2003 (12) TMI 175 - AT - Central Excise

Plastic - Demand - Limitation - Extended period - Whether lay flat tubings in the manufacture of LDPE bags are leviable to Central Excise duty and whether the extended period of limitation is invocable - HELD THAT - As the Tribunal has already decided the excisability of the lay flat tubes in the case of A.S. Processors Ltd. 1999 (6) TMI 90 - CEGAT NEW DELHI we hold that the impugned product is chargeable to excise duty. However we find substance in the submissions of the learned Advocate that extended period of limitation is not invocable for demanding the duty as the Appellants were under the bona fide belief that their product is not chargeable to duty. It is observed that lay flat tubings was exempted prior to 12-3-97 under Notification No. 8/96-C.E. dated 23-7-96. Morever it was again exempted from payment of duty by Notification No. 5/98 dated 2-6-98. Thus only during the period March 1997 to 1-6-98 lay flat tubes attracted the Central Excise duty. For invoking five years period for demanding duty presence of one of the ingredients mentioned in proviso to Section 11A(1) of the Central Excise Act is a pre-requisite. If there is no fraud collusion wilful misstatement or suppression of facts or contravention of any provisions under Central Excise Act or Rules with intent to evade payment of duty a notice for demand of Central Excise duty for a period beyond six months cannot be issued. It has been held by the Supreme Court in the case of CCE Hyderabad v. Campher Drug Industries 1989 (2) TMI 116 - SUPREME COURT that something positive other than mere inaction or failure on the part of the manufacturer conscious or deliberate withholding of information which the manufacturer knows otherwise has to be proved before he can be saddled with liability beyond a period of six months under the provisions of Section 11A(1) of the Act. In the present matter no such mala fide intention has been brought on record. We therefore hold that the entire demand of duty is time barred. As the demand itself is held time barred no penalty is imposable on either of the Appellants. Thus both the appeals are allowed.

Summary

Issues involved: Whether lay flat tubings in the manufacture of LDPE bags are leviable to Central Excise duty and whether the extended period of limitation is invocable.

Excisability of Lay Flat Tubings: The issue was whether lay flat tubings in the manufacture of LDPE bags are dutiable under Heading 39.17 of the Schedule to the Central Excise Tariff Act. The Appellant argued that they believed the product was not excisable, citing past exemptions and their bona fide belief. They also referenced Tribunal decisions stating that extended period of limitation cannot be invoked if there was a long-standing practice resulting in a bona fide belief that no duty was payable on the product.

Extended Period of Limitation: The Departmental Representative argued that since the lay flat tubes were manufactured and removed without following proper procedures, the extended period of limitation should apply. However, the Tribunal found that the Appellants were under a bona fide belief that their product was not chargeable to duty, supported by past exemptions and lack of fraudulent intent. They held that the demand for duty was time-barred, and thus, no penalty was imposable on the Appellants.

Conclusion: The Tribunal held that the lay flat tubes were chargeable to excise duty, but due to the Appellants' genuine belief and past exemptions, the extended period of limitation for demanding duty was not applicable. Citing Supreme Court precedent, they emphasized the need for evidence of fraud or deliberate withholding of information to extend the period for demanding duty. As such, the entire demand for duty was deemed time-barred, leading to the allowance of both appeals and no imposition of penalties.