Sustainability of demand by invoking extended period of limitation

PJ/Case Laws/2011-12/1414

Case: M/s Vulcan Techno Pvt Ltd & Anr v/s CCE, Vadodara

Citation: 2009-TIOL-931-CESTAT-AHM

Issue:- Demand of duty raised by invoking extended period of limitation – bona fide belief that activity not amounting to manufacture as identical manufacturer granted relief – not sustainable.

Brief fact:- Appellants were engaged in manufacture of drill rods which is an accessory for mining machinery. The said drill rods consist of two major parts viz Connectors and Steel pipes. These parts were not functional independently nor they are sold separately. The drill rod is manufactured as per the specific design, dimensions and drawing given by the buyers and accordingly they are tailor made to suit the specific mining machinery, in which they are used. For manufacture of their finished good i.e drill rod, the appellant have to first manufacture these two parts. Once both these components are manufactured, appellant assemble them together with its built-in threads. Subsequently, the joining portion is welded for strengthening purpose and are grinded to have an even and finished look. The product after carrying out all these processes, is known as drill rod, and is supplied to various Public sectors Undertakings for their use in the mining machinery.

Demand of duty was raised on the ground that the drill rod is a complete product having a specific and distinct use and therefore, they can be said to be manufactured.

The Commissioner confirmed the demand against the appellant and also upheld penalty and extended period of limitation was also invoked as the show cause notice was issued in 26.06.2006 for the period 2001-01 to 2004-05.

Appellant’s Contentions:- Appellant contended that impugned order is not sustainable on merits as well as on limitation. Relaince was placed on CCE, Pune v/s Vulcan Leval Ltd, Pune [1985 (22) ELT – 123 (T) wherein it was held that conversion of duty paid seamless steel bars and tubes into drilling rods and tubes by the process of threading and cutting does not constitute manufacture. The Commissioner has not followed this decision on the ground that the appellants are not only carrying out the above activities but are also doing something more. But no additional activities being undertaken by appellant have been referred to distinguish the decision.

On limitation, appellant contended bona fide belief that their activity did not amount to manufacture. That the classification list of another unit located near by was approved by proper officer holding that the activity did not amount to manufacture.

Respondent’s Contentions:-

Reasoning of Judgment:- The Tribunal is only considering to dispose of appeal on limitation. Show cause notice was issued after normal period of limitation had expired. It was held that though the Commissioner (Appeal) agreed with contentions of the appellant but still invoked extended period of limitation on ground that such classification filed by other assesses cannot be taken benefit by the present appeal in the absence of any classification filed by them.

The Tribunal held that there was sufficient reasons for the appellant to entertain bona fide belief that such emergence of drill rods was not an act of manufacture. Ratio of the judgment of Supreme Court in the case of Padmini Products reported at 2002-TIOL-289-SC-CX applicable. Demand raised is time barred. Impugned order set aside.

Decision:- Appeal allowed with consequential relief.

Comments

PJ/Case Laws/2011-12/1414

Post a Comment

Query