2008 (1) TMI 795 - AT - Central Excise

Summary

Issues: Valuation of unbranded chewing tobacco under Chapter 24, applicability of exemption Notification No. 121/94-C.E., duty payment, personal penalties, compliance with Chapter X Procedure.

In the present case, the dispute revolves around the valuation of unbranded chewing tobacco under Chapter 24 and the applicability of exemption Notification No. 121/94-C.E. Initially, the appellant faced a disagreement with the Central Excise authorities regarding the exemption, which was later resolved in favor of the appellant by the Commissioner (Appeals). Despite this, the Revenue insisted on duty payment for the period from April 1999 to June 2000, resulting in an enhanced duty amount of approximately Rs. 78.50 lakhs. Additionally, personal penalties were imposed on the appellant and the Manager under Section 11AC and Rule 173Q(1) respectively.

The appellant argued that since the exemption dispute was settled in their favor, they were not obligated to pay duty for the mentioned period, especially considering the duty paid was utilized as credit by their second unit, resulting in a revenue-neutral situation. On the other hand, the Revenue contended that the appellant did not comply with the Chapter X Procedure as required by the Notification, thus rendering the appellant ineligible for the exemption.

The appellant further countered the Revenue's argument by emphasizing that the Chapter X Procedure was not followed due to the Revenue's denial of the exemption benefit during the relevant period. They highlighted that the purpose of the Chapter X Procedure was to ensure the goods cleared were received by the second unit, which was not in dispute in this case. The appellant also referenced a Supreme Court judgment to support their position that the Revenue's denial of the exemption benefit precluded them from following the Chapter X Procedure.

Ultimately, the Tribunal found that the duty paid by the appellant had been availed as credit by the second unit, resulting in a revenue-neutral scenario. Consequently, the Tribunal concluded that the appeals should be allowed, setting aside the impugned order and ruling in favor of the appellant.