Khushal Fertilizer (P) Ltd. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. the issue involved in this appeal, filed by m/s. khushal fertilizer (p) ltd., is whether the extended period of limitation is invokable for demanding central excise duty from them.2.1 shri p.c. jain, learned advocate, submitted that the appellants manufacture steel tube and pipes and claim exemption under notification no. 202/98-c.e., dated 20-5-1988; that the tubes and pipes manufactured out of flats not exceeding 5 mm in thickness are exempt from duty under the notification; that the demand pertains to the period from 26-3-1990 to 30-3-1992; that when the matter was first heard by the appellate tribunal the same was remanded vide final order no. 1937/2000-b dated 23-11-2000 [2001 (127) e.l.t. 210 (tri.)] to examine the time bar issue afresh and also to work out the correct duty payable by the appellants.the learned advocate, further, submitted that during the relevant period a dispute was going on between the department and the suppliers of raw material regarding correct classification of their products; that the department classified the product of the supplier as flats and collected duty at the rate applicable to flats whereas the suppliers were claiming their product as bars and were paying the duty under protest; that they described the products as bars in the gate passes; that though the description of the goods mentioned in the relevant gate passes was bars, the duty was discharged by the supplier at the rate applicable to flats under protest; that they were, therefore, under bona fide belief that the goods received by them were flats as per the stand of the department and they were entitled for exemption under notification no. 202/88-c.e. he also mentioned that in their letter dated 22-1-1999 they had approached the central excise inspector for issuing certificate regarding exemption to their product as required by the banks for the purpose of loan being taken by them that thereafter their factory was visited by the central excise officers and they under their letter dated 29-4-1991 informed the date of commencement of production, total production during the year 1990-91, thickness and photocopies of gate-passes and sample pieces of cuttings; that again under their letter dated 6-6-1991 they submitted copies of ssi registration, gate-passes of supplier of raw material, photo copies of sale invoices issued by them; that as they had disclosed all the material facts to the department no mala fide intention can be attributed to them and consequently extended period of limitation is not invokable. he also contended that as they had themselves written the first letter in january, 1991 to the department and as such their bona fide is evident. he relied upon the decision in the case of cce, hyderabad v. pharmasia p. ltd. - 1997 (92) e.l.t. 464 (s.c.) wherein it has been held by the supreme court that exchange of correspondence between the assessee and excise department does not constitute mis-representation. he also relied upon the decision in the case of garg ispat udyog ltd. v. cce, jaipur - 2001 (136) e.l.t. 918 (t) wherein it has been held that as the correct classification of goods was in dispute no intention on the part of the assessee to evade payment of duty by resorting to suppression/mis-statement of facts can be attributed.2.2 the learned advocate, further, submitted that in the remand order the appellate tribunal has already allowed them the benefit of modvat credit; that the tribunal had clearly observed in the remand order dated 23-1-2000 that "the commissioner is wrong in allowing the modvat credit on the inputs restricting to the extent of duty payable on bars.it is settled position now that duty actually paid to be allowed as credit as it was held in the case of johnson & johnson ltd., reported in 1999 (112) e.l.t. 901"; that thus it is not open to the commissioner in the impugned order to dis allow the modvat credit. finally the learned advocate submitted that duty is to be recalculated by allowing them the benefit of the notification.3. countering the arguments smt. charul baranwal, learned sdr, submitted that the tribunal vide final order no. 1937/2000-b, dated 23-11-2000 has only remand the matter regarding invocation of extended period of limitation for demanding duty. the other issue regarding applicability of exemption and modvat credit had been categorically decided by the tribunal; that it is specifically mentioned in the final order dated 23-11-2000 that since on merit the matter has already been disposed of arising out of impugned order, "we are not inclined to go into the issue again". she, further, submitted that in their letter dated 21-1-1991 the appellants had not furnished any material to the department on the basis of which any action could have been initiated by the department; that it was only in their letter dated 29-4-1991 that the details regarding date of production, total production, total purchase of inputs alongwith its thickness were furnished by the appellants; that therefore, at the most the department came to know about the matter only from the date of receipt of letter dated 29-4-1991.4. we have considered the submissions of both the side. notification no. 202/88-c.e., dated 20-5-1988 exempted tubes & pipes of steel other than seamless tube and pipe of steel provided these were manufactured out of skelp, hoops, sheets of thickness not exceeding 5 mm, strips of thickness not exceeding 5 mm and flats of thickness not exceeding 5 mm.it is not in dispute that the gate-passes under which the appellants received inputs, were described by the suppliers as "rectangular bars"." as mentioned by the learned sdr this tribunal, in its earlier order dated 23-11-2000 has also denied the benefit of notification no.202/88 to the appellants. the extended period of limitation is invokable for the reasons that though the appellants started their production activity and went of availing the benefit of notification no. 202/88 wrongly they had not disclosed these facts to the department. the facts that the duty paying documents described the products as bars and not as flats and the appellants still availed of the benefit of exemption notification go to show their mala fide intention. however, we observe that in their letter dated 22-1-1991 they had requested the department for certificate to the effect that their product is exempt from the levy of duty. the department had thus acquired knowledge, on receipt of the said letter, that the appellants are manufacturing tubes and pipes and are availing the benefit of exemption under notification no. 202/88. whether further details were provided by the appellants or not in the said letter, the department cannot deny the fact that they had come to know about the appellants manufacturing tubes and pipes and availing benefit of exemption and nothing prevented the department from conducting investigation or seeking further information from the appellants. in view of this we hold that the suppression of facts stopped from 22-1-1991 and the extended period is applicable only prior to 22-1-1991. there is no force in the submissions of the learned advocate that they had themselves intimated to the department about their manufacturing the goods and availing of exemption. this does not wipe out the suppression of facts committed by them during the period prior to 22-1-1991. if the contention of the appellants is accepted, every person who is evading payment of duty can after some time inform the department about their manufacturing activity and will seek non-application of extended period of limitation.5. we find force in the submissions of the learned advocate that mod-vat credit of the duty actually paid has already been allowed to them by the tribunal. as the revenue had not filed any appeal against the said final order, it is not open to the commissioner now to disallow the modvat credit on fresh grounds. we also agree with the learned advocate that the duty has to be recomputed treating the price as cum-duty price in terms of the judgment of the supreme court in the case of cce v. maruti udyog ltd. - 2002 (141) e.l.t. 3 (s.c.). the matter is thus remanded to the adjudicating authority to re-compute the duty and allow the modvat credit. the adjudicating authority is at liberty to impose penalty, if deemed fit, after affording an opportunity of hearing to the appellants. the appeal is disposed of in these terms.

