2006 (11) TMI 77 - AT - Central Excise

Exemption Revenue contended that appellant were not eligible for exemption and accordingly demanded duty penalty and interest - Authority after considering all the factor allow the appeal with consequential relief

Summary

Issues:
1. Eligibility for exemption under Notification No. 8/2002-CE for intermediate products.
2. Applicability of time limitation for demand of duty.
3. Benefit of Cenvat credit and its impact on duty payment.

Eligibility for exemption under Notification No. 8/2002-CE for intermediate products:
The appellants, manufacturers of fabrics, sent HDPE Strips to a job worker for further manufacture of fabrics and sacks. The Revenue contended that these strips were not eligible for exemption under Notification No. 8/2002-CE. The appellants argued that the strips were not cleared for home consumption but only sent for job work, thus falling outside the excluded categories. They cited precedents and Trade Notices to support their position. The Tribunal examined the Annexure of the Notification which excluded certain goods, including plastic strips for weaving fabrics or sacks. As the impugned goods were not cleared for home consumption but for job work, the demand for duty on these strips was deemed unsustainable. The Tribunal also noted that the Department was aware of the appellants' activities, ruling out willful suppression of facts and invoking the longer period under Section 11AC.

Applicability of time limitation for demand of duty:
The appellants argued that the demand of duty on HDPE strips was time-barred as they had communicated all relevant facts to the Department. They contended that the surrender of the Registration Certificate and communication of their activities showed no willful suppression to evade duty payment. Citing case laws, they asserted that claiming exemption notification does not constitute suppression, and extended limitation periods are not applicable in such cases. The Tribunal agreed with this argument, further supporting the appellants' position.

Benefit of Cenvat credit and its impact on duty payment:
The appellants sought the benefit of Cenvat credit under Notification No. 9/2002-CE, stating that it would result in surplus credit, making the exercise revenue-neutral. They argued that no duty would be payable due to the excess Cenvat credit. However, the Revenue reiterated the findings in the impugned Order-in-Appeal without addressing this specific argument. Ultimately, the Tribunal allowed the appeal, providing consequential relief to the appellants based on the eligibility for exemption and the time limitation for duty demand.

In conclusion, the Tribunal ruled in favor of the appellants, finding that the demand for duty on the HDPE strips sent for job work was unsustainable under the exemption notification. The Tribunal also held that the demand was time-barred due to the communication of relevant facts to the Department, and the benefit of Cenvat credit could result in no duty payment.