The Department has filed the present appeal under section 35G of the Central Excise Act, 1944 challenging the order dated 24.11.2011 of the Custom, Excise and Service Tax Appellate Tribunal, West Zonal Branch, Ahmedabad, in Appeal No. E/333 of/2006 by proposing the following question as substantial question of law. “Whether the CESTAT was right in law in allowing the appeal of the assessee by holding that the amount deposited by the assessee during the pendency of the investigation can not be said to have been paid by them voluntarily towards the duty for relevant period in the show cause notice, when the said show cause notice has been held to be time-barred, especially when there was no challenge to the order on merits of the claim and in absence of coercion for deposit of the legitimate amount of duty?”
2. We heard learned advocate Mr. D.M.Parikh for the appellant- Department.
3. The facts involved in the appeal were that the respondent assessee was 100% Export Oriented Unit engaged in the manufacture of cotton denim fabrics, which was an excisable item under the Customs Tariff Act, 1975. The audit party visited the factory of the respondent on 3rd and 4th October 2002. It raised objection that the assessee had not paid the required duty of central excise on its sales effected in the Domestic Tariff Area (DTA). Initially it was pointed out that there was a short levy for the period from 01.04.2000 to 31.03.2002 and towards that amount of Rs.6,52,258/- was payable as duty. In response to that claim, the assessee paid Rs.5,03,673/- from the said period from April 2000 to March 2002 on 11.11.2002, as per the demand raised by Superintendent, AR-III, Rural Division. Thereafter, the Deputy Commissioner (Central Excise) informed the AG (Audit) that the difference in short levy of duty as calculated by the auditor was already paid and the matter may be treated as closed.
3.1 However, it appears that there was already a demand raised by the audit party in form of factual note that Rs.9.36 lacs was the short payment of duty, which was further revised to Rs.14,59,379/- in the subsequent communications. After some further communication and computation, the Joint Commissioner (Central Excise) issued show cause cum demand notice dated 10.09.2004 pointing out therein differential duty amounting to Rs.14,48,878/- as short levied and payable in respect of finished goods in DTA during the period from 16.09.1999 to August 2002. In the show cause notice, the work sheet was prepared and the duty, penalty and interest were claimed.
3.2 After the aforesaid show cause notice, the Joint Commissioner issued a corrigendum dated 17.06.2005 wherein the portion of show cause notice regarding short levy was substituted and it was stated that instead of Rs.14,48,878/-, amount of Rs.43,74,475/- was payable. As the revised amount was falling within the jurisdiction of Commissioner, a further corrigendum dated 06.07.2005 was issued.
3.3 The respondent-noticee had already paid the total amount of Rs.10,34,098/- and the details of said payments were conveyed. The assessee had paid Rs.5,03,673/- as mentioned above by challan dated 14.11.2002, further Rs.2,76,194/- on 20.12.2002 and again Rs.2,54,231/- on 03.03.2003 totaling to Rs.10,34,098/-.
3.4 The abovementioned show cause notice culminated into the Order-in-Original (OIO) dated 31.10.2005 whereby the adjudicating authority held that payment of total Rs.10,34,098/- paid in three parts on 14.11.2002, 20.12.2002 and 03.03.2003 was legal and proper and sustainable on merits and hence they were held valid. The adjudicating authority, however, held that the rest of the demand raised subsequently in September 2004 and June 2005 were barred by limitation.
3.5 The assessee preferred appeal before the Tribunal. The challenge was made only against that part of the order of the adjudicating authority whereby it upheld the ground of limitation, at the same time, confirmed the demand qua the amount already paid by the assessee. Therefore, the issue addressed by the Tribunal was whether the adjudicating authority’s confirmation of demand of the amount paid by the respondent during the pendency was required to be upheld or required to be set aside more particularly when the authority had held the entire demand as barred by limitation.
4. The Tribunal in its impugned order extensively quoted from the order of the adjudicating authority. Certain parts of the relevant observation and findings in the OIO, are extracted hereinbelow.
“Therefore, the question of suppression of facts or mis- declaration with an intention to evade duty in baseless as not borne on any tangible evidences rather there is not averment or any material which can create any doubt on bonafide of the assessee's action. Therefore, the notice issued on 10th September, 2004 as well as corrigendum dated 7th Junem 2005 and 28th July, 2005 were without any authority of law and are held to be not justified.”
“Thus, the total sum of Rs. 10,34,098/- was honoured by the physical payment by the party on its own volition i.e. without challenge and protest, which was leviable and payable according to them. In fact, the qualification of the demand was carried out by the Superintendent and conveyed to the party where the price of the goods cleared was taken as cum duty price. But the period involved was from 1.3.2000 to 31.3.2000. However, such payment was really short as the demand was worked out for Rs. 14,48,878/- for period 16.9.1999 to 31.8.2002. I further find that, on merits, the demand was initially as conveyed for the period as demanded in show cause notice dated 10.09.2004 as same was due in terms of the circular dated 6.2.2001.”
“When the parent notice of demand dated 10.09.2004 itself was barred by limitation holding the corrigendum as legal, proper or valid, does not arise. Those were without authority of law. To that extent, the submission of the ld. Counsel and the reliance on case laws as extracted above is very much relevant and are apt to the fact and circumstances of the present case. Therefore, the question of penalty does not arise. Therefore is no material which warrants to hold that even there was an element of evasion or avoidance of duty on part of the notice company as the confusion was prevailing and percolating up to the highest level.”
“Since the payment made by the party was on written communication by way of demand which on merit was sustainable and payable and hence the demand so paid is hereby held as legal, proper sustainable and maintainable. They do not deserve any refund neither on merit nor on limitation. However, jacking them with further liabilities after limitation period is over, is not justified and cannot be maintained and sustained. Therefore, the proceedings started by issuance of show cause notice dated 10/09/2004 and tried to be fortified or enhanced by corrigendum are held to be inappropriate and illegal. Thus, demands and other proposed cause of actions are barred by limitation as provided under provisions of Section 11A of Central Excise Act, 1944.”
5. After considering the facts and the findings of the adjudicating authority, the Tribunal arrived at its own conclusion as under.
“It can be seen from the above reproduced findings of the lower adjudicating authority that he has clearly held that show cause notice dated 10.09.2004 as well as corrigendum dated 17.06.2005 and 28.07.2005 were without any authority of law and inappropriate and illegal. It is also his finding that the demands and other proposed causes of action are barred by limitation as provided under provisions of Section 11A of Central Excise Act, 1944. It is to be seen that the Revenue authorities have not filed any appeal against the said Order-in- Original nor they have filed any cross objection against such findings of the adjudicating authority as regards the demand is hit by limitation. In the absence of any objection of appeal from the department, the findings of the adjudicating authority as regard the limitation have attained finality. If that be so, any amount deposited by the assessee during the pendency of the investigation cannot be said to have been paid by him voluntarily towards the duty that is calculated for the relevant period in the show cause notice.”
6. We are in agreement with above conclusion of the Tribunal.
6.1 It deserves to be stated that more particularly when the entire demand in the show cause notice was declared to be barred by limitation, the adjudicating authority erred in concluding that the amount already paid was validly paid and was justified on merits. The reasoning is self contradictory. The amount paid was part of duty, demanded in the show cause notice, which was clearly held to be beyond time. Once the demand was held unsustainable, no amount of duty could have been treated as leviable.
6.2 In the aforesaid view, the appeal is devoid of merits raising no substantial question of law.
7. Accordingly, the appeal is dismissed.
[V.M.SAHAI, J.]
[N.V.ANJARIA, J.]
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