Judgment:
1. The issue involved in this appeal, filed by M/s. Khushal Fertilizer (P) Ltd., is whether the extended period of limitation is invokable for demanding Central Excise duty from them.

2.1 Shri P.C. Jain, learned Advocate, submitted that the Appellants manufacture steel tube and pipes and claim exemption under Notification No. 202/98-C.E., dated 20-5-1988; that the tubes and pipes manufactured out of flats not exceeding 5 mm in thickness are exempt from duty under the Notification; that the demand pertains to the period from 26-3-1990 to 30-3-1992; that when the matter was first heard by the Appellate Tribunal the same was remanded vide Final Order No. 1937/2000-B dated 23-11-2000 [2001 (127) E.L.T. 210 (Tri.)] to examine the time bar issue afresh and also to work out the correct duty payable by the Appellants.

The learned Advocate, further, submitted that during the relevant period a dispute was going on between the department and the suppliers of raw material regarding correct classification of their products; that the department classified the product of the supplier as flats and collected duty at the rate applicable to flats whereas the suppliers were claiming their product as bars and were paying the duty under protest; that they described the products as bars in the gate passes; that though the description of the goods mentioned in the relevant gate passes was bars, the duty was discharged by the supplier at the rate applicable to flats under protest; that they were, therefore, under bona fide belief that the goods received by them were flats as per the stand of the department and they were entitled for exemption under Notification No. 202/88-C.E. He also mentioned that in their letter dated 22-1-1999 they had approached the Central Excise Inspector for issuing certificate regarding exemption to their product as required by the banks for the purpose of loan being taken by them that thereafter their factory was visited by the Central Excise officers and they under their letter dated 29-4-1991 informed the date of commencement of production, total production during the year 1990-91, thickness and photocopies of gate-passes and sample pieces of cuttings; that again under their letter dated 6-6-1991 they submitted copies of SSI registration, gate-passes of supplier of raw material, photo copies of sale invoices issued by them; that as they had disclosed all the material facts to the department no mala fide intention can be attributed to them and consequently extended period of limitation is not invokable. He also contended that as they had themselves written the first letter in January, 1991 to the department and as such their bona fide is evident. He relied upon the decision in the case of CCE, Hyderabad v. Pharmasia P. Ltd. - 1997 (92) E.L.T. 464 (S.C.) wherein it has been held by the Supreme Court that exchange of correspondence between the assessee and Excise Department does not constitute mis-representation. He also relied upon the decision in the case of Garg Ispat Udyog Ltd. v. CCE, Jaipur - 2001 (136) E.L.T. 918 (T) wherein it has been held that as the correct classification of goods was in dispute no intention on the part of the assessee to evade payment of duty by resorting to suppression/mis-statement of facts can be attributed.

