2006 (1) TMI 435 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 209A on the appellant company for a contract entered into in 1991.
2. Challenge to penalty of Rs. 50,000 imposed upon the appellant company under Rule 209A.

Detailed Analysis:
The judgment by the Appellate Tribunal CESTAT, Kolkata involved the imposition of a penalty under Rule 209A on an appellant company for a contract entered into in 1991. The appellant company had entered into a contract with M/s. ABM Architects (P) Ltd. for designing office layout and supervising interior designing/decoration. While proceedings were initiated against the architect for duty demand on wooden furniture, the appellant company faced a penalty under Section 209A of the Central Excise Rules, 1944. The appeal specifically challenged the penalty of Rs. 50,000 imposed on the appellant company, as the duty demand against the furniture manufacturer had not been appealed against.

The appellant company contended that at the time of entering the contract in 1991, the issue of whether wooden furniture could be considered handicraft for exemption was not settled. Referring to a Tribunal decision in Collector of Central Excise v. Louis Shoppe, the appellant argued that wooden furniture was entitled to exemption under Notification No. 76/86-C.E. However, a subsequent Supreme Court decision in the same case held that wooden furniture did not qualify as handicraft. The appellant argued that based on the Tribunal's consistent view until the Supreme Court decision, they should not be penalized for a bona fide belief following the Tribunal's interpretation.

The Tribunal, after hearing the Revenue's arguments, noted that the Supreme Court had acknowledged the Tribunal's favorable view towards the assessee in similar cases. Citing Commissioner of Central Excise, Trichy v. Grasim Industries Ltd., where penalties were set aside due to the Tribunal's consistent interpretation, the Tribunal found no justification for penalizing the appellant company. The Tribunal emphasized that since the contract was entered into in 1991 and the law was clarified by the Supreme Court in 1995, the penalty imposition was unwarranted. Consequently, the Tribunal set aside the penalty and allowed the appeal, also disposing of the Stay Petition.

In conclusion, the judgment highlighted the importance of considering the timeline of events, the evolution of legal interpretations, and the principle of penalizing parties based on their bona fide beliefs following established legal precedents.