2011 (5) TMI 726 - AT - Central Excise

Demnd of duty and penalty - 100% EOU - Demand raised on the ground that fresh Mushrooms were classifiable under CETH 07095100 of the Central Excise Tariff attracting nil rate of duty and are therefore excisable goods. - held that - after the introduction of new Tariff, fresh mushrooms are covered under CETH 07095100. As submitted by the learned Jt. CDR, with which we agree, there is no dispute about the classification. Fresh mushrooms now attract NIL rate of duty and find place in the Schedule as observed above. Before 28-2-2005, fresh mushrooms were not covered in the Schedule and this was the case made out by the appellants also. Excisable goods - According to the assessee, the use of expression as being subject to duty of excise contemplates actual levy and collection of excise duty. It was submitted that some amount should be leviable and collectable as excise duty and only in such a situation, goods can be termed as excisable goods. Where no duty is levied or collected because the rate of duty in the Tariff itself is NIL, then such goods cannot be treated as goods being subject to duty of excise. - Held that - even if attracting nil rate of duty, the goods remain excisable and they do not become non-excisable. Therefore, just because the goods listed in the schedule attract nil rate of duty, it cannot be said that they become non-excisable. Therefore, the question of proviso going beyond the main section does not arise. Appropriate duty - held that - the decision of Hon ble Supreme Court, in the case of Dhiren Chemicals (2001 -TMI - 1709 - SUPREME COURT OF INDIA) would not be applicable to the present case - In that case, Hon ble Court was concerned with the interpretation of the phrase on which appropriate amount of duty of excise has already been paid . Therefore, the Hon ble Court interpreted the term appropriate and has already been paid . The Hon ble Court was not at all concerned with the interpretation of the term excisable goods . Similarly, since we are not concerned with the term suffered in this case, the other submissions made in that connection are also not relevant. Deeming Debonding of EOU - held that - there is absolutely no legal provision anywhere for any deemed de-bonding. No evidence was shown to us that appellant applied to Development Commissioner for giving retrospective effect to the date of de-bonding. Further, the de-bonding permission is given in principle by the Development Commissioner and after the duties are discharged and certificate is issued by Customs, final de-bonding order is issued. While confirming the duty, penalty waived, matter remanded back for re-quantification of duty.

Summary

Issues Involved:
1. Preliminary objections regarding the maintainability of the appeal.
2. Classification and excisability of fresh mushrooms under the Central Excise Tariff.
3. Application of the proviso to Section 3(1) of the Central Excise Act, 1944.
4. Consideration of cum duty price for the value realized by the appellant.
5. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Preliminary Objections:
The respondent raised three preliminary objections:
- The Miscellaneous Application No. 602/2010 was not disposed of by the Tribunal.
- The affidavit filed by the appellant on 7-3-2011 for amending the appeal memorandum was not permissible.
- The appeal was not maintainable as the appellant, M/s. Eco Valley Farms & Foods Ltd., had no legal existence at the time of filing the appeal.

The Tribunal rejected all three objections:
- The Miscellaneous Application had been disposed of, as indicated in the Tribunal's order.
- The affidavit was considered primarily for correcting the duty demand amount, and procedural grounds should not prevent justice.
- The appellant company was still in existence, and the merger of its food business did not dissolve its legal entity.

2. Classification and Excisability of Fresh Mushrooms:
The appellant argued that the issue had been decided earlier by the Commissioner (Appeals) and should be binding. However, the Tribunal noted that the Tariff underwent a change after 28-2-2005, classifying fresh mushrooms under CETH 07095100 with a NIL rate of duty. The Tribunal concluded that fresh mushrooms are excisable goods as they are specified in the Schedule, despite attracting a NIL rate of duty.

3. Application of Proviso to Section 3(1) of the Central Excise Act, 1944:
The appellant contended that goods with a NIL rate of duty are not excisable and hence not subject to customs duty. The Tribunal disagreed, citing that the definition of "excisable goods" includes goods specified in the Schedule, regardless of the duty rate. The Tribunal upheld that fresh mushrooms are excisable and subject to duty under the proviso to Section 3(1).

4. Consideration of Cum Duty Price:
The appellant argued that the value realized should be treated as cum duty price. The Tribunal referred to the Supreme Court's decision in Amrit Agro Industries, which requires the manufacturer to demonstrate how the value was determined. The Tribunal remanded the matter to the Commissioner to decide afresh whether the value at which the mushrooms were sold can be treated as cum duty value.

5. Imposition of Penalty:
The Tribunal noted that the appellant had a bona fide belief that mushrooms were non-excisable based on a previous unchallenged decision. Given the complexity of the excisability issue, the Tribunal found that imposing a penalty was unjustified. However, interest on the duty was deemed payable.

Conclusion:
The Tribunal upheld the classification of fresh mushrooms under CETH 07095100 and their excisability under the proviso to Section 3(1). The duty amount demanded was to be re-quantified, considering judicial precedents and statutory provisions. The penalty imposed on the appellant was set aside, and the appeal was disposed of accordingly.