2.2 The learned Advocate, further, submitted that in the Remand Order the Appellate Tribunal has already allowed them the benefit of Modvat credit; that the Tribunal had clearly observed in the Remand order dated 23-1-2000 that "the Commissioner is wrong in allowing the Modvat credit on the inputs restricting to the extent of duty payable on bars.

It is settled position now that duty actually paid to be allowed as credit as it was held in the case of Johnson & Johnson Ltd., reported in 1999 (112) E.L.T. 901"; that thus it is not open to the Commissioner in the impugned order to dis allow the Modvat credit. Finally the learned Advocate submitted that duty is to be recalculated by allowing them the benefit of the Notification.

3. Countering the arguments Smt. Charul Baranwal, learned SDR, submitted that the Tribunal vide Final Order No. 1937/2000-B, dated 23-11-2000 has only remand the matter regarding invocation of extended period of limitation for demanding duty. The other issue regarding applicability of exemption and Modvat credit had been categorically decided by the Tribunal; that it is specifically mentioned in the Final Order dated 23-11-2000 that since on merit the matter has already been disposed of arising out of impugned order, "We are not inclined to go into the issue again". She, further, submitted that in their letter dated 21-1-1991 the Appellants had not furnished any material to the Department on the basis of which any action could have been initiated by the Department; that it was only in their letter dated 29-4-1991 that the details regarding date of production, total production, total purchase of inputs alongwith its thickness were furnished by the Appellants; that therefore, at the most the department came to know about the matter only from the date of receipt of letter dated 29-4-1991.

4. We have considered the submissions of both the side. Notification No. 202/88-C.E., dated 20-5-1988 exempted tubes & pipes of steel other than seamless tube and pipe of steel provided these were manufactured out of skelp, hoops, sheets of thickness not exceeding 5 mm, strips of thickness not exceeding 5 mm and flats of thickness not exceeding 5 mm.

It is not in dispute that the gate-passes under which the Appellants received inputs, were described by the suppliers as "Rectangular Bars"." As mentioned by the learned SDR this Tribunal, in its earlier order dated 23-11-2000 has also denied the benefit of Notification No.202/88 to the Appellants. The extended period of limitation is invokable for the reasons that though the Appellants started their production activity and went of availing the benefit of Notification No. 202/88 wrongly they had not disclosed these facts to the Department. The facts that the duty paying documents described the products as bars and not as flats and the Appellants still availed of the benefit of exemption notification go to show their mala fide intention. However, we observe that in their letter dated 22-1-1991 they had requested the department for certificate to the effect that their product is exempt from the levy of duty. The department had thus acquired knowledge, on receipt of the said letter, that the Appellants are manufacturing tubes and pipes and are availing the benefit of exemption under Notification No. 202/88. Whether further details were provided by the Appellants or not in the said letter, the department cannot deny the fact that they had come to know about the Appellants manufacturing tubes and pipes and availing benefit of exemption and nothing prevented the department from conducting investigation or seeking further information from the Appellants. In view of this we hold that the suppression of facts stopped from 22-1-1991 and the extended period is applicable only prior to 22-1-1991. There is no force in the submissions of the learned Advocate that they had themselves intimated to the department about their manufacturing the goods and availing of exemption. This does not wipe out the suppression of facts committed by them during the period prior to 22-1-1991. If the contention of the Appellants is accepted, every person who is evading payment of duty can after some time inform the department about their manufacturing activity and will seek non-application of extended period of limitation.

5. We find force in the submissions of the learned Advocate that Mod-vat credit of the duty actually paid has already been allowed to them by the Tribunal. As the Revenue had not filed any appeal against the said Final Order, it is not open to the Commissioner now to disallow the Modvat credit on fresh grounds. We also agree with the learned Advocate that the duty has to be recomputed treating the price as cum-duty price in terms of the judgment of the Supreme Court in the case of CCE v. Maruti Udyog Ltd. - 2002 (141) E.L.T. 3 (S.C.). The matter is thus remanded to the Adjudicating Authority to re-compute the duty and allow the Modvat credit. The Adjudicating Authority is at liberty to impose penalty, if deemed fit, after affording an opportunity of hearing to the Appellants. The appeal is disposed of in these terms.