CESTAT upholds Excise Duty Demand on Scraps, made within 5 years from Date of Knowledge [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Bangalore Bench upheld the excise duty demand on scraps, made within 5 years from date of knowledge.

The appellant Deccan Mining Syndicate (p) Ltd. is 100% EOU engaged in the manufacture and export of iron ore. The appellant was availing the benefit of Notification No.23/2003 dated 31.03.2003. As per Para 6.8 (a) of the Foreign Trade Policy 2009 to 2014, the appellant was eligible to clear 50% of the value of exports under Domestic Tariff Area ( DTA ). Para 6.8(e) reads “scrap/waste/remnants arising out of production process or in connection therewith may be sold in DTA, as per SION norms notified under Duty Exemption Scheme on payment of concessional duties as applicable, within overall ceiling of 50% of FOB value of exports.

The counsel for the appellant submitted that the Preventive Officers visited the unit on 25.8.2011 whereas, the showcase notice was issued in 29.01.2014 invoking larger period of limitation and duty has been demanded without specifying the quantity and the value of the goods alleged to have been removed during each month and each year from 2006 to 2010. Since from 2011, the department was aware of the facts the show cause notice is time barred.

With regard to the limitation issue, the counsel for the department submitted that the shortages were detected by the Department on 25.08.2011 and undertook investigation in the said case. After conclusion of the investigation, the show-cause notice was issued on 29.01.2014. Since the appellant had failed to prove that the shortages were for many years including the years before 2011, the demand notice issued on 29.01.2014 for the date of cause of action i.e., 25.08.2011 is well within the larger period of five years as they had failed to intimate the department of the said shortage at any time till it was noticed on 25.08.2011.

A Two-Member Bench comprising DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “With regard to limitation, it is an admitted fact that the shortage was detected by the Department only on 25.08.2011 and the show-cause notice was issued on 29.01.2014 which is within 5 years of the date of knowledge. In fact, no return was filed explaining the shortages and it was noticed only after visiting the unit and the return was filed at a later date.”

“Based on the above the demand is within 5 years from the date of knowledge and therefore the claim of the appellant that it is time barred is unacceptable. Accordingly, we uphold the demand of duty but extend the benefit of the Notification No.23/2003-CE dated 31.03.2003 without extending the benefit of SAD since the appellant has not proved that VAT has been discharged on these shortages. The matter stands remanded for redetermination of duty after extending the benefit of Notification 23/2003-CE dated 31.03.2003” the Tribunal held.

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