2000 (11) TMI 1174 - AT - Central Excise

Tribunal rules duty payment time-barred for gear box components supplied to EOUs

The Tribunal ruled in favor of the appellants in a case concerning duty payment on components used in manufacturing gear boxes supplied to Export Oriented ... Exemption for inputs captively used - benefit to 100% EOU and FTZ supplies - prospective application of substantive amendment - Modvat credit denial on inputs for goods cleared to 100% EOU/FTZ - extended period for assessment under the proviso to Section 11A - bona fide reliance on prevailing judicial decisions as bar to extended periodExemption for inputs captively used - benefit to 100% EOU and FTZ supplies - prospective application of substantive amendment - Modvat credit denial on inputs for goods cleared to 100% EOU/FTZ - Whether inputs/components captively used in manufacture of gear boxes cleared to 100% EOUs were entitled to the exemption under Notification No. 217/86 for the period before 1-3-92. - HELD THAT: - The Tribunal held that amendments made by Notifications dated 1-3-92 (which removed the bar on availing concession/exemption for goods used in manufacture of goods cleared to 100% EOU or FTZ) effected a substantive change and therefore operate prospectively from 1-3-92. Consequently, for clearances made in the period prior to 1-3-92 the amended position could not be invoked. Applying the Larger Bench's reasoning in L & T Ltd. (as applied by this Bench), the amendment by Notification No. 33/92 is effective from its date and does not apply retrospectively to the tax period in question. Therefore the appellants could not claim the later-notified exception for the period antecedent to 1-3-92. [Paras 3]Amendment removing the bar on exemption for inputs used in manufacture of goods cleared to 100% EOU/FTZ is substantive and prospective; appellants cannot rely on it for clearances in the period before 1-3-92.Extended period for assessment under the proviso to Section 11A - bona fide reliance on prevailing judicial decisions as bar to extended period - Whether the extended period under the proviso to Section 11A could be invoked to demand duty and penalty from the appellants for the disputed period. - HELD THAT: - The Tribunal found that although on the merits the appeal fails because the amendment is prospective, the appellants had acted under an understanding of the law prevailing prior to the Larger Bench decision in L & T Ltd., and several earlier decisions supported the view favourable to the appellants. There was no finding of suppression of facts or fraudulent intent to evade duty. In these circumstances the conditions for invoking the extended period under the proviso to Section 11A were not satisfied. Accordingly the demand made by invoking the extended period, and the penalty imposed, could not be sustained and are time-barred and liable to be set aside. [Paras 3]Extended period under the proviso to Section 11A not invocable where the assessee acted under bona fide reliance on existing decisions; demand and penalty are time-barred and set aside.Final Conclusion: The appeal is dismissed on merits insofar as the substantive amendment of 1-3-92 cannot be given retrospective effect, but the duty demand and penalty confirmed by the Collector are set aside as time-barred because the appellants had bona fide relied on prevailing decisions and there was no suppression or intent to evade payment; appeal disposed accordingly. Issues:1. Whether the appellants are liable to pay duty on components used in the manufacture of gear boxes supplied to 100% Export Oriented Units (EOUs).2. Whether the demand for duty is time-barred.Analysis:1. The appellants manufactured gear boxes and parts thereof, using components like gear box housing, pinion shaft, wheel shaft, gear wheel, etc., which were captively used in the manufacture of gear boxes. Some gear boxes were supplied to EOUs without duty payment, leading to Central Excise authorities initiating proceedings. The Collector passed an Order-in-Original demanding duty and imposing a penalty. The appellants argued that the gear boxes supplied to EOUs did not qualify for complete duty exemption. They relied on Notification No. 123/81 and an amendment to Notification No. 217/86 by Notification No. 33/92. The Tribunal noted that amendments removed the bar for concession/exemption to goods used in manufacturing for EOUs or Free Trade Zones. The Larger Bench's decision in M/s. L & T Ltd. case supported this interpretation. The Tribunal found the demand was not applicable before 1-3-92, thus ruling in favor of the appellants. The duty and penalty were set aside due to the time-barred nature of the demand.2. The appellants contended that the Show Cause Notice issued in 1992 demanded duty for a period starting from 1987. They argued that they availed concessions based on the understanding of the law at that time, and hence, no extended period for duty demand could be invoked. The Revenue relied on a decision by the Larger Bench which contradicted the Indian Aluminium case. The Tribunal examined the amendments to Rule 57C and Notification No. 175/86, observing that the law amendments were substantive and prospective. Despite the earlier decisions favoring the appellants, the Tribunal ruled that the demand was time-barred. Consequently, the duty and penalty imposed were set aside.In conclusion, the Tribunal disposed of the appeal in favor of the appellants, ruling that the duty demand was time-barred due to the retrospective application of relevant law amendments.