Win for ITC Limited: CESTAT sets aside Departmental Order on rule 16(2) of Central Excise Rules demand [Read Order]
The process of dismantling, retrieving, and identifying usable parts is invariably the first step in further manufacturing and constitutes part of the manufacturing process
Win for ITC Limited - CESTAT - Departmental - Central Excise Rules demand - taxscan
Win for ITC Limited - CESTAT - Departmental - Central Excise Rules demand - taxscan
The Chennai Regional Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the revenue failed to establish willful suppression to invoke the extended limitation period. It allowed the appeal of ITC Ltd by setting aside the demand order passed under Rule 16 (2) of the Central Excise Rules, 2002.
M/s ITC Limited (SBU-Packaging and Printing), the appellant, faced a demand of Rs.14,03,964/- with interest and penalty under Rule 16(2) of Central Excise Rules, 2002. The demand was confirmed by the Commissioner of Central Excise (Appeals-I), Chennai through Order-in-Appeal No.37/2017 dated 09.02.2017. The issue pertained to duty credit taken on returned finished goods that were later sold as scrap during 2012-13.
Aggrieved by the order, the appellant approached the CESTAT. The appellant's primary contention was that they had carried out manufacturing operations including regluing and repairs on the returned goods before clearing them as scrap. They argued that the dismantling and salvaging process was part of manufacturing, and there was no suppression of facts to justify invoking the extended limitation period.
The Revenue justified the demand by stating that no specific manufacturing process was carried out on the returned goods, and the appellant had not disclosed the receipt of these goods in their ER-1 returns. It was argued that these facts were only uncovered during a CERA Audit, justifying the invocation of the extended limitation period.
The two member bench comprising Mr. P. Dinesha (Member-Judicial) and Mr. M. Ajit Kumar (Member-Technical) observed that the Revenue's own Show Cause Notice acknowledged that the appellant had sold the paper products as scrap on payment of appropriate duty. The tribunal noted that the process of dismantling, retrieving, and identifying usable parts is invariably the first step in further manufacturing and constitutes part of the manufacturing process.
The tribunal stated that when an issue relates to interpretation on which two views are possible, the authorities may dispute the view entertained by the appellant, but this alone is insufficient to conclude there was suppression. Finding no evidence of willful suppression, the bench concluded that the invocation of the extended period was unsustainable.
Based on this finding on limitation, the tribunal set aside the impugned order and allowed the appeal in favor of M/s ITC Limited with consequential benefits as per law.
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