By TIOL News Service

HYDERABAD, JAN 30, 2017: THE appellants are manufacturers of refined cotton seed oil falling under Chapter heading no. 15 and are exempted from payment of duty. During the course of processing cotton seed into refined cotton seed oil, waste emerges which is called as soap stock. It is the case of appellant that the appellant was initially not paying duty on the said soap stock as the said goods were non-excisable goods. In March 2006, department issued a letter to the appellant requiring the appellant to pay duty on the soap stock. In obedience to this letter, appellant started paying duty on the soap stock cleared. Later on 21.02.2011 department issued another letter to the appellant stating that the soap stock which emerges during the refining of cotton seed oil is a waste product and therefore the appellant is not liable to pay duty on the said goods. The said letter referred to the judgment passed by the Hon'ble Apex Court in the case of CCE, Hyderabad Vs M/s Priyanka Refineries Ltd. Again, in obedience to the department direction, the appellant stopped paying duty on soap stock. Thereafter department issued show cause notice alleging that the appellant failed to pay duty on soap stock from 2011 to 2012 and alleging suppression of facts with an intent to evade payment of duty. After due process of law, the original authority confirmed the demand, interest and imposed equal amount of penalty. In appeal the Commissioner (Appeals) upheld the same. Assessee is in appeal against the same.

After hearing both sides, the Tribunal held:

+ The facts of this case present an interesting as well as pathetic situation faced by the assessee/appellant. The appellant stopped paying duty on the letter issued by department in 2011 directing the appellant not to pay duty on the waste/soap stock and also informing that he is liable to reverse the CENVAT Credit availed on inputs. Thereafter, department has issued show cause notice not only demanding payment of duty from 2011-2012 but also alleging suppression of facts with intent to evade payment of duty. The facts by itself make it candid that there was no suppression of facts with intent to evade payment of duty on the part of the appellant. The adjudication officers of the department should bear in mind that after 06.08.2014 the assessee is required to make mandatory pre-deposit for filing appeal before the Commissioner (Appeals) and Tribunal. Therefore, they should be more cautious and apply mind reasonably while conduct of adjudication and not blanketly confirm the demand in the show cause notice. The appellant has been able to establish a case in their favour and the show cause notice issued invoking the extended period of limitation cannot sustain on the evidence presented by the case. Therefore, the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.

(See 2017-TIOL-272-CESTAT-HYD)