Whether extended period of limitation be invoked when classification was in knowledge of department?

PJ/Case Law/2013-14/2095

Case:- M/s GAIL (INDIA) LTD VsCOMMISSIONER OF CENTRAL EXCISE, KANPUR

Citation:- 2014-TIOL-30-CESTAT-DEL

Brief facts:- Vide its impugned order, Commissioner had confirmed demand of duty of Rs.1,62,95,955/- along with imposition of penalty of identical amount. The said demand stands confirmed for the period March, 2000 to February, 2002 by issuing a show cause notice dated 10.8.2004. The demand is in respect of one of their product 'pentane' which was being cleared by the appellant under sub heading 2711.19 of the Central Excise Tariff as other 'petroleum gases and other gaseous hydrocarbons' and paying Central Excise duty @ 8% ad valorem after availing of the benefit of sl. No. 24 of notification No.6/2000-CE dated 1.3.2000 and sl. No.34 of notification No.3/2001-CE dated 1.3.2001.

Appellant’s contention:- Apart from contesting the issue on merits, learned advocate appearing for the appellant has submitted that the demand is fully barred by limitation inasmuch as the appellant was filing due classification claiming classification of 'pentane' under heading 2711.19 with the benefit of exemption vide notification No.6/2000-CE dated 1.3.2000 and 3/2000 dated 1.3.2001. Even in respect of their Vijaypur unit 'pentane' was being classified under heading 2771.19 and the classification declaration filed by their Vijaypur unit was duly approved by the department. Learned advocate also draws attention to various decisions of the Tribunal laying down that wherever the classification has been filed by the appellant, no allegation of suppression or mis-statement can be made there against. Learned advocate has specifically drawn attention to an order-in-original No. 52/UDR-II/MP/2004 dated 29.3.2005 passed by the Commissioner of Central Excise, Baroda wherein while classifying the product under heading 27711090, the demand stand dropped by the adjudicating authority, in their own case, on the point of limitation. He submits that the said order stand duly accepted by the Revenue and no appeal stand filed against that. He draws attention to another order passed by the Commissioner in the case of M/s. GAIL, Vijaypur vide its order No. 80-88/Commr/CEX/IND/2005 dated 11.11.2005 wherein the Show cause notice proposing change in classification were dropped by him by observing that the correct classification of 'pentane' in under heading 2711.19. As such, he pleads for allowing the appeal on point of limitation.

Respondent’s contention:-The Revenue was of the view that the product was correctly classifiable under sub-heading 2710.90 of the Central Excise Tariff as other 'petroleum oils obtained from bituminous minerals other than crude, preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations'. Goods classifiable under this heading were chargeable to duty @ 16% ad valorem during March, 1999 to 11.01.2002 and @ 20% ad valorem during 12.1.2002 to 28.2.2002. Accordingly, proceedings were initiated against them resulting in confirmation of demand of duty.

