2010 (9) TMI 561 - AT - Central Excise

Demand - Rule 26 of the Central Excise Rules - It is further submitted that the plea of limitation raised by the assessee was brushed aside in a casual manner - The case of the Revenue is mainly that, as the cartons which were cleared for export did not satisfy Rule 19(1), the clearance should be counted as a clearance for home consumption and consequently such clearances must be added to the aggregate value of the clearances for home consumption for SSI purpose - assessee in the present case has established that the cartons in question were not cleared for home consumption but cleared for export in terms of Rule 19(1) of the Central Excise Rules and, therefore, such clearances are not likely to be reckoned as part of aggregate clearances for home consumption for the purpose of SSI Notification for any of the financial years comprised in the period of dispute - appeals are allowed

Summary

Issues Involved:
1. Demand of duty.
2. Interest on duty under Section 11AB of the Central Excise Act.
3. Penalty under Section 11AC of the Central Excise Act.
4. Penalty under Rule 26 of the Central Excise Rules.
5. Applicability of SSI exemption.
6. Proof of export and its acceptance.
7. Invocation of the extended period of limitation.

Detailed Analysis:

1. Demand of Duty:
The Commissioner confirmed a demand of over Rs. 72 lakhs against the assessee for the period from 2001-02 to 2005-06. The department alleged that the assessee cleared goods for home consumption beyond the prescribed limit under the relevant SSI exemption Notification. The cartons cleared to exporters without payment of duty were treated as clearances for home consumption because they were not directly exported from the factory, thus not attracting Rule 19(1). This led to the inclusion of these clearances in the aggregate value for home consumption, resulting in the demand.

2. Interest on Duty under Section 11AB:
The show-cause notice invoked Section 11AB for the levy of interest on the alleged duty. This was based on the premise that the assessee had cleared goods beyond the exemption limit and had suppressed facts to evade duty.

3. Penalty under Section 11AC:
A penalty equal to the duty was imposed on the assessee under Section 11AC, citing suppression of facts with intent to evade payment of duty. The department argued that the assessee's failure to disclose that the cartons cleared to exporters should be considered as clearances for home consumption justified the penalty.

4. Penalty under Rule 26:
A separate penalty of Rs. 10 lakhs was imposed on one of the partners under Rule 26 of the Central Excise Rules. This was based on the same grounds of alleged suppression and evasion of duty.

5. Applicability of SSI Exemption:
The assessee claimed SSI exemption, arguing that their clearances for home consumption were within the prescribed limit. They contended that the cartons cleared to exporters should not be included in the aggregate value for home consumption. The department disputed this, arguing that the clearances did not meet the conditions of Rule 19(1) and should be included in the aggregate value.

6. Proof of Export and Its Acceptance:
The assessee provided Bills of Lading, FORM-H, and other sales tax forms as proof of export. They cited the Tribunal's decision in Vadapalani Press v. CCE, Chennai, which accepted FORM-H as proof of export for excluding goods from the aggregate value of clearances for SSI benefit. The Tribunal in this case reiterated that the sales tax forms should be accepted as proof of export, even if the goods were exported from the customer's premises and not directly from the factory.

7. Invocation of the Extended Period of Limitation:
The department invoked the extended period of limitation, alleging suppression of facts with intent to evade duty. The assessee argued that they had informed the department about their clearances for export and had sought confirmation on their understanding that such clearances should not be included in the aggregate value for home consumption. The Tribunal found that the relevant facts were within the department's knowledge, and thus, the extended period of limitation was not justifiable.

Conclusion:
The Tribunal found that the cartons cleared by the assessee were indeed for export and not for home consumption. The documents provided by the assessee were deemed sufficient proof of export. The Tribunal followed its earlier decision in Vadapalani Press, holding that the clearances in question should not be included in the aggregate value for home consumption for SSI exemption purposes. Consequently, the demand for duty, interest, and penalties was set aside, and the appeals were allowed.