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Extended period of limitation cannot be invoked for demanding duty when penalty is dropped u/s 11AC: CESTAT, Bangalore

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

SOUTH ZONAL BENCH, BANGALORE

Appeal No. E/20807/2016-SM

Arising out of Order-in-Appeal No. CAL-EXCUS-000-APP-501-15-16, Dated: 29.2.2016

Passed by Commissioner of Central Excise, Customs And Service Tax (Appeals-II), COCHIN

Date of Hearing: 28.03.2018

Date of Decision: 28.03.2018

M/s ARYA VAIDYA PHARMACY COIMBATORE LTD

KANJIKODE (FACTORY), KANJIKODE POST, PALAKKAD 678621

KERALA

Vs

COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX

CALICUT CENTRAL REVENUE BUILDING, MANANCHIRA

CALICUT KOZHIKODE-673001 KERALA

Appellant Rep by: Mr S durairaj, Adv.

Respondent Rep by: Mr Pakshirajan, AR

CORAM: S S Garg, Member (J)

CX – Appellant manufactures both dutiable and exempted Ayurvedic medicines and availed cenvat credit of excise duty paid on inputs under Rule 6(1) of Cenvat Credit Rules, 2001, 2002 and 2004 – they did not reverse the credit of duty availed on fuel used in the manufacture of exempted goods for the period 30.1.2002 to 28.2.2006 and 1.3.2006 to 31.10.2006 – SCNs issued – demands confirmed along with interest, penalties imposed – on appeal, the Commissioner(A) rejected the same but dropped the penalties imposed under Section 11AC of the CEA – appeal to CESTAT.

HELD: Appellant has no case on merit in view of the judgment of the Gujarat High Court in the case of Deeyakar Aluminium Pvt. Ltd. wherein it is held that credit will not be available on such quantity of fuel which is used in the manufacture of exempted goods; that sub-rule (2) nowhere says that the legal effect of sub-rule(1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule(2) – in the decisions relied upon by the appellant, it has been consistently held by the Tribunal that the extended period cannot be invoked when penalty is dropped under Section 11AC – by following the ratios of the said decisions, the demand for the period from 30.1.2002 to 30.11.2005 is time barred and set aside, the appellant is liable to pay the duty for the period from December 2005 to October 2006 and for the purpose of quantification of duty for the normal period, the case is remanded back to the original authority to re-quantify the demand for the normal period along with interest – accordingly, the appeal is partially allowed and the demand for the extended period is set aside and the appeal is allowed by way of remand : CESTAT [para 6]

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