Relief for Apollo Tyres: CESTAT Rules Extended Limitation Inapplicable When Packaging Practice Unchanged for 25 Years [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extended limitation period under the Central Excise Act cannot be applied when the assessee’s packaging practice has remained unchanged for over twenty-five years and was previously accepted by the department.

Apollo Tyres Limited, the appellant, manufactures tyres, tubes, and flaps. For certain packed tubeless tyres, the appellant paid duty under Section 4A of the Central Excise Act and for other tyres, tubes, and flaps, whether sold individually or together with strapping, they paid duty under Section 4.

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The department issued a show cause notice in August 2019 for the period September 2013 to June 2017, alleging that all such goods should have been valued under Section 4A as “pre-packaged commodities” under the Legal Metrology Act, 2009. An alternative demand was also raised under Section 4 for alleged non-passing of discounts.

The appellant’s counsel argued that strapped tyre-tube-flap sets were not “pre-packaged commodities” under the Legal Metrology Act and that such classification should be determined by the Legal Metrology authorities. They referred to earlier orders issued in 2011 for previous periods where similar show cause notices were dropped after detailed examination, with no appeal filed by the revenue.

They also argued that the extended limitation could not be invoked because the practice was long-standing, fully disclosed, and exempt under the Legal Metrology Act for packages exceeding twenty-five kilograms.

The revenue counsel argued that the strapped sets satisfied the definition of “pre-packaged commodities” and that the commissioner’s findings supported valuation under Section 4A. They also argued that identical products were valued differently, justifying the extended limitation period.

The two-member bench comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) observed that the department had accepted the same practice in earlier final orders, and no change in law or facts was shown to justify a different view.

The tribunal also observed that the commissioner had failed to address the exemption plea under the Legal Metrology Act and had not established the suppression of facts necessary to invoke the extended limitation period.

The tribunal explained that without proving suppression, the extended period under Section 11A(4) cannot be invoked. It pointed out that the appellant’s method had remained consistent for decades, and the revenue had full knowledge of it through statutory declarations and past proceedings. The appeal was allowed with consequential benefits, and the revenue’s appeal was dismissed.

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