2013 (11) TMI 692 - AT - Central Excise

Third member decision - Compliance of the procedure under Chapter X of the Central Excise Rules or not Clandestine removal of goods - Assessee manufactured branded goods - Goods captively consumed - Benefits of Notification Nos. 16/97, 8/98 or 8/99 for remission of excise duty Held that - Following CCE, New Delhi v. Hari Chand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT OF INDIA - the compliance of the procedure under Chapter X of the Central Excise Rules, 1944 should be strict - the procedure laid down in Chapter X is meant to establish receipt of goods by the recipient unit and their utilization - the object and purpose of the procedure laid down in Chapter X is to ensure that goods are not diverted or utilised for some other purpose, under the guise of the exemption Notification - goods manufactured at the supplier s end were excisable goods and if an assessee wants to claim remission of duty, he has to follow certain pre-requisities - the detailed procedures have been laid down to Chapter X so as to curb diversion and misutilisation of goods which are otherwise excisable - the plea of substantial compliance and intended use is misplaced and non-derogable compliance with the requirement of Chapter X of the 1944 Rules, is mandatory - appeals remitted to the appropriate Bench for determination.

Summary

Issues:
Interpretation of exemption benefits for branded goods under Notification Nos. 16/97, 8/98, or 8/99 without following Chapter X procedure of Central Excise Rules.

Analysis:
The judgment dealt with a normative ambiguity arising from various decisions regarding the eligibility of manufacturers to avail exemption benefits for branded goods without following the prescribed procedure under Chapter X of the Central Excise Rules. The appeals were against an order concluding that goods manufactured by the assessee, used as original equipment and for replacement, were cleared without duty payment. The issue was whether manufacturers could claim exemption for captively consumed intermediate goods without full compliance with Chapter X. The Supreme Court's decision in CCE v. Hari Chand Shri Gopal clarified that strict compliance with Chapter X is mandatory to prevent diversion of excisable goods under the guise of exemptions.

The Constitution Bench's ruling in Hari Chand Shri Gopal resolved any doubts about the necessity of strict compliance with Chapter X procedures. The purpose of these procedures is to ensure the proper receipt and utilization of goods to prevent misuse under exemption notifications. The judgment emphasized that detailed procedures in Chapter X aim to prevent diversion and misuse of excisable goods, making non-derogable compliance mandatory. The plea of substantial compliance or intended use was deemed inadequate, emphasizing the essential requirement of full compliance with Chapter X rules.

In light of the Supreme Court's decision in Hari Chand Shri Gopal, the issue referred to the Tribunal for consideration was deemed resolved. The judgment clarified that compliance with Chapter X rules is mandatory for claiming duty remission on intermediate goods used for final product manufacturing. The Tribunal directed the appeals to be remitted for consideration of any other pending issues and for a detailed review on merits by the appropriate Bench, indicating the necessity for adherence to procedural requirements in excise duty matters.