2013 (5) TMI 568 - AT - Central Excise

Duty exemption under Notification No. 50/2003-C.E. denied - Personal penalty on director - extented period of limitation invoked - Held that - As decided in Indian Aluminium Co. Ltd. v. Thane Municipal Corporation (1991 (9) TMI 162 - SUPREME COURT OF INDIA) that when the exemption notification is subject to observance of some condition and non-observance of that condition is likely to facilitate commission of fraud and introduce administrative inconveniences, the exemption would not be available if the condition has not been fulfilled and such condition cannot be treated as mere a procedural condition. Unless the officers have advance intimation about the assessee s intention to avail of this exemption the correctness or otherwise of the claim for exemption cannot be checked. Condition (1) regarding filing of declaration as prescribed in the para 1 of the notification is a condition meant to prevent misuse of this exemption and its non-observance would only facilitate the misuse of this notification and cause administrative inconveniences. Therefore non-filing of declaration shall result in denial of exemption. As regards question of limitation, it is not disputed that the appellant before availing of the exemption had neither applied for registration nor intimated the department about nature of activity therefore extended period under proviso to Section 11A has been correctly invoked. Since Shri Shantanu Sangi, Director of the appellant-company was actively involved in the day to day activity of the appellant-company penalty on him under Rule 26 has been correctly imposed. This is not the case for total waiver from requirement of pre-deposit thus appellant-company directed to deposit entire amount of duty demand confirmed against them within eight weeks from the date of this order. Appellant Shri Shantanu Sangi, Director of the appellant-company is directed to deposit an amount of Rs. 1 lakh within eight weeks from the date of this order.

Issues Involved:
1. Eligibility for duty exemption under Notification No. 50/2003-C.E.
2. Non-filing of required declaration and its impact on exemption eligibility.
3. Applicability of extended period of limitation under proviso to Section 11A.
4. Imposition of penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002.
5. Seizure and confiscation of goods under Rule 25 of Central Excise Rules, 2002.
6. Requirement of pre-deposit for hearing of the appeals.

Detailed Analysis:

1. Eligibility for Duty Exemption under Notification No. 50/2003-C.E.:
The appellant, engaged in manufacturing steel structures and bodies of motor vehicles, claimed duty exemption under Notification No. 50/2003-C.E. The notification exempts specified goods from excise duty if certain conditions are met, including the location of the manufacturing unit in specified industrial areas and the filing of a declaration before the first clearance. The appellant's unit was in an eligible area, and the goods manufactured were not listed in Annexure-I of the notification.

2. Non-filing of Required Declaration and Its Impact on Exemption Eligibility:
The appellant did not file the required declaration before commencing clearances, nor did they inform the jurisdictional Central Excise Officers about their manufacturing activities. The department argued that non-filing of the declaration, a condition meant to prevent misuse of the exemption, resulted in the denial of exemption. The appellant contended that the declaration was a procedural formality and that substantive benefits should not be denied for procedural lapses. The Tribunal, referencing the Apex Court's judgment in Indian Aluminium Co. Ltd. v. Thane Municipal Corporation, held that non-compliance with the condition facilitated potential fraud and administrative inconvenience, thus denying the exemption.

3. Applicability of Extended Period of Limitation under Proviso to Section 11A:
The department invoked the extended period of limitation under proviso to Section 11A due to the appellant's failure to register or inform about their activities. The appellant argued against the invocation of the extended period, citing no wilful mis-statement or suppression of facts. However, the Tribunal found that the extended period was correctly invoked given the appellant's lack of compliance and transparency.

4. Imposition of Penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002:
Penalties were imposed on the appellant-company and its director under Section 11AC and Rule 26 for non-compliance and failure to file the required declaration. The Tribunal upheld the penalties, noting that the director was actively involved in the company's activities and the non-compliance facilitated misuse of the exemption notification.

5. Seizure and Confiscation of Goods under Rule 25 of Central Excise Rules, 2002:
Goods valued at Rs. 36,70,277/- cleared to another unit were seized and ordered for confiscation under Rule 25, with an option for redemption upon payment of a fine. This action was part of the show cause notice and subsequent adjudication by the Commissioner.

6. Requirement of Pre-deposit for Hearing of the Appeals:
The Tribunal directed the appellant-company to deposit the entire duty demand amount within eight weeks and the director to deposit Rs. 1 lakh. Upon compliance, the requirement for pre-deposit of the remaining interest and penalties would be waived, and recovery stayed until the disposal of the appeals.

Conclusion:
The Tribunal upheld the department's actions, denying the exemption due to non-compliance with the notification's conditions, invoking the extended period of limitation, and imposing penalties. The appellant was directed to make pre-deposits to proceed with the appeals. Compliance was to be reported by 28-12-2012.

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