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Judgment
The appellant is in appeal against the impugned order wherein duty has been demanded for no amortization of the cost of machine supplied to the
appellant from their principal manufacturer free of cost during the period April, 2003 to March, 2006 by way of issue of show-cause notice dated
21.10.2010.
The facts of the case are that the appellant is a manufacturer of motor vehicle parts and undertaking the work of job worker of M/s Bajaj Auto Ltd.
The appellant purchased 229 machines in 2013 and 21 machines were supplied by M/s Bajaj Auto Ltd. free of cost to the appellant during the period
April, 2003 to March, 2006. M/s Bajaj Auto Ltd. paid duty on the machines but the appellant took CENVAT Credit thereof. After job work, the goods
were cleared to M/s Bajaj Auto Ltd.-principal manufacturer on payment of duty but the cost of machines, which were freely supplied by M/s Bajaj
Auto Ltd. was not amortized in the job charges on which duty has been paid. An audit took place in 2005 and no objection was raised with regard to
amortization of the cost of the machine. Further, another audit took place in November, 2007 to December, 2007 also. In 2007, the objection was
raised with regard to free supply of the machines and correspondence were going on between the appellant and the Department and the said objection
was dropped on 19.01.2010 and proposal was made for closure of the audit objection on 19.01.2010 and objection was closed on 23.02.2010.
Thereafter on 18.6.2010, the said audit objection was re-opened and after subsequent correspondence with the appellant, the impugned show-cause
notice was issued to the appellant on 21.10.2010 by demanding duty on account of amortization of machines, which have been procured by the
appellant from M/s Bajaj Auto Ltd. free of cost during the period 1.4.2003 to march, 2006. The matter was adjudicated and demand of duty was
confirmed along with interest and penalty was also imposed. Against the said order, the appellants are before us.
Learned Counsel for the appellant submits that as the periodical Audits took place and they have not raised any objection on the said amortization
cost of the machines free supplied to the appellant by M/s Bajaj Auto Ltd. Therefore, there is no case against the appellant. Other submissions were
taken on record in place of the audit objection raised in November, 2007 for which proposal was made on 19.01.2010 and action was taken for closure
of the audit objection on 23.02.2010, therefore, the show-cause notice issued to the appellant on 21.10.2010 is barred by limitation and no demand is
sustainable as show-cause notice has not mentioned the period for which they had raised the demand of amortization cost of the machines. He further
submitted that it is not a case for suppression of facts by the appellant, therefore, extended period of limitation is also not invokable.
On the other hand, learned AR for the Revenue opposed the contention of the appellant and submitted that although periodical audits took place but
at that time the appellant had not produced any relevant documents. Further, in November, 2007 the objection was raised and it is a fact on record that
the machines were supplied to the appellant free of cost by M/s Bajaj Auto Ltd. and the clearance of the goods took place after December, 2005,
therefore, the cost of free supplied goods should have been amortized on the clearance post December, 2005, which was not intimated to the
Department by the appellant and same was raised in March, 2010, therefore, extended period of limitation is rightly invoked.
Heard the parties and perused the records.
The facts, which are not disputed, are as under: -
21 machines were free supplied to the appellant by M/s Bajaj Auto Ltd. during the period 1.4.2003 to March, 2006. The audit took place during April,
2005 and September, 2006, wherein no objection was made with regard to amortization of free supply of machines by M/s Bajaj Auto Ltd. In
November, 2007, audit objection was raised, the same was replied and a proposal was made to close the objection on 19.01.2010 and the same was
closed on 19.02.2010. Thereafter on 13.5.2010, the issue was raised with regard to confirmation that the machines supplied to the appellants were not
sold i.e. the appellant was not paid any amount for this machine and this can be verified from Books of Account of free supplied machines. For this
lapse, necessary action was sought to be taken from April 2006 to September, 2007 and onwards upto March, 2010. Thereafter, a show-cause notice
was issued to the appellant alleging that they procured the machine during the period April, 2003 to March, 2006 and why not cost of the machine be
amortized for clearance of the goods to M/s Bajaj Auto Ltd.
We have gone through the show-cause notice in detail. We do not find that for which period demand is sought to be recovered by the Revenue.
During the period April, 2003 to March, 2006 the appellant procured the machines free of cost from M/s Bajaj Auto Ltd. but there is no whisper about
clearance made to the appellant without amortizing the said free supplied machine. We also took note of the fact that there is no allegation of
suppression of facts against the appellant. It only alleged that the appellant has contravened the provisions of Central Excise Act, 1944 and Central
Excise Rules with intent to evade payment of duty, but no specific allegation against the appellant is made. We also took note of the audit objection
raised against the appellant and reply thereof and objection was dropped on 19.02.2010. In these circumstances, the extended period of limitation
cannot be invoked in respect of clearance of the goods for which demand of duty was sought in the show-cause notice. Therefore, we hold that the
show-cause notice is defective as no specific period of demand is mentioned. In these circumstances, we hold that the demand made against the
appellant is barred by limitation.
Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, as per law.
(Dictated and pronounced in open court)