Demand of Central Excise Duty cannot be sustained being time barred and in absence of any suppression by the assessee

The CESTAT, Ahmedabad has ruled that a demand for Central Excise Duty cannot be sustained if it is time-barred and there's no evidence of the assessee suppressing facts with intent to evade payment. In this case, the Revenue Department had conducted verification and had knowledge of the exemption claimed by Ambica Engineering Works. The Tribunal found that the department failed to consider this verification report and that the assessee's claim of exemption, even if mistaken, did not amount to suppression of facts or intent to evade duty. Consequently, the demand order was set aside.

The CESTAT, Ahmedabad in the matter of Ambica Engineering Works v. C.C.E. & S.T.-Surat-I [Excise Appeal No. 10859 of 2020, dated June 7, 2022] set aside the demand order has held that invoking extended limitation period by the Revenue Department cannot be sustained, being time barred and is invalid in the absence of suppression of fact with intent to evade payment of duty on the part of the assessee.

Facts

Ambica Engineering Works, ("the Appellant") is engaged in the manufacturing of textile machineries, falling under Chapter 84 of the Central Excise Tariff Act, 1985 ("the Central Excise Act"). The Appellant cleared the manufactured goods by availing exemption under Notification No. 06/2002-Central Excise dated March 01, 2002 ("N/N 06").

The Appellant submitted an application on August 02, 2007 for Central Excise Registration, which was granted. Further, a post facto verification was done by the Revenue Department ("the Respondent") of the premises and intended purpose for which Central Excise Registration application was made by the Appellant and a report was given w.r.t. eligibility of exemption on the goods manufactured by the Appellant underNotification No. 06/2006 Central Excise dated March 1, 2006 ("the Exemption Notification").

In November 2008, an audit was conducted and accordingly, the statement of the Appellant was recorded and thereafter a Show Cause Notice dated April 06, 2009 ("the SCN") was issued inter-alia raising demand of duty for the period April 15, 2004 to February 2008 and denying the benefit of Exemption Notification, which were confirmed vide Order dated July 31, 2010, by invoking the extended period of limitation. The Appellant in this regard, filed an appeal before the CESTAT, Ahmedabad, wherein, vide order dated September 06, 2019 the matter was remanded with the direction to consider the matter on limitation in view of the verification report of the Respondent.

However, vide Order-in-Original dated September 30, 2020 ("the Impugned Order") whereby demand of the duty was confirmed.

Being aggrieved, this appeal has been filed.

Issue

• Whether the extended period of limitation can be invoked in absence of any evidence of wilful mis-declaration or suppression of facts or intention to evade payment of duty?

Held

The CESTAT, Ahmedabad in Excise Appeal No.10859 of 2020, dated June 7, 2022held as under:

• Observed that, the Respondent had carried out the verification of the manufacturing activity of the Appellant physically and specific report in respect of the claim of Exemption Notification was reported, which was not considered by the lower authorities as the same was neither presented nor available at the time of adjudication.
• Noted that, the information regarding the nature of goods claimed for exemption was within the knowledge of the Respondent.
• Stated that, once the exemption is claimed and the same is in the knowledge of the Respondent, firstly the Respondent is to do the proper verification to ascertain whether the goods on which exemption is claimed are covered under the Exemption Notification. The belief of an assessee may be right or wrong but it is incumbent on the Respondent to ascertain the correctness of the eligibility of the Exemption Notification. Therefore, by declaring the goods under Exemption Notification, there cannot be a charge of suppression of fact on the part of the Appellant or the Appellant had suppressed anything or had an intention to evade payment of duty.
• Set aside the SCN and the Impugned Order passed by the Respondent.
• Held that, the demand raised in the SCN and confirmed vide the Impugned Order is not sustainable, being time barred.