2010 (11) TMI 924 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 108/1995 for exemption eligibility.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Issue 1: Interpretation of Notification No. 108/1995 for exemption eligibility

The case involved a dispute where the respondent had entered into an agreement with West Bengal State Electricity Board (WBSEB) to supply items based on a certificate of exemption under Notification No. 108/1995. However, the Department later discovered that the Japan Bank for International Co-operation (JBIC) was not an authorized authority to finance the project, rendering WBSEB ineligible for exemption. The respondent was issued a show-cause notice demanding duty, interest, and penalties. The lower appellate authority sustained the demand but waived the penalty, leading to the Revenue's appeal before the Tribunal.

The Department argued that the penalty under Section 11AC should be levied as the respondent suppressed the fact that JBIC was not an approved international organization for project financing. They cited legal precedents reversing earlier decisions and emphasizing the mandatory penalty under Section 11AC when its conditions are met. The Department contended that the respondent's actions warranted penalty imposition.

On the other hand, the respondent contended that they relied on WBSEB's certificate for exemption eligibility, regularly filed RT-12 Returns, and did not suppress any facts. They referenced a case where a penalty was dropped based on similar facts. They argued that they acted in good faith based on the certificate's information and had no intention to deceive the Department.

The Tribunal analyzed the facts and held that the respondent's reliance on WBSEB's certificate, which was within the Department's knowledge, did not indicate fraudulent intent. The Tribunal cited a similar case where penalties were dropped due to lack of suppression of facts. Consequently, the Tribunal upheld the lower appellate authority's decision, rejecting the Revenue's appeal.

Issue 2: Imposition of penalty under Section 11AC of the Central Excise Act, 1944

The Tribunal examined whether the respondent's actions warranted the imposition of penalties under Section 11AC. It was established that the respondent cleared goods to WBSEB based on a certificate indicating exemption eligibility under Notification No. 108/1995. The Tribunal found no evidence of fraudulent intent, collusion, willful misstatement, or suppression of facts by the respondent. As a result, the Tribunal concluded that the penalty under Section 11AC was not applicable to the respondent. The penalties on various representatives of the respondent under Section 11AC of the Central Excise Act, 1944, and Rule 26 of Central Excise Rules, 2001 were also deemed not leviable.

In conclusion, the Tribunal upheld the lower appellate authority's decision, rejecting the Revenue's appeal and confirming that penalties under Section 11AC were not applicable to the respondent.