2005 (11) TMI 303 - AT - Central Excise

Summary

Issues: Appeal against demand of duty and penalties under Notification No. 3/2001-C.E. for clearance of Naphtha; Compliance with Central Excise Rules for concessional rate of duty; Procedural lapses in clearance of goods; Applicability of CT-2 certificate; Benefit of doubt for procedural lapses during transition period.

Analysis:
1. The appeal was filed against the demand of duty and penalties imposed by the Commissioner of Central Excise for clearing Naphtha to M/s Indian Farmers Fertilizer Co-operative Ltd. without following the procedure under Notification No. 3/2001-C.E. The appellants argued that they had cleared Naphtha under the old procedure using a CT-2 certificate valid until 31st March, 2002. They contended that IFFCO applied for permission under the new Rules on 27th July, 2001, and the necessary permission was granted on 6th August, 2001. The Tribunal noted that the demand was not sustainable as IFFCO had applied for permission before the clearance, and the demand against IFFCO had been dropped due to procedural lapses during the transition period.

2. The Revenue contended that the appellants, as manufacturers of Naphtha, cleared the goods without the required proforma countersigned by the competent officer, making them liable to pay duty. However, the Tribunal found that the goods were cleared against a valid CT-2 certificate and that the demand was not sustainable due to the procedural compliance by IFFCO and the absence of misuse of concessions.

3. Two show cause notices were issued, one to the appellants and another to IFFCO, for duty on the Naphtha cleared. The Commissioner dropped proceedings against IFFCO, acknowledging the procedural lapses due to confusion during the transition period. The Tribunal upheld this decision, stating that denial of benefits for minor technical discrepancies was not justified. As proceedings against the recipient were dropped, the demand against the manufacturer was deemed unsustainable, and the penalties were set aside.

4. The Tribunal emphasized that the appellants had cleared the Naphtha before IFFCO obtained necessary permission under the new Rules, but as the permission was granted subsequently and in light of the dropped proceedings against IFFCO, the demand against the manufacturer was not sustainable. Consequently, the penalties were also set aside, and the appeal was allowed.

This comprehensive analysis highlights the procedural and compliance issues, the application of rules during the transition period, and the Tribunal's decision to set aside the demand and penalties based on the procedural lapses and the benefit of doubt given to the appellants in line with the decision regarding the recipient's compliance.