2006 (11) TMI 530 - AT - Central Excise

Interpretation of Statute - Notification No. 41/99-C.E. - Demand - Limitation - Show cause notice issued within one year - Penalty - Imposition of - Mens rea not necessary

Issues Involved:
1. Eligibility for exemption under Notification No. 41/99-CE.
2. Timing of filing the undertaking with the Assistant Commissioner/Deputy Commissioner.
3. Interpretation of conditions (a) and (b) in the Notification.
4. Procedural vs. substantive conditions for exemption.
5. Penalties under Rule 173Q.
6. Limitation period for issuing show-cause notices.

Detailed Analysis:

1. Eligibility for exemption under Notification No. 41/99-CE:
The main issue is whether the benefit of exemption under Notification No. 41/99-CE dated 26-11-1999 will commence only from the date of receipt of the undertaking by the Assistant Commissioner/Deputy Commissioner of Central Excise or whether it also covers the period prior to the said date. The Notification exempts tea from the whole of the duty of excise subject to the conditions specified in the corresponding entry in column (3) of the Table annexed to the Notification. For the financial year 2000-2001, the undertakings required under the Notification were received belatedly by the jurisdictional Assistant Commissioner/Deputy Commissioner.

2. Timing of filing the undertaking with the Assistant Commissioner/Deputy Commissioner:
The Notification specifies that the benefit of exemption will commence from the date of the undertaking with the Assistant Commissioner/Deputy Commissioner. The appellate authority considered the delay in filing the undertaking as a "procedural lapse" not affecting the claim of the assessee for exemption from payment of duty on the tea removed from their factories from 1-4-2000 till the dates of filing of undertakings. However, the appellate authority in the assessees' appeals held that the filing of the undertaking for each financial year was a pre-requisite for availing exemption under Notification No. 41/99-CE, and the benefit would not be available for the period prior to the date of filing of the undertaking.

3. Interpretation of conditions (a) and (b) in the Notification:
Condition (a) states, "The benefit of exemption from duty will commence from the date of the undertaking with the Assistant Commissioner/Deputy Commissioner of Central Excise as specified in condition (b)." According to the legal interpretation, the date of the undertaking is the date on which it is received by the Assistant Commissioner/Deputy Commissioner, not the date on which it is sent by the manufacturer. This interpretation is supported by the literal meaning of the verb "file" and relevant case law.

4. Procedural vs. substantive conditions for exemption:
The substantive conditions for claiming the benefit of the Notification are those mentioned in condition (b) of the Table annexed to the Notification. The filing of the undertaking with the Assistant Commissioner/Deputy Commissioner was argued to be a procedural requirement, and any delay in this matter was considered a condonable lapse. However, it was held that both conditions (a) and (b) are mandatory for claiming exemption under the Notification. The Supreme Court's ruling in Eagle Flask Industries Ltd. v. CCE supports this view, stating that conditions for availing benefits under an exemption notification must be strictly complied with.

5. Penalties under Rule 173Q:
The department's appeals included a prayer for restoration of penalties imposed on the assessees for removing dutiable goods without payment of duty. The appellate authority had vacated these penalties, but the department sought their reinstatement. The Tribunal found that even in the absence of mens rea, Rule 173Q was invocable against manufacturers indulging in clearances of excisable goods without payment of duty. However, the quanta of penalties imposed were reduced to Rs. 5,000/- each, considering the facts and circumstances of the cases.

6. Limitation period for issuing show-cause notices:
The plea of limitation was raised against the relevant show-cause notices, arguing that they were issued beyond the six-month period prescribed under Section 11A(1) of the Central Excise Act during the periods of dispute. However, the Tribunal held that the provision of limitation in force on the date of issue of the show-cause notice would be applicable. Since the limitation period was one year on the dates of issue of the relevant show-cause notices, the notices were deemed to be within the period of limitation.

Conclusion:
The Tribunal concluded that the benefit of exemption under Notification No. 41/99-CE would commence from the date of filing the undertaking with the Assistant Commissioner/Deputy Commissioner. The appeals by the department were allowed in part, restoring the demands of duty but with reduced penalties. The appeals by the assessees were dismissed with a reduction in the quantum of penalties.

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