Full Judgment
2. Respondent are engaged in the manufacture of various products classified under Chapter 32 of Central Excise Traffic Act. They filed a monthly return for May 98 indicating some balance of finished goods and also some goods received by them for repairing and reconditioning under Rule 173H. Admittedly, the said return was the last return filed by them as they had stopped their manufacturing activities from March 98 onwards on account of heavy losses and workers strike. The appellant vide their letter dated 25-1-2001 also intimated the revenue that as they were unable to pay the wages to their workers, it seems that there was theft in the factory and goods were not available. Thereafter SCN was issued on 18-7-02 alleging clandestine removal of the goods & Proposing confirmation of demand and imposition of penalty. While adjudicating the case. Joint Commissioners observed that the respondent vide their letter dated 25-1-2001 had admitted non-availability of the goods in their factory in which case it was for the assessee to discharge the duty burden on the same. Accordingly, confined the demand of duty and also imposed penalty under Section 11 AC.3. On appeal against the above order respondent contended before the Commissioner (Appeals) that admittedly goods were not cleared by them clandestinely and as such, duty confirmation was not justified. Demand was also contested on the point of limitation. While allowing the appeal on ground of limitation, Commissioner (Appeals) observed as under: In this entire proceedings, I find that no effort was made by the Central Excise authorities to enquire into the physical availability of the disputed goods or its removal thereafter under the claimed unusual circumstances even after receipt of letter dated 25-1-2001 even though no F.I.R. was lodged with the police authorities. At least, on the said receipt of the letter from the appellant, Central Excise officers should have acted upon this information, inter alia, by conducting inquiries for establishing the duty liabilities on the said goods, some of which were claimed as received for repairing and reconditioning under Rule 173H of Central Excise Rules. They should have thereafter, proceeded to issue a show cause notice for recovery of the duty liabilities found payable by the appellant.
Accordingly, it was not open to the authorities to allege clandestine removal of the disputed goods, some of which were claimed to be duty paid goods received in terms of Rule 173H of Central Excise Rules to apply the extended period of limitation for this recovery without establishing intention to evade duties.
Appellant had claimed that their goods were not available due to the unusual happenings within their factory after March 1998. Therefore even if the liabilities for payment of duties on the disputed goods are in principle to be accepted, it was not open to the authorities of apply the extended period of limitation in recovery of duties even considering letter dated 25-1-2001 as the date when information was given by the appellant on non-availability of these goods.
Thereafter unless some inquiry was conducted to establish the manner in which such goods have been cleared inter alia, clandestinely out of factory, normal period of limitation in recovery of duties should have been applied. With the facts on record, there exist no ground to justify application of the extended period of limitation contained in Section 11A(1) by alleging any mala fide with intent to evade payment of duties. In fact, the show cause notice and also the impugned order do not reveal that any effort was made by Central Excise authorities to inquire the facts pertaining to non-availability of the good in question, even though the show cause notice for recovery of duties in application of the extended period of limitation with proposal for penalization of grounds of suppression of information in terms of Section 11 AC and recovery of interest under Section 11AB of Central Excise Act, was issued on 18-7-2002 on the basis of the suo moto disclosure of the non-availability of the goods by the appellant in their letter dated 25-1-2001, after a normal period of one year provided in the statute for recovery of differential duties from a Central Excise assessee.
In the said position of facts, I find merit to the claim that of extended period . of limitation is not sustainable on the basis of facts contained in the impugned order and therefore, the demand for duties is barred by limitation of time contained in Section 11A of Central Excise Act. Also, when no duty liability can be sustained on ground of applicability of limitation, both the charge of recovery of interest under Section 11AB, and also penalization under Section 11 AC of Central Excise Act are not Sustainable also for the reason that the onus of providing intention to evade duty, or establishing clandestine removal, is not discharged. Impugned order is therefore, set aside.
4. Revenue has challenged the above order on the ground that date of intimation of loss is not the relevant date in Section 11A and has relied upon the larger bench decision of the Tribunal in the case of Nizam Sugar Factory Ltd. v. Collector of Central Excise, Hyderabad laying down that the period of five years cannot be curtailed because the department had knowledge about the fraud.
However, I find that the said decision is not applicable to the peculiar facts of the present case in as much as it is clear that the goods were not cleared by the assessee without payment of duty but were lost on account of probable theft by the workers. No doubt that in such a case, assessee is duty bound to discharge duty liability on such goods but the question is whether extended period of limitation is available to the revenue or not when the entire facts were intimated to the revenue. There is no available date for the alleged clearance of goods so as to be considered as relevant date for the purposes of Section 11A. In my views the issue has been extensively examined by the appellate authority and rightly concluded in favour of the respondent.
The said order does not call for any interference. Appeal, filed by the revenue, is accordingly dismissed.