CX - Department woke up from its peaceful slumber eight months after receiving letter from appellant - demand hit by limitation: CESTAT
By TIOL News Service
HYDERABAD, MAY 17, 2017: THE appellants manufacture pharmaceutical formulations.
Filgrastim is exempt from payment of central excise duty by way of Notfn No. 12/2012-CE as the same was specified under list 4 of S.No. 42 of Notfn No. 21/2002-Customs .
The product Pegfilgrastim was launched on 26.03.2011 and as it was not covered under the exemption notification(s) (supra), appellant paid duty during the period March, 2011 to December, 2012 by availing CENVAT credit on inputs and input services.
After receiving clarification from their technical staff to the effect that Pegfilgrastim is manufactured by the identical process of manufacturing filgrastim, only difference being an additional pegylation step, the appellant vide letters dated 5.9.2012 and 16.11.2012 intimated to the department that the product Pegfilgrastim attracts nil rate of duty and stopped payment of duty from 1.1.2013 onwards. The proportionate credit of inputs lying in stock and input services as well as pertaining to the process and finished goods lying in stock was reversed.
A SCN was issued alleging that the appellant had availed irregular CENVAT credit of Rs.8,65,587/- on inputs and input services used in the manufacture of exempted pegfilgrastimduring the period March, 2011 to December, 2012 and seeking recovery of the same as well as penalty and interest thereon.
The lower authorities upheld the demand.
Before the CESTAT the appellant submitted that they had addressed a letter dated 05.09.2012 (and a reminder dated 16.11.2012) to the Dy. Commr. seeking clarification as to whether they are required to pay CE duty on the impugned ‘Pegfilgrastim' and since nothing was heard they stopped paying duty from January 2013 onwards; that the demand is time barred as facts were in the knowledge of the department and that the entire exercise is revenue neutral. Reliance is also placed on the decision in Ajmeer Food Products Pvt Ltd. = 2015-TIOL-2118-CESTAT-DEL.
The AR supported the order of the lower authorities.
The Bench observed -
++ In letter dated 05.09.2012 the appellant has put forward their intention to clear the product without payment of duty. But the appellant continued to clear the products by paying the duty/availing credit till December 2012. Therefore, it is proved that even after entertaining reasonable doubt as to the dutiable nature of the products, they continued to pay duty and avail credit till December 2012. They have stopped payment of duty only from January 2013.
++ It has taken another 8 months for the department to wakeup from their peaceful slumber and issue a letter calling for the details of the credit availed . The department has no case that the appellants did not furnish details when required for. …, I am able to conclude that the appellant cannot be saddled with allegation of suppression of facts with intent to evade payment of duty. Therefore, … show cause notice issued invoking the extended period of limitation cannot sustain.
The demand was restricted to the normal period of limitation. Penalty was also held as not imposable as the appellant had availed credit and paid the duty on the genuine belief that the product is dutiable. The interest for the normal period is maintained.
The argument of revenue neutrality was not accepted and the case law cited by the appellant was held as distinguishable.
The appeal was partly allowed.
(See 2017-TIOL-1641-CESTAT-HYD)
