The present appeal preferred by the Department is directed against order dated 26th August 2009 passed by the Custom, Excise and Service Tax Appellate Tribunal, West Zonal Branch, Ahmedabad in Appeal No.E/19/2006. It was assessee’s appeal before the Tribunal, which was allowed on merits as well as on the ground of limitation. 1.1 While admitting the appeal, this Court formulated following two substantial questions of law for consideration and determination.
[i] “Whether the learned Tribunal is justified in the eye of law, in facts and the circumstances of the case, in holding that the demand of the duty by the Revenue in respect of undisputed sale of the paperwaste and plastic waste and scraps is not sustainable in the eye of law ?”
[ii] “Whether the learned Tribunal is justified in the eye of law, in facts and circumstances of the case, in holding that the demand of the duty is barred by the limitation as there is no mala fide on the part of the said Unit, though there is suppression of clandestinly clearance of the subjectgoods, without payment of duty and without information to the Revenue, regarding pricedeclaration, classification, etc. ?”
2. We heard learned advocate Mr. Gaurang H. Bhatt for the Department. On behalf of the respondent, none appeared though the record showed that the respondent was duly served on 21.03.2011. Learned advocate for the appellant took us through the relevant record and the impugned order.
3. Noticing the relevant facts first, the respondent unit was engaged in manufacturing of various brands of toilet soaps. The soaps manufactured by it were cleared by taking them in wrapper under the various brands. In that process of packing, some paper turnings used to generate, which were collected and stocked by the assessee. Moreover, in the process of pouch packing, certain plastic waste was also generated. These wastes were classifiable under the relevant entry of the Chapter of the Central Excise Tariff Act, 1985. The paper turnings and plastic wastes attracted duty at the applicable tariff rate, according to the case of the department.
3.1 The Addl. Commissioner, Central Excise, issued show cause notice dated 21.02.2001 on the ground that the paper waste and the plastic waste generated during the process of packing were sold in clandestine manner and without filing the necessary classification declaration and without payment of Excise Duty and that the MODVAT credit was taken. It was stated that the paper waste and the plastic waste were classifiable and excisable. The Excise Duty amounting to Rs.2,14,617/ was demanded for the period from May 1996 to December 1999. Penalty under section 11AC and interest under section 11AB of the Act were also sought to be levied. The adjudicating authority confirmed the demand under section 11A(1) of the Act of Rs.1,60,673/ leviable on clearance of waste of plastic and waste of paper and also directed to pay penalty of Rs.1,58,955/ as well as the interest.
3.2 The Commissioner (Appeals) by his order dated 25.10.2005 rejected the appeal of the assessee and upheld the order of the adjudicating authority. The appellantassessee thereafter preferred appeal before the Custom, Excise and Service Tax Appellate Tribunal (hereinafter mentioned as ‘the CESTAT’ for short), which came to be allowed as per the impugned order.
4. As could be noticed from the impugned order, the CESTAT based its order firstly on merits by holding that the paper and plastic wastes generated during the process of packing of soap were not a marketable commodity and it could not be said that the assessee was manufacturing the same and, therefore, it was held that those byproducts were not excisable items. The second ground considered by the Tribunal was that of limitation.
4.1 The substantial questions of law formulated by this Court at the time of admission rerpesentated the aforesaid two issues involved in the matter.
5. As far as the issue of limitation is concerned, provisions of section 11A come into play. The section relates to recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. Subsection (1) thereof interalia says that wherein duty of excise has not been levied or paid etc., a Central Excise Officer may within one year from the relevant date serve the notice on the persons chargeable with the duty which has not been levied, requiring him to show cause. The Proviso to section says that where any duty of excise has not been levied or paid etc. by reasons of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty, the provision of subsection (1) of section 11A shall have effect for five years. The period of one year mentioned in section 11A(1) was substituted for ‘six months’ by amending Act of 10 of 2000 with effect from 12.05.2000. Similarly, in the Proviso, in place of ‘one year’, the words ‘five years’ came to be replaced by the same amending Act.
5.1 Admittedly, the demand in the show cause notice for duty, penalty etc. was relatable to the period from March 1996 to December 1999. The show cause notice was issued on 20.02.2001. In respect of the relevant period in the show cause notice, the period of limitation application was six months as per the above provision and the extended period under the Proviso was one year. Exfacie therefore, the show cause notice was beyond limitation in terms of section 11A(1) of the Act.
6. The Tribunal in impugned order observed on the aspect of limitation as under.
“We also find force in the appellant’s contention of the demand being barred by limitation. Merely because no classification list was filed, but itself is no ground for invocation of longer period of limitation, as observed by the Hon'ble Supreme Court in the case of Padmini Products. What is relevant is that there should be malafide intention on the part of the assessee leading to some suppression or misstatement. In the present case, we find that even if the fact of sale of soap waste generated in the factory was not being brought to the knowledge of the Revenue, the same cannot be on the basis of any malafide. As such we are of the view that the demand is also hit by the bar of limitation.”
7. Whether the grounds of willful misstatement or suppression of facts etc. with an intention to evade duty for the purpose of invocation of extended period under the Proviso exist or not, is a question dependent on facts. In the instant case, it was the contention of the respondentassessee before the lower authorities that the plastic and paper waste were not marketable and that merely on the count that the goods are specified under the Central Excise Tariffs under particular heading or merely because somebody buys the waste or that they were sold, the same do not become marketable. The assessee had been agitating the issue before the lower authorities contending that the waste items in question were not marketable and that they were not liable to excise duty.
8. In the present appeal, learned advocate for the appellant department relied on various judicial pronouncements in which the tests of marketability have been laid down by the courts. However, we find it not necessary to delve into that aspect, when in our view the Tribunal was justified in holding that merely because no classification list was filed, that by itself was no ground for invocation of longer period of limitation. As stated above, the assessee was agitating his case before the Excise authorities resting on the belief that the paper and plastic wastes in question were not excisable items, by contending that they were not marketable. There was neither a willful misstatement nor suppression of facts with intent to evade payment of duty. In the facts and circumstances it cannot be said that there was an intention on part of the assessee to evade the duty. The demand notice dated 21.01.2001 was, therefore, clearly time barred under section 11A(1) of the Act.
9. In the aforesaid view, it is held that the Tribunal was justified in holding that the demand of duty was barred by limitation as there was no malafide on the part of the assessee unit. Accordingly, we answer the second question formulated in affirmative and against the Department. As this appeal of the Department fails on the issue of limitation, the first question is not required to be gone into. The same is not therefore probed into its merits, leaving it open to be decided in appropriate case.
10. The appeal is accordingly dismissed.
[V. M. SAHAI, J.] Amit [N. V. ANJARIA, J.]