the normal period on grounds of non-disclosure of clearance values.- Whether mandatory penalties can be imposed in the absence of valid invocation of the extended period.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Correctness of Computation of Demand of Duty under Notification No. 08/2003-CERelevant legal framework and precedents: The interpretation of Notification No. 08/2003-CE is central. This notification governs exemption limits and computation of aggregate clearances for duty liability. The Tribunal's earlier order dated 04.07.2013 serves as a precedent, where it was held that duty paid on branded goods prior to crossing the exemption limit must be taken into account.Court's interpretation and reasoning: The Tribunal reaffirmed that the method of calculation adopted by the adjudicating authority was correct in principle. The department's demand was initially based on excluding clearances under other brand names from the aggregate clearance, which the respondents challenged. The Tribunal held that such clearances should be included for the purpose of computing aggregate clearance, thereby affecting the duty liability.Key evidence and findings: The respondents furnished details in their ER-1 returns disclosing clearance values of goods cleared under other brand names. The department's show cause notice relied on non-disclosure of these clearances as a basis for invoking extended limitation.Application of law to facts: Since the respondents had disclosed clearance values, the department's contention of non-disclosure was untenable. The Tribunal found that the demand computation excluding these clearances was incorrect and that the respondents were entitled to claim adjustment of duty already paid on such branded goods.Treatment of competing arguments: The department argued that clearances under other brand names were not disclosed and hence not to be included. The respondents countered by producing ER-1 returns evidencing disclosure. The Tribunal sided with the respondents based on documentary evidence.Conclusions: The Tribunal concluded that the computation of demand excluding clearance values of other branded goods was incorrect. The respondents are entitled to adjust duty already paid, and the quantum of demand must be recalculated accordingly.Issue 2: Entitlement to Adjustment of Duty Already PaidRelevant legal framework and precedents: The principle that duty paid on earlier clearances should be adjusted against total duty liability is well established. The Tribunal's order dated 04.07.2013 emphasized this entitlement.Court's interpretation and reasoning: The Tribunal reiterated that the respondents' claim that total duty paid exceeded the liability calculated on correct interpretation of the notification must be examined by the adjudicating authority. The adjustment is a matter of fact and quantum to be determined on remand.Key evidence and findings: The respondents' submissions and documentary evidence indicated that duty had been paid on branded goods prior to crossing exemption limits.Application of law to facts: The Tribunal directed the original adjudicating authority to verify the amount of duty paid and payable and adjust accordingly.Treatment of competing arguments: The department accepted the entitlement to adjustment but contested the quantum and sought to sustain demand beyond the normal period.Conclusions: The respondents are entitled to adjustment of duty already paid, and the adjudicating authority must compute the correct quantum accordingly.Issue 3: Invocation of Extended Period of LimitationRelevant legal framework and precedents: Extended period of limitation under the relevant laws can be invoked only on cogent grounds such as suppression or non-disclosure of material facts. The department relied on non-disclosure of clearance value of goods cleared under other brand names to justify extended limitation.Court's interpretation and reasoning: The Tribunal examined the show cause notice and found that the only ground for extended limitation was non-disclosure of clearance values. However, since the respondents had furnished these details in their ER-1 returns, the ground was negated.Key evidence and findings: ER-1 returns disclosed clearance values for other brand name goods. No other positive evidence was produced by the department to justify extended limitation.Application of law to facts: The Tribunal held that in absence of any cogent evidence of concealment or suppression, extended period cannot be invoked.Treatment of competing arguments: The department argued for extended limitation based on alleged non-disclosure. The respondents rebutted with documentary proof.Conclusions: The Tribunal upheld the adjudicating authority's order rejecting invocation of extended period and held that the department would not succeed on this ground.Issue 4: Imposition of Mandatory PenaltiesRelevant legal framework and precedents: Mandatory penalties are generally imposed when duty is demanded beyond the normal period due to suppression or fraud, justifying extended limitation.Court's interpretation and reasoning: Since the extended period was not invokable, the Tribunal held that mandatory penalties could not be imposed.Application of law to facts: The facts negated suppression or concealment, thereby negating the basis for penalty.Conclusions: Mandatory penalties are not imposable in the present case.3. SIGNIFICANT HOLDINGSThe Tribunal held:'The issue has already attained finality in terms of Tribunal's Order dt.04.07.2013 and neither party has challenged the mode of computation of demand, which is based on interpretation adopted by the department.''Except for the quantum, which is to be arrived at by verifying the amount paid and payable, they did not find any other issue in the appeal.''In the absence of any other cogent and positive evidence on record, this ground [non-disclosure] has already been considered and it was found that they have already disclosed these details to department in their ER-1s.''Since the scope of extended period is not available in the facts of the case, the mandatory penalty is also not imposable in the matter.'Core principles established include:- Duty paid on branded goods prior to crossing exemption limits must be considered for adjustment against total demand.- Disclosure of clearance values in statutory returns negates grounds for invoking extended period of limitation.- Absence of suppression or concealment negates imposition of mandatory penalties.- Quantum of duty demand must be recalculated on remand applying correct interpretation and adjustment principles.Final determinations:- The department's computation excluding clearance values under other brand names is incorrect.- Respondents are entitled to adjustment of duty already paid.- Extended period of limitation cannot be invoked due to absence of concealment.- Mandatory penalties cannot be imposed.- The matter is remanded to the original adjudicating authority for determination of quantum in accordance with these principles.