2013 (8) TMI 198 - CGOVT - Central Excise

Remission of duty under Rule 21 of the Central Excise Rules, 2002 - M/s. Hindustan Coca Cola Beverages Pvt. Ltd. is manufacturers of aerated water, mineral water and soda - After filling with mineral water and aerated water in bottles, there occurred some breakage in the store of finished goods - Applicant supplied the figure of breakage only after pursuance of department and that they did not file any application for remission of duty Show-cause Notice issued making demand of duty along with interest and also imposed penalty of an amount equal to duty on applicant Held that - Circular No. 930/20/2010-CX., dated 9-7-2010 is clarificatory in nature, and when any circular is issued clarifying the provision of any previous circular, the same is applicable retrospectively. In the instant case, the Circular, dated 9-7-2010, has been issued to clarify the provisions of Circular, dated 17-9-1975 in light of some judicial pronouncement, introduction of MODVAT/CENVAT Scheme and also in view of Central Excise Rules, 2002 The said circular being clarificatory in nature, has a retrospective effect - In case of breakage/destruction of final product, remission can be claimed under Rule 21 of Central Excise Rules, 2002, but the remission is granted subject to condition of reversal of CENVAT credit availed on the inputs. In this case, the applicant was required to file application for remission of duty, which he failed to do. As such, they rendered themselves liable for payment of duty along with interest and penalty - Decided against the Assessee.

Summary

Issues:
- Demand of duty on breakage of aerated water and mineral water bottles.
- Applicability of Circulars and Trade Notices issued by the Central Board of Excise and Customs.
- Denial of remission of duty by the Commissioner (Appeals).
- Non-compliance with procedures prescribed in the Central Excise Manual.
- Application of Central Government's order on an identical matter.
- Prospective or retrospective effect of a clarificatory Circular dated 9-7-2010.

Analysis:
1. Demand of Duty on Breakage: The case involved M/s. Hindustan Coca Cola Beverages Pvt. Ltd. facing demand of duty due to breakage of aerated water and mineral water bottles in their unit. The jurisdictional Central Excise Officers issued Show Cause Notices, leading to the confirmation of duty demand, interest, and penalty by the adjudicating authority. The Commissioner (Appeals) upheld the demand of duty but set aside the penalty, prompting the applicant to file a revision application.

2. Applicability of Circulars and Trade Notices: The applicant argued that Circulars of the Central Board of Excise and Customs (C.B.E. & C.) were binding on the department, citing Circulars related to tolerance limits for breakages. The Circulars specified a tolerance limit of 0.5% for breakages of aerated water bottles, which could be written off subject to certain conditions. The applicant contended that they complied with the conditions specified in the Circulars, thus justifying remission of duty.

3. Denial of Remission of Duty: The Commissioner (Appeals) denied remission of duty based on the applicant's alleged failure to follow prescribed procedures in the Central Excise Manual. However, the applicant argued that the breakages occurred within the tolerance limits specified in the Circulars, and thus, remission should not have been denied.

4. Non-Compliance with Procedures: The Commissioner (Appeals) upheld the demand of duty on the grounds of the applicant's non-compliance with the procedures outlined in the Central Excise Manual. The applicant contested this decision, stating that the destruction process outlined in the Manual was not applicable to their situation of breakages during handling and storage.

5. Application of Central Government's Order: The applicant raised the issue of a Central Government order passed in an identical matter concerning their sister unit, arguing that the Commissioner (Appeals) erred in not applying the same order in their case. However, the Government found that the Circular dated 9-7-2010 clarified the issue of breakage tolerance and remission, making the previous order inapplicable.

6. Prospective or Retrospective Effect of Clarificatory Circular: The applicant contended that the Circular dated 9-7-2010 should not have retrospective effect. However, the Government held that clarificatory circulars have retrospective application, citing relevant judicial decisions, and upheld the Commissioner (Appeals) order based on this interpretation.

In conclusion, the Government rejected the revision application for being devoid of merit, upholding the Commissioner (Appeals) order regarding the demand of duty on breakage of aerated water and mineral water bottles, the applicability of Circulars, denial of remission of duty, and the retrospective effect of the clarificatory Circular.