TaxTMI 
TaxTMI 
2026 (3) TMI 14
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....confirms the demand of central excise duty by invoking the extended period of limitation contemplated under section 11A(4) of the Central Excise Act, 1944 [the Central Excise Act] with interest and penalty. 2. Excise Appeal No. 50731 of 2018 has been filed by the appellant to assail the order dated 03.11.2017 passed by the Commissioner that adjudicates the show cause notice dated 28.08.2017 that was issued for the period August, 2015 to June, 2017 seeking to deny the benefit of the Exemption Notification. The order, therefore, confirms the demand of central excise duty with interest and penalty. 3. The appellant is an Export Oriented Undertaking [EOU] It is engaged in the manufacture of automotive cylinder heads falling under Central Excise Tariff Heading 8409 in its Machining Division. The said goods are used in automobiles. The Company had two manufacturing unit, namely, Machining Division which is an EOU and Foundry Division situated in the Domestic Tariff Area [DTA] 4. The process followed by the appellant with respect to the clearance of automotive cylinder heads under two scenarios has been described by the appellant in the form of a flow chart which is as follows: ....
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....tured in India. 10. The demand proposed in the show cause notice was confirmed by order dated 19.09.2017 holding that the condition of the Exemption Notification was not fulfilled. However, while quantifying/calculating the differential duty demand, the order considered the entire DTA clearances of cylinder heads as reported in Form ER-2 (covering both scenarios 1 and 2) instead of considering only the cylinder heads manufactured out of processed ingots which is scenario 2 alone. This order has been challenged in Excise Appeal No. 51949 of 2017. 11. Another show cause notice dated 28.08.2017 was issued by the department for the subsequent period raising the same issue. This show cause notice was also contested on merits. The demand has been confirmed and the benefit of the Exemption Notification has been denied by order dated 03.11.2017, which order has been challenged in Excise Appeal No. 50731 of 2018. 12. Shri K.S. Naveen Kumar, learned counsel assisted by Shri Dakshina Murthy, Shri Mayank Srivastava and Shri Asish Choudry made the following submissions: (i) It is clear from the flow chart that the immediate raw material for manufacturing automotive cylinder he....
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....r heads manufactured out of processed ingots and not on the entire clearance to DTA shown in the ER-2 returns, which fact is supported by the Chartered Accountant Certificate dated 05.07.2018; (v) Another Certificate dated 07.08.2024 was issued by Chartered Accountant certifying that for the period from April, 2012 to June, 2017, the EOU unit of the appellant had not purchased aluminium ingots under the cover of Form CT-3 by a DTA unit and thus duty paid ingots were received; (vi) As regards, Excise Appeal No. 50731 of 2018, the facts are similar to Excise Appeal No. 51949 of 2017. However, post May, 2015, the appellant stopped manufacturing automotive cylinder heads from process ingots. In support of this, a Certificate of the Chartered Accountant was enclosed; (vii) The extended period of limitation is not invocable in the facts and circumstances of the case; (viii) Since the duty demand itself does not survive, interest liability will not arise; (ix) There is no evidence of mens-rea or guilty mind warranting imposition of penalty; and (x) Since the extended period of limitation is not invokable, penalty under section 11AC is ....
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.... 14. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 15. To appreciate the contentions that have been advanced, it would be appropriate to reproduce the relevant portion of the Exemption Notification which is as follows: "31st March, 2003 Notification No. 23 /2003 - Central Excise ***** The Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below, and falling within the Chapter, heading No. of the First Schedule of the Central Excise Tariff Act, 1944, specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking ***** and brought to any other place in India in accordance with the provisions of Foreign Trade Policy and subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (5) of the said Table, from so much of the duty of excise leviable thereon under section 3 of the Central Excise ....
