2011 (3) TMI 384 - AT - Central Excise

Demand - Classification - Notification No. 10/97-C.E., dt. 1-3-1997 - barred by limitation - There was no intention to evade payment of waste which constituted 0.12% to 0.4% of the weight of the goods cleared (to job worker) - The original authority did not have the advantage of the finding and reasoning of the Additional Commissioner, Chennai on the same issue in respect of the assessee s sister unit as the said order was not produced before him - The exemption allowed is challenged for the sole reason as there was no doubt that the goods satisfied the other conditions of the notification to qualify for the exemption - Held that impugned order is contrary to the settled interpretation of the notification - Appeal is allowed

Issues Involved:
1. Demand of duty on scrap not returned by job workers.
2. Demand on tractor cleared availing benefit of Notification No. 10/97.
3. Imposition of penalty under Section 11AC.

Issue-wise Detailed Analysis:

1. Demand of Duty on Scrap Not Returned by Job Workers:

The appellant, M/s. Tractors and Farm Equipments Ltd. (TAFE), contended that the demand of duty on scrap generated during job work was barred by limitation. They argued that the adjudicating authority failed to establish any intention to evade duty, which is a prerequisite for invoking the extended period of limitation under Section 11A. The appellant cited the Supreme Court judgments in Tamil Nadu Housing Board v. Collector of CE, Madras and Pushpam Pharmaceuticals Company v. Collector of CE, Bombay, emphasizing that the proviso to Section 11A can only be invoked in cases of deliberate withholding of correct information to evade duty. The appellant also argued that the scrap generated was fine dust with no commercial value, supported by certificates from job workers and a statement from their manager. The Department failed to provide evidence of the scrap being marketable or known in the market.

The Tribunal noted that the lower authorities did not render a finding of willful misstatement or suppression of facts with intent to evade duty. The Tribunal accepted the appellant's argument and vacated the penalty imposed under Section 11AC, while sustaining the duty liability as the appellant did not contest it.

2. Demand on Tractor Cleared Availing Benefit of Notification No. 10/97:

The appellant argued that the tractor cleared to M/s. National Aeronautics Ltd. (NAL) was eligible for exemption under Notification No. 10/97-C.E. They claimed that the tractor-cum-trailer was used for carrying scientific instruments, qualifying it as an apparatus under the notification. They cited several Tribunal decisions, including P.L. Haulwel Trailers v. CCE, Chennai, which held that equipment used to carry scientific instruments qualifies for exemption.

The Tribunal found that the clearance was made against the requisite certificate from the appropriate authority, and the appellant's belief that the tractor was eligible for exemption was bona fide. The Tribunal referred to the P.L. Haulwel Trailers case, which supported the appellant's claim. Consequently, the Tribunal vacated the demand of duty, interest, and penalty regarding the agricultural tractor.

3. Imposition of Penalty under Section 11AC:

The appellant contested the imposition of penalty equal to the duty liability on the scrap. They argued that there was no intention to evade duty, as evidenced by their regular payment of duty on similar waste generated at their Chennai factory. The Tribunal noted that the lower authorities did not find any willful misstatement or suppression of facts with intent to evade duty. Considering the appellant's bona fide belief and the absence of intent to evade duty, the Tribunal vacated the penalty imposed under Section 11AC.

Conclusion:

The Tribunal allowed the appeal to the extent of vacating the penalty imposed under Section 11AC and the demand of duty, interest, and penalty regarding the agricultural tractor. The duty liability on the scrap was sustained as the appellant did not contest it. The Tribunal's decision was based on the appellant's bona fide belief, the absence of intent to evade duty, and the support of relevant judicial precedents.

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