Extended period of Limitation

PJ/Case Laws/2011-12/1353

Extended period of Limitation - invoking of

Case: KAY KAY PRESS METAL CORPORATION Versus COMMR. OF CEN. EX., VALSAD

Citation: 2011 (270) E.L.T. 691 (Tri. - Ahmd.)

Issue:- Extended period cannot be invoked when asseessee is under bonafide belief based on Tribunal or Court’s decisions.

Brief Facts:- Appellant was undertaking the activities such as cutting, bending, punching on duty paid articles, plates or channels. Revenue alleged that the said activities amounted to manufacture and issued show cause notice in 2003 for the period 1998-1999 to 1999-2000.

The Adjudicating Authority confirmed the demand of duty of Rs. 41,04,217/- and impose penalty of identical amount.

Hence, appellant is before the Tribunal.

Appellant’s Contention:- Appellant have relied upon the Supreme Court judgment in the case of Continental Foundation Jt. Venture v. CCE, Chandigarh [2007 (216) E.L.T. 177 (S.C.)] wherein it was observed that when there is a bona fide doubt as to non-excisability of the goods due to divergent views of the Courts, extended period of 5 years cannot be invoked and more failure or negligence in not taking licence or not paying duty, is not sufficient to invoke extended period.

Reasoning of Judgment:- The Tribunal noted that the issue is no more res integra and stands settled against the appellant on merit by the Larger Bench in the case of Mahindra & Mahindra Ltd. v. CCE, Aurangabad [2005 (190) E.L.T. 301 (Tri.-LB)].

The Tribunal observed that though there are certain disputes about the factual position in the present case as to whether the appellant themselves have carried out the processes or they have got it done through job worker, but the present appeal can be disposed off on the point of time bar.

It was noted that the period involved is 1998-2000, whereas the Show Cause Notice was issued in 2003. During the relevant period, various decisions of the Tribunal were to the effect that such activity of cutting, bending, and punching duty paid articles, plates or channels does not amount to manufacture. It was only subsequently that the matter was referred to Larger Bench in the light of the decision of the Supreme Court in the case of Collr, CE., Jaipur v. Man Structurals Ltd. [2001 (130) E.L.T. 401 (S.C.)].

It was noted that the Larger Bench decision of the Tribunal took notice of the earlier decisions of the Tribunal in the case of Aruna Industries v. Collr., C.E. - 1986 (25) E.L.T. 580 (Tri.) as also many other decisions of Tribunal including the Supreme Court judgment in the case of Wainganga Sahkari S. Karkhana Ltd. v. Commissioner [2002 (50) RLT 177 (Tribunal)], as affirmed by the Supreme Court [2002 (142) E.L.T. 12 (S.C.)].

As such, it is clear that during the relevant period, various decisions and judgments held the activity as not amounting to manufacture. As such, we are only required to deal with the plea of limitation.

The Tribunal noted that the Tribunal's decision in the case of Mahindra & Mahindra Ltd. v. CCE, Aurangabad [2000 (201) E.L.T. 27 (Tri.-Del.)] had the same effect as the judgment relied upon the assessee herein, wherein it was laid down that where the appellant is under bona fide belief that parts of structures are not excisable and such impression of non-excisability prevailed during the material period amongst assesses and officers. Inasmuch as, decisions during the material period were favouring the assessee, the charge of suppression of fact is not sustainable and extended period is not invokable. Similarly, reliance was placed on the case of Mail Mark Nun yarn v. CCE, Chennai - 2009 (241) E.L.T. 422 (Tri. - Chennai), it was held that divergent views prevailing on excisability of Shikakai Powder, with different High Courts having held different views on the issue, the appellants can be said to be under bona fide belief and extended period of limitation cannot be invoked.

It was held that the law on the issue is clear i.e. to the effect that when there are divergent views, many of which are in favour of the assessee holding the field, no suppression or mis-statement can be attributed to the assessee, to entertain the same belief. As admittedly, in the present case, judgment prior to Larger Bench in the case of Mahindra & Mahindra Ltd., were laying that the processes allegedly adopted by the appellant did not amount to manufacture, the tribunal is of the view that the demand raised beyond the period of limitation, by invoking extended period, is barred. As such, irrespective of the fact as to whether the appellants themselves have undertaken the said activity or not, the demand is required to be quashed on the above issue itself.

As the Tribunal has already held the demand as barred by limitation and the impugned order is required to be set aside on this ground, the Tribunal finds no justification for imposition of penalty on the appellant. The same is also set aside.

Decision:- Appeal allowed.

Comment:- This decision is clearly bringing the landmark analogy that when a manufacturer has acted on the basis of decisions of tribunal and High Courts and has not paid the duty then the extended period of limitation cannot be invoked. This means that the allegation of willful suppression, fraud etc. with an intent to evade payment of duty cannot be alleged in such cases.

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PJ/Case Laws/2011-12/1353

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