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....e been denied to the appellant. 18. A similar issue was examined by the Tribunal in Gujarat Ambuja Exports. Gujarat Ambuja Exports was engaged in the manufacture of ring spun cotton yarn for which it imported raw cotton and also procured it from the domestic manufacturers. In the process of manufacture of ring spun cotton yarn, cotton waste emerged which was further used by the appellant for manufacture of open end cotton yarn which was cleared to the DTA after availing the benefit of the Exemption Notification that required that the benefit would be available subject to the condition that the goods cleared in DTA were manufactured only out of indigenous raw material. The department had denied the benefit of the Exemption Notification for the reason that the open end yarn cotton cleared to DTA was produced also from cotton waste arising from imported cotton. The Tribunal held that the open end yarn cotton was manufactured from cotton waste and not from the imported cotton and, therefore, the benefit of the Exemption Notification would be available to Gujarat Ambuja Export. The relevant portions of the decision of the Tribunal are reproduced below: "1.1 The brief facts o....
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....We noticed that the cotton waste is a distinct and separate commercial commodity and appeared in the Central Excise Tariff under Chapter heading 5202. Therefore in our view the cotton waste that got generated while producing/ manufacturing of Ring Spin Yarn should be considered as a separate manufactured goods and said cotton waste used in the manufacturing of Open End Yarn should be taken as raw material produced or manufacture in India. In the present matter imported cotton are raw material for "Ring Spun Yarn", it cannot be said that the same are "raw materials" as envisaged in Notification No. 8/97 for Open End Yarn. The expression "raw materials" is a material used in manufacture of goods; in the case in hand Open End Yarn is manufactured from cotton waste and not from the imported cotton." (emphasis supplied) 19. Likewise, in the present case the immediate raw material for manufacture of automotive cylinder heads is castings which is manufactured in India. Even the processed aluminium ingots are processed in India. The appellant would, therefore, clearly be entitled to the benefit of the Exemption Notification. The appellant was, therefore, not required to provide recor....
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.... any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,- (a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,- (i) his own ascertainment of such duty; or (ii) the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA. 25. Section 11A(4) of the Central Excise Act deals with circumstances under which the extended period of limitation of five years can be invoked. It is reproduced below: ....
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....n M/s. Chemfab Alkalies Ltd. vs. Commissioner of C. Ex., Pondicherry [2010 (251) E.L.T. 264 (Tri.-Chennai)] wherein it was held: "6. ***** It cannot be a case of anybody that since all the excisable units are being audited by the department from time to time, the extended period of limitation will not apply in respect of any unit. Such an interpretation would render the relevant legal provision regarding application of extended period of time totally redundant and hence cannot be accepted." 29. The Commissioner further held: "20.3 From the above, I find that the assessee has suppressed the material facts from the department with intent to evade central excise duty in terms of proviso to Section 3(1) of Central Excise Act, 1944, by way of suppressing the facts. Had the audit of the unit of the assessee not been conducted by AG and not examined the issue of misuse of availing benefit of FTP and the Notification, the same would have not come to the notice of the department. *****" 30. Learned counsel for the appellant submitted that the department was aware of the activities of the appellant and they had been subjected to audits in the past. Learned counsel als....
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....ion. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bonafide manner. The relevant portion of the judgment is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a mala fide belief particularly when such a belief was emanating from the view taken by a Division Bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could coexist. In such cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of....
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....he date the audit was conducted. Even otherwise merely because facts came to light only during the audit does not prove that there was an intent on the part of the assessee to evade payment of duty." (emphasis supplied) 35. It will also be pertinent to refer to the decision of the Tribunal in Himadri Chemicals wherein it was held as follows: "11. Therefore, following the decisions rendered by the Hon'ble High Courts of Gujarat and Bombay having a direct application in the case in hand, we are of the view that since adequate disclosures were duly made in the ER-2 returns, there cannot be any case of suppression and therefore, the SCN issued in April 2016 for raising demand of duty on DTA clearances made by appellant in September 2011 is wholly barred by limitation of time." 36. The decision of the Tribunal in G.D. Goenka also needs to be referred to. The Tribunal summed up the issues relating to invocation of the extended period of limitation in paragraph 25 which is reproduced below: "25. To sum up: a) The appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not ....