2012 (1) TMI 126 - AT - Central Excise

Denial of exemption under Notification No. 22/2009-C.E., dated 7-7-2009 - investment in four CD writers - Held that - certificates issued by the District Industries Centre and the recommendation given by the Range Superintendent and accepted by higher authorities at the relevant time have to be given more weightage rather than statements recorded by an investigating agency four to five years later from a few employees. If any objection that they were not eligible for the exemption, because they had not made investment worth a few thousands, was raised at the relevant time, they could have demonstrated that it was done or bought another CD writers to satisfy Revenue. Having accepted the claim at the relevant time raising the issue of such a minuscule investment after four to five years is prima facie not justified. Considering the nature of exemption and the commodity manufactured and investment required, there was no way the Revenue could have stopped the appellants from availing the exemption by raising issues at the relevant time - Decided in favour of assessee.

Issues:
1. Whether the appellants undertook substantial expansion for the manufacture of excisable goods.
2. Whether the appellants are eligible for exemption under Notification No. 50/2003-C.E.
3. Whether the appellants provided evidence of procurement of CD writers.
4. Whether the appellants are eligible for alternate exemptions under other notifications.
5. Whether the appellants can claim Cenvat credit of Service Tax paid on royalty payment.
6. Whether the capacity for production of canned software is the relevant factor for exemption eligibility.

Issue 1:
The judgment revolves around whether the appellants undertook substantial expansion for the manufacture of excisable goods, particularly canned software, to be eligible for exemption under Notification No. 50/2003-C.E. The dispute arises from the investment in four CD writers, which the department claims the appellants did not make. The appellants argued that they made investments and expanded their capacity, supported by certifications, declarations, and visits by Excise authorities. The District Industries Centre also issued a certificate confirming substantial expansion. The Revenue relied on statements of company officials and financial records to challenge the appellants' claim.

Issue 2:
The appellants contended that they were eligible for exemption under Notification No. 50/2003-C.E. due to substantial expansion in their capacity for manufacturing canned software. They argued that the disputed CD writers were supplied free of cost by the computer supplier, supported by evidence of the order placed. The appellants emphasized that the demand for exemption was justified, given the investments made and certifications received. The Tribunal considered the certificates issued by the District Industries Centre and the Range Superintendent more credible than statements recorded years later, especially since the issue of CD writers was not raised earlier.

Issue 3:
The Revenue pointed out that the appellants failed to provide evidence of procuring CD writers during the lower authority proceedings. They argued that the certificates from the District Industries Centre lacked specific verification of CD writer purchases. The Revenue relied on statements of company officials admitting no investments in CD writers and the absence of inventory increase in critical equipment. The Tribunal, however, gave more weight to earlier certifications and recommendations, dismissing objections raised years later.

Issue 4:
The appellants raised claims for alternate exemptions under different notifications, but these were not extensively argued as the matter was under consideration for stay only. The Tribunal did not delve deeply into these alternate exemption claims in the judgment.

Issue 5:
The appellants also raised the issue of claiming Cenvat credit for Service Tax paid on royalty payment under the reverse charge mechanism. However, this issue was not extensively discussed in the judgment due to the focus on the substantial expansion and exemption eligibility under Notification No. 50/2003-C.E.

Issue 6:
The Revenue argued that the eligibility for exemption should be based solely on the capacity for production of canned software, not on the capacity for digitization of maps. They emphasized the importance of CD writers for software replication and highlighted discrepancies in financial records. The Tribunal, however, believed that the appellants had met the criteria for substantial expansion based on earlier certifications and recommendations, disregarding objections raised later.

In conclusion, the judgment favored the appellants, accepting their claims for exemption without pre-deposit and ordering a stay on collection during the appeal process. The Tribunal placed more weight on earlier certifications and recommendations, considering the nature of the investment required and the timing of objections raised by the Revenue.

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