[Order per : Rakesh Kumar, Member (T)]. - The facts leading to filing of these two appeals and stay applications are, in brief, as under :-

1.1 M/s. Jayaswal Neco Industries Ltd., Siltara, Distt. Raipur (hereinafter referred to as the ‘appellant’) are engaged in the manufacture of Sponge Iron, M.S. Billets, etc., chargeable to Central Excise duty. In course of audit of their Central Excise records for the year 2006-2007, it was found that during this period, they had availed VAT exemption vide Circular No. 13/FA/(5)/98/584, dated 28-9-99 issued by the Directorate of Industries, Madhya Pradesh and accordingly, while they were exempt from the VAT and were not required to pay the same to the Government of Chhattisgarh, they could collect the same from the buyers and retain the same. The Central Excise Audit Officers found that though during 2006-2007, the appellant company had collected an amount of Rs. 2,43,96,177/- as VAT from the customers and had retained the same with them and had not paid to the Government of Chhattisgarh still they had not included this amount in the assessable value of the goods, for the purpose of payment of Central Excise duty, while in terms of the provisions of Section 4(3)(d) of the Central Excise Act, 1944, transaction value excludes only the excise duty, sales tax, and other tax, if any, actually paid or actually payable on the goods. Accordingly, a show cause notice dated 28-4-2011 was issued to the appellant company for recovery of allegedly short paid Central Excise duty amounting to Rs. 39,03,387/- plus Education Cess of Rs. 78,067/- along with interest thereon under Section 11AB and also for imposition of penalty. This show cause notice was issued by invoking extended period under the provision to Section 11A(1) of the Central Excise Act, 1944.

1.2 The above show cause notice was adjudicated by the Addl. Commissioner vide order-in-original dated 19-6-2012 by which the above-mentioned duty demand plus education cess was confirmed by the Addl. Commissioner along with interest and penalty of equal amount, i.e., Rs. 39,81,044/- was imposed on the appellant under Section 11AC. On appeal being filed to the Commissioner (Appeals) against the order of the Addl. Commissioner, the Commissioner (Appeals) vide order-in-appeal dated 4-6-2013 upheld the duty demand plus education cess along with interest but set aside the penalty under Section 11AC observing that the issue being of interpretation does not attract penal provisions of Section 11AC.

1.3 Against the above order of the Commissioner (Appeals), while the appellant company has filed the appeal against the portion of the order upholding the duty and education cess demand along with interest, the Revenue has appeal against the portion of the order setting aside the penalty under Section 11AC. The appellant along with the appeal, have also filed a stay application.

2. Heard both the sides. Though the matter was listed for hearing of the stay application, after hearing the matter for sometime, the Bench was of the view that this matter can be taken up for final disposal. Accordingly, with the consent of both the sides, this matter was heard for final disposal.

3. Shri Krishna Mohan Menon, Advocate, ld. counsel for the appellant, pleaded that so far as the question of excluding from the assessable value, the VAT collected by the appellant and retained by them, is concerned, this issue stands decided by the Apex Court against the appellant in its judgment in the case of CCE, Jaipur v. Super Synotex (India) Ltd. reported in (S.C.). He, however, pleaded that though the issue on merits stands decided against the appellant, the appellant have a case on limitation, as during the period of dispute, i.e., period 2006-07, there were a series of the judgments of the Tribunal and the Board’s Circulars according to which in such cases, where the VAT/Sales Tax is exempt but under special scheme of the State Governments, the assessee is allowed to collect the same from the customers and retain the same, the same it is not to be included in the assessable value. He, therefore, pleaded that the appellant company had acted under bona fide belief that this VAT retained by them is not to be included in the assessable value and hence, longer limitation period of 5 years under proviso to Section 11A(1) of the Central Excise Act, 1944 would not be applicable and in this regard, he placed reliance upon the Apex Court judgment in the case of Continental Foundation Joint Venture reported in , wherein it was held that when on account of conflicting judgments of the Tribunal or Courts or the Board’s Circular there was scope for entertaining doubt about the view to be taken, the assessee would have to be treated as having acted under bona fide belief and extended limitation period under proviso to Section 11A(1) would not be applicable. He, therefore, pleaded that since in this case, the show cause notice for demand of short paid duty during 2006-07 had been issued on 28-4-2011, the same is time-barred. With regard to the Revenue’s appeal, he pleaded that when the appellant company had acted in bona fide belief and there cannot be any element of fraud, wilful misstatement, suppression of facts, or deliberate contravention of the provisions of Central Excise Act, 1944 or of the Rules made thereunder with intent to evade payment of duty, there is no question of imposition of penalty under Section 11AC and as such, there is no merit in the Revenue’s appeal praying for imposition of penalty on the appellant under Section 11AC.

