2013 (3) TMI 112 - HC - Central Excise

Pre-fabricated components of concrete - fabrication at site - held that - the Tribunal, after taking into account the evidence produced by the manufacturer on record, came to the conclusion that the fabrication did not take place at the site of the Corporation at Mundra. - Entire claim of the manufacturer is based on Exemption Notification No. 3/2005. One of the essential conditions was that the fabrication should take place at the site for construction work. This essential condition was not satisfied. The appeal of the manufacturer, therefore, must fail. - Decided against the assessee. Bonafide belief - Clearance of goods without payment of duty under the guise that it was exempt by virtue of Notification No. 58/2003-C.E. - whether the manufacturer can be said to be under bona fide belief that it was covered under Notification No. 58/2003-C.E. and was therefore not required to pay any excise duty. - held that - Tribunal gave no specific reasons why it formed the opinion that the manufacturer had bona fide belief of being covered by Notification No. 58/2003. Both the conditions require certain overt acts on the part of the manufacturer. The manufacturer not having taken these steps; not having supplied the documents, cannot be said to have been carrying any bona fide belief that it was protected under Notification No. 58 of 2003. Regarding Cenvat Credit - if the Department holds that the manufacturer is required to pay duty at a certain rate, it cannot in the same breath contend that the manufacturer would not be entitled to avail CENVAT credit on the inputs used in manufacturing such goods. - To that extent decided in favor of assessee. While deciding the issue in favor of revenue, an option given to assessee to pay duty with interest within the stipulated time on which the manufacturer would avail of the option of 25% of the penalty.

Issues Involved:
1. Waiver of penalty under Section 11AC of the Central Excise Act, 1944.
2. Entitlement to CENVAT credit.
3. Applicability of Exemption Notification No. 3/2005-C.E.
4. Validity of the certificate issued by the Central Warehousing Corporation.
5. Demand of Central Excise duty on structures embedded to earth.

Detailed Analysis:

1. Waiver of Penalty under Section 11AC:
The Department contended that the Tribunal erred in waiving the penalty imposed under Section 11AC despite confirming the duty demand. The Tribunal had accepted the Department's findings of wilful misstatement by the assessee but concluded that the manufacturer had a bona fide belief regarding exemption eligibility. The High Court noted that the Tribunal did not provide specific reasons for this belief and emphasized that the manufacturer failed to fulfill the conditions required by Notification No. 58/2003-C.E., such as supplying goods against a bill of export and producing proof of export. Consequently, the High Court reversed the Tribunal's decision, reinstating the penalty but allowed the manufacturer an opportunity to pay 25% of the penalty if the duty and interest were paid within 30 days.

2. Entitlement to CENVAT Credit:
The Tribunal directed that the manufacturer should be given the benefit of CENVAT credit subject to the production of necessary documents. The High Court upheld this decision, stating that if the Department requires the manufacturer to pay duty, it cannot deny the manufacturer the right to avail CENVAT credit on inputs used in manufacturing the goods. The High Court agreed with the Tribunal's view that the manufacturer should be entitled to CENVAT credit upon producing the necessary documents.

3. Applicability of Exemption Notification No. 3/2005-C.E.:
The manufacturer argued that it was entitled to exemption under Notification No. 3/2005-C.E., which requires goods to be fabricated at the site of work for use in construction. Both the Commissioner and the Tribunal found that the goods were fabricated at the factory site in Kathwada and not at the Corporation's site in Mundra. The High Court found no perversity in these findings and concluded that the essential condition of fabrication at the construction site was not satisfied. Therefore, the manufacturer was not entitled to the exemption under Notification No. 3/2005-C.E.

4. Validity of the Certificate Issued by the Central Warehousing Corporation:
The manufacturer presented a certificate from the Central Warehousing Corporation claiming that the goods were manufactured at the site. However, the Tribunal found that the work orders and invoices indicated that the goods were supplied, not fabricated, at the site. The High Court agreed with the Tribunal's assessment that the certificate did not support the manufacturer's claim, given the documentary evidence to the contrary.

5. Demand of Central Excise Duty on Structures Embedded to Earth:
The manufacturer contended that the structures in question, being embedded to earth, became part of immovable property and thus should not be subject to Central Excise duty. The High Court did not specifically address this argument in detail but upheld the duty demand based on the findings that the goods were manufactured and cleared from the factory site without fulfilling the exemption notification conditions.

Conclusion:
The High Court upheld the duty demand and reversed the Tribunal's waiver of the penalty, allowing the manufacturer an opportunity to pay a reduced penalty upon timely payment of duty and interest. The High Court also confirmed the manufacturer's entitlement to CENVAT credit subject to the production of necessary documents. The manufacturer's appeal regarding the exemption under Notification No. 3/2005-C.E. was dismissed, and the findings of fabrication at the factory site were upheld.

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