Commr. of C. Ex., Cus. and S.T., Daman vs Tulsiani Builder and Textile Pvt. Ltd.

Akil Kureshi, J.—Revenue is in appeal against judgment of CESTAT dated 22-6-2010 [2010 (261) E.L.T. 1150 (Tri. - Ahmd.)]. Following questions have been presented for our consideration :

(A) Whether in the facts and circumstances of the case, the Tribunal has committed a substantial error of law in deciding appeal on the question of limitation, which was not in issue in appeal, and not giving any finding on merit of the case?

(B) Whether in the facts and circumstances of the case the Tribunal has committed a substantial error of law in holding that extended period of limitation prescribed under first proviso to Section 11A of the Central Excise Act, 1944 cannot be invoked and show cause notice was required to be issued within normal period of limitation?

(C) Whether in the facts and circumstances of the case the Tribunal has committed a substantial error of law in rejecting the appeal of revenue?

At the outset, learned counsel for the appellant pointed out that the sole question involved in this appeal is with respect to extended period of limitation being available for recovering unpaid duty of the respondent.

From the perusal of the record with the assistance of learned counsel for the Revenue, we find that the Revenue intended to apply the extended period of limitation for recovery of unpaid dues on the ground that the respondent assessee had removed the goods clandestinely without payment of duty. The Appellate Commissioner however, held in favour of the assessee upon which the Revenue approached the Tribunal. After one round of remand from the High Court, Tribunal in its fresh impugned order dated 22-6-2010 rejected the Revenue''s appeal in following terms :

The learned SDR on behalf of the Revenue submitted that the respondents were fully aware that they had manufactured dyed yarn during the period prior to 17-4-1997, the date on which the unit was converted to a non composite mill by removing the texturised machines and thereby becoming a dyeing unit. As per Notification No. 19/97-C.E., dated 11-4-1997, a concessional rate of duty was fixed in respect of dyed filament yearn manufactured in a factory which does not have the facilities for producing single or draw twisting or, texturised yarn. Appellant had manufactured dyed yarn prior to 11-4-1997 when the unit was a composite mill and therefore yarn manufactured during the relevant period was not eligible for concessional rate Knowing fully well, the respondents had cleared dyed yarn ant concessional rate of duty subsequent to 17-4-1997 which was manufactured prior to 11-4-1997 and therefore he submitted that respondents were not eligible for the benefit of concessional duty and demand for duty has been correctly confirmed by invoking extended period u/s 11A of Central Excise Act, 1944. The respondents had availed modvat credit and had texturisig machine prior to 11-4-1997 and therefore, they had deliberately evaded the duty by clearing the goods at concessional rate of duty. He also drew out attention to the fact that the Joint Commissioner in the adjudicated order has dealt with this issue, and, had confirmed the demand invoking the extended period. He also distinguished the decision of the Hon''ble Supreme Court from which the Commissioner (Appeals) had drawn support to come to the conclusion that for determining, the rate of duty, the date of removal is relevant and not the manufacture and date of manufacture would be relevant only to determine excisability.

We have considered the submissions made by the learned DR and we find that the Revenue has not been able to make a mat on the limitation aspect. On 17-4-1997 respondents filed an application for amendment in the registration certificate. Therefore, on 17-4-1997 department came to know that respondents converted their unit to a single dyed yarn unit by removing texturised machine. Further the respondents also filed return with the department which showed that appellants had cleared goods at a concessional rate of duty and in view of the fact that registration certificate had been amended, department cannot be said to be unaware of the fact of clearance of Stock manufactured prior to 17-4-1997. Further even after the visit of the officers on 8-5-1997 for preventive checks, the show cause notice could have definitely been issued within one year or six months as the case may be since the case is based on statutory records and goods have been cleared under proper documents only goods manufactured have been accounted properly exemption has been claimed in the documents. The purpose of filing the monthly returns, requirement of maintenance of daily stock account, declaration of classification and registration are to facilitation detection of short levy. Further the very fact that commissioner (Appeals) allowed the appeal relying upon a decision of Apex Court shows issue one of interpretation. If Commissioner (Appeals) could wrongly apply a Supreme Court''s decision, can we fault the assessee. In such a case proviso to Section 11A is not clearly attracted. Further we also take note or the decision of Supreme Court in the case of Polyset Corporation [2000 (115) E.L.T. 4 (S.C)] relied upon by the Commissioner (Appeals) does say that date of manufacture is relevant for excisability and for rate of duty, date of removal is relevant. The show cause notice was issued in 2003. Under these circumstances invocation of extended period cannot be sustained. Since the show cause notice itself cannot be sustained on the ground of limitation and the respondents had raised an issue of limitation before both the lower authorities, we find that the demand is clearly time barred and cannot be sustained. Accordingly we rejected the appeal filed by the Revenue.

Counsel for the Revenue relying on decision of Division Bench of this Court in case of Commissioner of Central Excise Vs. Neminath Fabrics Pvt. Ltd., submitted that the Tribunal committed error in not granting extended period of limitation in the present case. Counsel submitted that this Court in the above decision in case of Neminath Fabrics Pvt. Ltd. (supra) held that the point from which the period of one year or five years is computed is relevant date as defined in sub-section (3)(ii) of Section 11A of the Central Excise Act and once knowledge was acquired by the department regarding clandestine removal, proceedings must be initiated within one year, would not be the correct position in law.

In the present case, however, we find from the orders of the Tribunal that the very foundational fact of clandestine removal of goods is not established. The Tribunal had come to the conclusion that the department was fully aware all along that the assessee was manufacturing dyed yam prior to 17-4-1997, date on which unit was converted to non composite mill by removing the texturised machines and thereby becoming a dyeing unit. It was noted that as per Notification No. 19/97 dated 11-4-1997, concessional rate of duty was fixed in respect of dyed filament yearn manufactured in a factory which does not have the facilities for producing single or draw twisting or texturised yarn. Thus the appellant which had manufactured dyed yarn prior to 11-4-1997 when it was a composite unit was not eligible for concessional rate of duty. In short view of the Tribunal would come to that there was no fraud, collusion or misstatement or suppression of facts or contravention of any of the provisions of Act or the Rules with intent to evade payment of duty.

In that view of the matter, we do not find any error in view of the Tribunal that extended period of limitation was not available to the department in present case. The Conclusion of the Tribunal are factual in nature. Application of statutory provision to such facts is not defective. Additionally, we also find that Tribunal was of the opinion that entire issue was not free from doubt and even the Appellate Commissioner at one stage had thought that assessee would be entitled to concessional rate of duty which of-course was later on not found sustainable.

We however, agree that suggestion of counsel of Revenue that as held by the Division Bench of this Court in case of Neminath Fabrics Pvt. Ltd. (supra), once the facts necessary to permit the department extended period of limitation are established on record, thereafter, the question of initiating proceedings within six months/one year from the date of knowledge of the department, is not relevant. Any observations to the contrary in the order of Tribunal impugned in this appeal cannot be approved.

Subject to above observations, Tax Appeal is dismissed.