4. Shri Govind Dixit, ld. Departmental Representative, vehemently defended the portion of the impugned order upholding the duty demand along with interest and pleaded that the appellant company is guilty of suppressing the relevant facts from the department and hence, extended period has been correctly invoked. He pleaded that since the appellant company had suppressed relevant facts from the department, the penalty imposed by the original adjudicating authority on the appellant company under Section 11AC should have been maintained by the first appellate authority and the same has been wrongly set aside. Shri Dixit emphasized that the fact of non-inclusion of the VAT amount retained by them in the Assessable Value of the goods was not disclosed by them to the department either in the ER-I Returns or by direct communication and when full facts were not disclosed by the appellant company, they have to be held guilty of wilful suppression of the relevant facts.

5. Shri Menon in rejoinder pleaded that wherever the VAT amount was collected from the customers, the fact that it has been collected from the customers and it is exempt, is mentioned in the invoices and in this regard, he drew attention to some of such sample invoices placed on record. He accordingly, emphasized that there was no suppression of facts on the part of the appellant.

6. We have considered the submissions from both the sides and perused the records. On merits, the question as to whether the VAT which was exempt and which the appellant have collected from the customers and retained in terms of a Scheme of the State Government, is to be included in the assessable value or not, stands decided against the appellant by the Apex Court’s judgment in the case of Super Synotex (India) Ltd. (supra). Therefore, we hold that the appellant during the period of dispute were liable to pay duty on the assessable value including amount of VAT collected by them from their customers and retained by them and since the VAT amount was not included in the assessable value, there has been short payment of duty. However, the duty demand for the 2006-07 period has been issued only on 28-4-2011 by invoking extended period of five years under proviso to Section 11A(1) and this demand would survive only if it can be proved that the appellant had not acted under bona fide belief or that they had committed fraud or wilful misstatement or suppression of facts with intent to evade payment of duty. However, we find that during the period of dispute, the Board’s Circular No. 378/11/98-CX, dated 12-3-98 and No. 671/62/2002-CX, dated 9-10-2002 were in favour of the appellant, as these circulars clarified that sales tax/VAT collected by an assessee but retained and not paid to the Government is not includible in the assessable value. Not only this, there were several judgments of the Tribunal on this issue which were in favour of the appellant company, the last other judgment being in the case of Super Synotex (India) Ltd. (supra), which was subsequently reversed by the Apex Court vide judgment reported in (S.C.). In view of the Board’s Circular and the judgments of the Tribunal, which were in favour of the appellant, it can be said that the appellant had acted under bona fide belief that VAT amount collected by them from the customers and retained was not includible in the assessable value and hence, in these circumstances, in view of the Apex Court judgment in the case of CCE v. Continental Foundation Joint Venture (supra), the longer limitation period would not be available and as such, the duty demand would have to be held as time barred.

7. When as discussed above, the appellant have been held to be acted under bona fide belief and for this reason, the longer limitation period under proviso to Section 11A(1) has been held to be not available to the department, there would be no question of imposition of penalty on the appellant under Section 11AC.

8. In view of the above discussion, the appeal filed by appellant is allowed and the appeal filed by the Revenue is dismissed. The stay application also stands disposed of.

(Operative part already pronounced)