2005 (7) TMI 561 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty and demand of duty on Maharashtra State Electricity Board (M.S.E.B) and M/s. Elecon Engg. Co. Ltd.
2. Validity of the certificate issued by M.S.E.B to M/s. Elecon regarding deemed export benefits.
3. Applicability of penalty under Rule 209A on M.S.E.B.

Analysis:
1. The case involved the imposition of penalties and demand of duty on M.S.E.B and M/s. Elecon Engg. Co. Ltd. for the supply of goods under notification 108/95. The settlement commission granted immunity to M/s. Elecon Engg. Co. Ltd. from payment of interest and penalties after depositing the duty amount. The Commissioner examined the validity of M.S.E.B's stand regarding deemed export benefits and found that M.S.E.B had issued a certificate to M/s. Elecon stating their supplies were eligible for deemed export benefits, despite being aware that such benefits were not available due to loan suspension. This led to the imposition of penalties under Rule 209A on M.S.E.B.

2. The certificate issued by M.S.E.B to M/s. Elecon was a crucial piece of evidence in establishing connivance between the parties for evasion of duty. However, the Tribunal found that the certificate could not be relied upon for penal consequences. The Tribunal noted that the certificate was not listed in the charges or notice issued to M.S.E.B, violating principles of natural justice. Additionally, the authority of the certificate was an engineer of the project and did not represent the official stance of the Board. The Tribunal concluded that the certificate did not prove intent to evade duty on the part of M.S.E.B, and therefore, the penalty under Rule 209A could not be upheld.

3. The Tribunal further analyzed the requirement of knowing concert for imposing penalties under Rule 209A, which necessitates dealing with goods liable to confiscation. Since no liability for confiscation of goods was proposed or found, the penalty under Rule 209A could not be justified. The Tribunal considered the efforts made by the Government of Maharashtra and M.S.E.B to continue the project despite the World Bank loan suspension. As a result, the penalty was set aside, and the appeal was allowed on 22-9-2005.