Reasoning of judgment:-After appreciating the submissions made by both sides, the bench found that present appeal can be disposed of on the point of limitation itself. Demand for the period stand raised by the show cause notice dated 10.8.2004, by invoking the longer period of limitation. Though it is not disputed that appellant had been filing the declaration claiming the classification of goods under sub-heading 2711.19 along with the benefit of exemption notification, still the longer period stand invoked against them on the ground that 'pentane' was not properly classified under 2710.90 and as such, there was mis-declaration on the part of the assessee.
Further the bench did not agree with the above reasoning of the Revenue. The 'pentane' disputed product, in question is being classifiable by other units of M/s. GAIL India under sub-heading 2711.19 only. They have also filed the same classification. If the Revenue was not in agreement with the said declaration of such classification, it was open to the officers to raise the objection to the same and to initiate proceeding for change in classification. It was found that the issue of limitation stands discussed in detail, by the Commissioner of Central Excise and Customs, Baroda while deciding the classification of the same product in the case of M/s. GAIL, LPG Recovery Project, Gandhar, Bharuch. For better appreciation, we reproduce the relevant part of the said order
"The other question which has to be decided is as to whether the assessee company is guilty of deliberate misdeclaration and suppression of relevant information in respect of pentane mixture and whether longer limitation period of five years under proviso to Section 11A(1) of the Central Excise Act, 1944 is available to the department for recovery of short paid duty in respect of the clearances of the pentane mixture. On going through the records I find that the assessee company had filed a classification declaration under the then Rule 173B of the Central Excise rules, 1944 on 3rd April 2001 wherein they had declared the pentane mixture as one of the products being manufactured by them and its classification had been declared as 2711.19 and the rate of duty as 8% adv. Along with classification declaration a detailed note describing the manufacturing process had also been enclosed. This classification declaration had been received in the Range office on 04.04.2001. No objection has been raised to the classification of pentane mixture under subheading 2711.19 of the Tariff either by Range Officer or by jurisdictional Assistant Commissioner. In addition to this, I also find that the assessee company was filing monthly RT - 12 / ER - 1 returns, during the period of dispute, in which classification of the pentane mixture was being shown as under subheading 2711.19 of the Tariff and rate of duty was being mentioned as 8% adv. and at no point of time any objection was raised either by the Range officer or by the jurisdictional Assistant Commissioner to the classification of pentane mixture under subheading 2711.19 of the Tariff. In view of this position, the allegation that the assessee company had deliberately mis-declared the description of pentane mixture and deliberately misclassified the same under subheading 2711.19 of the Tariff with intention to evade payment of duty is not sustainable. The assessee company in the classification declaration filed by them in April 2001 had claimed the classification of pentane mixture under subheading 2711.19 and had also given detailed manufacturing process of the production and it was for the department to correct the same but no such action was taken. In view of this, I hold that longer limitation period of five years is not available to the department under proviso to Section 11A(1) of the Central Excise Act. 1944 and since the show cause notice for demanding short paid duty during the period from May 2001 to February 2002 was issued only on 25-11-2004, the entire demand of duty is time barred."
The appellant relied on the Hon'ble Supreme Court decision in the case ofPahwa Chemicals Pvt. Ltd. vs. Commissioner [2005 (189) ELT 257 (SC) = (2005-TIOL-144-SC-CX)as also on the decision of Supreme Court in the case ofDensons Pultretaknik v. Commissioner [2003 (155) ELT 211 (SC)]= (2003-TIOL-46-SC-CX)laying down that claim of classification under different heading then the one adopted by the Revenue does not amount to suppression of facts. To the similar effect is another decision of Supreme Court in the case ofO K Play (India) Ltd. vs. Commissioner [2005 (180) ELT 300 (SC).
They also took note of another decision of the Commissioner in respect of Vijaypur unit of same appellant wherein he has observed as under:
"5. The above SCNs proposing change in classification from 2711.19 to 2710.90 was issued because of Audit objection. The Department had initially classified the Pentane under Chapter sub-heading 2711.19 only. The above technical aspect was explained to Audit and they have accepted the technical aspect and have agreed to classification under 2711.19 and audit objection has been closed. I am also in agreement with the technical description of Pentane and its correct classification under 2711.19. In view of the settlement of dispute, the show cause notice in question deserves to be dropped."
In view of the foregoing, they were of the firm opinion that there was no suppression or misstatement on the part of the appellant so as to justifiably invoke the longer period of limitation. We accordingly, allow the appeal on the point of limitation itself, impugned order is accordingly set aside and appeal allowed with consequential relief.

Decision:- Appeal allowed.

Comment:- The essence of this case is that when revenue never raised a query on the classification of pentane even when the same was reflected in every return filed claiming benefit of the exemption notification, then the revenue cannot invoke the extended period of limitation contenting that there was mis-declaration of facts. As revenue had always accepted the returns filed, it was open for them to seek clarification regarding the details of exemption claimed. Therefore, invocation of extended period of limitation and imposing penalty on the assessee was not tenable in eyes of law.

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PJ/Case Law/2013-14/2095

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