Selling cement below CAS-4 cost does not, without evidence of suppression, justify the extended limitation period.

The appellant, a cement manufacturer operating under an area-based exemption scheme, challenged an Order-in-Appeal that sustained three disputed liabilities: central excise duty of Rs. 24,33,138 for 29 August 2012 to September 2013; recovery of an alleged erroneous refund of Rs. 62,797; and service tax of Rs. 75,549.69, including cesses, for the period up to 30 June 2012.

The excise demand was based on allegations that cement had been sold below the cost of production shown in CAS-4; the service-tax demand concerned freight collected from buyers in excess of the appellant’s actual freight expense.

The show-cause notice was served on 16 October 2014 and invoked the extended period of limitation.

The Commissioner (Appeals) had dropped certain other demands but upheld these disputed amounts and associated interest and penalties; the appellant appealed to the Tribunal.

Whether the extended period of limitation could be invoked to sustain the central excise duty demand where the allegation was that goods were sold below CAS-4 cost, but no evidence of flow-back or suppression was shown.

Whether service tax was payable on freight recovered in excess of the actual freight incurred by the appellant for the period up to 30 June 2012.

Whether the demand for recovery of the Rs. 62,797 refund, with interest and penalty, was sustainable on the facts and within the extended period of limitation.

The Tribunal considered the CBEC Circular No. 979/03/2014-CX dated 15 January 2014, issued following Commissioner of Central Excise v. Fiat India Pvt. Ltd., 2012 (283) E.L.T. 161 (S.C.), but held that the circular did not make the extended period automatically applicable: the relevant circumstances had to be comparable, and an allegation of sale below CAS-4 cost, without evidence of flow-back, did not by itself establish suppression of value.

It relied on Commissioner of Central Excise & Service Tax v. Ultra Tech Cement Ltd. (decision dated 1 February 2018), which noted that the circular’s paragraph 7 precluded invoking the extended period in cases where the assessee had adopted an alternate interpretation before the Supreme Court’s judgment.

For service tax, the Tribunal applied Rule 2(1)(d)(i)(B) of the Service Tax Rules, 1994, holding that the appellant’s liability was referable to freight paid by it and that the excess collected over the freight incurred was its profit, not an amount taxable under the provision.

It also considered CCE v. Roofit Industries Ltd., 2015 (319) E.L.T. 221 (S.C.); CCE v. Ispat Industries Ltd., 2015 (324) E.L.T. 670 (S.C.); and CCE, Mumbai-III v. Emco Ltd., 2015 (322) E.L.T. 394 (S.C.).

The Tribunal found that the appellant’s area-based exemption and the Department’s verification of its records before granting refunds undermined the allegation of suppression with intent to evade duty.

It further found no evidence that the appellant had received any flow-back, and held that CAS-4 cost was not an “approved price” for purposes of treating the sale as comparable to the circumstances addressed in Fiat India and the Board circular.

The extended period therefore could not sustain the excise demand; the related interest and penalty also fell with it.

As to freight, the Tribunal held that tax could not be imposed on the excess collected over actual freight under the cited Service Tax Rules provision, and rejected the demand for the period before 1 July 2012 as well as thereafter.

For the refund demand, it again relied on the verified records and absence of suppression to conclude that the extended period was unavailable.

It upheld the penalty of Rs. 10,000 imposed under Section 77 of that Act and disposed of the appeal accordingly.