2014 (11) TMI 576 - AT - Central Excise

Waiver of pre-deposit - Manufacturing and captive consumption of Compound in the manufacturing of Finished Chewing Tobacco which was exempt from duty - benefit of Notification No.52/02-CE dated 17.10.2002 and Notification No.08/2004-CE dated 21.01.2004 - Suppression of facts - Clearance of goods for captive consumption - Held that - It is not in dispute that the manufactured intermediate product, i.e.compound is excisable and hence dutiable. Even though at the adjudication stage, the applicants disputed its excisability, but such an argument has not been pressed hard before us. Now, the question arises is whether duty is required to be discharged on the intermediate product, compound . An intermediate product is exempted from payment of duty in the normal course under Notification No.67/95-CE dated 16.03.95, if consumed in the factory for manufacture of dutiable final products and in the present case also, under Notification No.52/02-CE dated 17.10.2002, the intermediate product is exempted if the final product is dutiable. The crux of the arguments advanced by the ld. Advocate is that it is not the intention of the legislature to levy duty on the intermediate products. It is the contention that in any case, no duty is required to be paid on the intermediate product when used in the manufacture of other finished goods. The argument is attractive and we would have agreed with the contention of the ld. Advocate for the Applicants; but we find that the vital point missing from the said argument, is that the finished product ought to be dutiable, so as to claim exemption on the intermediate product. Prima facie, we are of the view, both intermediate and final product cannot avail the benefit of exemption from payment of duty. Prima facie we do not find from records that the Applicants had specifically ever disclosed the facts and claimed exemption on the intermediate product Compound in balti , even after the issue of exciseablity was settled by the Hon ble supreme Court 2005 (4) TMI 66 - SUPREME COURT OF INDIA in their own case. In these Circumstances, the Applicants could not make out a prima facie case for total waiver of pre-deposit of dues adjudged. No financial hardship pleaded - Partial stay granted.

Summary

Issues Involved:
1. Waiver of pre-deposit of duty and penalty.
2. Eligibility for exemption under Notification No.08/2004-CE.
3. Applicability of Notification No.52/2002-CE.
4. Suppression of facts and extended period of limitation.
5. Compliance with conditions of exemption notifications.

Issue-wise Analysis:

1. Waiver of Pre-deposit of Duty and Penalty:
The applicants sought a waiver of pre-deposit of duty and penalty. The Tribunal directed each applicant to deposit 10% of the duty confirmed against them within six weeks. Failure to comply would result in the dismissal of the appeal.

2. Eligibility for Exemption under Notification No.08/2004-CE:
The applicants claimed that the 'compound' manufactured at the intermediate stage should be exempt from duty under Notification No.08/2004-CE. They argued that the exemption for 'Finished Chewing Tobacco' implies automatic exemption for the intermediate 'compound' used for captive consumption. The Tribunal noted that the exemption is conditional, requiring compliance with specific conditions, such as investment in the North-Eastern States. The applicants had not claimed exemption for the 'compound' under this notification, and thus, the Tribunal found it inappropriate to extend the benefit retrospectively without detailed examination.

3. Applicability of Notification No.52/2002-CE:
The applicants argued that the 'compound' should be exempt under Notification No.52/2002-CE, which exempts intermediate products used in the manufacture of dutiable final products. However, the Tribunal noted that the final product, 'Branded Flavoured Chewing Tobacco/Zarda Scented Tobacco,' was exempt under Notification No.08/2004-CE, making the intermediate product dutiable. The Tribunal emphasized that both intermediate and final products cannot avail the benefit of exemption simultaneously.

4. Suppression of Facts and Extended Period of Limitation:
The applicants contended that the show cause notice was time-barred as the Department was aware of the manufacture of 'compound' and had audited the records periodically. The Tribunal found that the applicants had not specifically disclosed the manufacture and clearance of the 'compound' for captive consumption, even after the Supreme Court had settled its excisability. Thus, the Tribunal prima facie did not find a case for total waiver of pre-deposit.

5. Compliance with Conditions of Exemption Notifications:
The Tribunal highlighted that exemptions are conditional and require strict compliance. The applicants had not fulfilled the conditions for exemption under Notification No.08/2004-CE, such as investment in the North-Eastern States. The Tribunal referred to the Supreme Court's principle that exemptions must be strictly construed and conditions must be exactly fulfilled. The applicants' failure to comply with the conditions retrospectively made them ineligible for the claimed exemptions.

Conclusion:
The Tribunal directed the applicants to deposit 10% of the confirmed duty within six weeks, emphasizing the need for compliance with exemption conditions and the lack of disclosure regarding the intermediate product's manufacture. The Tribunal found no merit in the applicants' arguments for total waiver of pre-deposit and highlighted the importance of fulfilling conditions for claiming exemptions.