2011 (2) TMI 637 - AT - Central Excise

Clearance of goods paying concessional rate of duty under Notification 2/95-CE dated 4.1.1995 for which they were not eligible in the absence of any permission from the Development Commissioner. Accordingly to pay duty at the full rates and consequently they were required to pay a differential duty. Held that - The clearances are affected without obtaining prior permission from the Development Commissioner the assessee would be liable to pay duty u/s 3(1) which is the excise duty leviable on like goods produced or manufactured in India. In the instant case the assessee has paid more duty equal to 50% of each of the aggregate duties of customs on like goods imported into India in terms of Notification 2/95. decided in favour of Assessee.

Summary

Issues:
- Duty liability under Notification 2/95-CE for clearance of goods into DTA without prior permission from the Development Commissioner.
- Interpretation of the requirement for prior authorization for availing concessional rate of duty under Notification 2/95-CE.
- Applicability of duty liability under main section 3(1) of the Central Excise Act, 1944 for goods cleared into DTA without proper permission.

Analysis:
1. Duty Liability under Notification 2/95-CE: The case involved the departmental appeal against an order where the Commissioner concluded that the assessee was entitled to clear goods into DTA without exceeding the entitlement limit specified by the Development Commissioner. The Commissioner emphasized that the clearances were in accordance with the EXIM policy and Hand Book of Procedures, hence the show-cause notice lacked a sound foundation. The Commissioner dropped the proceedings as the demand was deemed unsustainable due to the absence of evidence of exceeding entitlement limits.

2. Interpretation of Prior Authorization Requirement: The department contended that prior authorization from the Development Commissioner was necessary for availing the concessional rate of duty under Notification 2/95-CE. Citing precedents like SIV Inds. vs. CCE, the department argued that without such permission, goods would be liable to excise duty under the main provision of the Central Excise Act. However, the Commissioner's observation was that the assessee had authorization for clearance into DTA, even if obtained subsequently, and the benefit of the notification could not be denied solely due to procedural lapses.

3. Applicability of Duty Liability: The department relied on judgments like Goyal Synthetics P. Ltd. vs. CCE and CCE Vishakpatnam vs. NCC Blue Water Products Ltd. to support the contention that prior permission was necessary for concessional duty under Notification 2/95-CE. Conversely, the respondent cited cases like CCE vs. Pratap Singh and Sam Spintex Ltd. vs. CCE to argue that goods would be subject to excise duty under the main section 3 of the Act if no permission was obtained. The respondent highlighted that the duty liability discharged under the notification was higher than under the main section, making the duty demand unsustainable.

In conclusion, the Appellate Tribunal rejected the department's appeal, affirming the Commissioner's decision. The Tribunal concurred with the Commissioner's findings that the clearances into DTA were in compliance with the authorizations from the Development Commissioner, even if obtained subsequently. The Tribunal emphasized that the substantive benefit of Notification 2/95-CE could not be denied due to technical procedural lapses, and the duty demand was deemed unsustainable based on the findings of entitlement limits and compliance with EXIM policies.