2004 (4) TMI 353 - AT - Central Excise

Issues:
Whether duty of Excise is chargeable from the appellants on the quantity of inputs obtained duty free without complying with the conditions of Notification No. 1/95-C.E., dated 4-1-95 as amended.

Analysis:

In the present case, the appellants, who are 100% Export-Oriented Undertakings, were procuring High Speed Diesel Oil under Notification No. 1/95-C.E. on the basis of CT-3 certificates. The issue revolved around whether the duty of Excise is chargeable from the appellants for obtaining HSD oil without obtaining approval from the Commissioner of Customs on the recommendation of the Development Commissioner, as required by the amended Notification No. 1/95-C.E. The appellants argued that they had approached the Development Commissioner for ex-post facto recommendation, which was granted, but the approval was not forwarded to the Commissioner. The Dy. Commissioner vacated the demand, stating that since ex-post facto approval was obtained, there was no reason to continue the demands. However, the Commissioner (Appeals) set aside the Dy. Commissioner's order, leading to the appeal.

On the other hand, the Revenue contended that the appellants were not eligible for the exemption under the notification as they had not obtained the required approvals. Citing precedents, the Revenue argued that compliance with the conditions specified in the notification is mandatory for availing the exemption. The Tribunal noted that similar matters had been decided in favor of both the Revenue and the appellants in previous cases. It was observed that the duty had been demanded from the appellants solely on the ground of lack of approval, without considering other grounds for duty liability as specified in Rule 196 of the Central Excise Rules.

The Tribunal analyzed the conditions specified in Notification No. 1/95-C.E. and Rule 196 of the Central Excise Rules. It was noted that duty liability of the recipient arises only under specific circumstances, such as if the goods are not accounted for as being used for the intended purpose or if they are lost or destroyed during transportation or handling. Since the duty was demanded solely due to the lack of approval, the Tribunal held that the duty should have been demanded from the supplier who cleared the goods without payment of duty on the basis of an invalid CT-3 certificate. Consequently, the Tribunal set aside the demand and allowed all the appeals based on this ground alone.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing that duty liability should be imposed in accordance with the specified conditions and grounds for duty liability as per the Central Excise Rules, and in this case, the demand was not justified solely on the basis of lack of approval, leading to the decision to set aside the demand and allow the appeals.

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