2014 (12) TMI 1123 - AT - Central Excise

Waiver of pre deposit - benefit of Notification No. 6/2006-C.E., dated 1-3-2006 - Penalty u/s 11AC - Held that - Parts cleared by the appellants have been used for some other purpose or diverted to the market. In fact no evidence has been collected. Further, HAL was directly addressed by the Revenue and HAL has also replied that these items are parts of PTA Lakshya and they have been used for purpose for which they were obtained. Appellants have taken the precaution of getting an end-use certificate to show that the requirements of Notification are fulfilled. It has to be noted that on their own the appellant could not have ensured that the parts are to be for end-use for which exemption was allowed. Indian navy has also certified that these are parts of aircrafts. The only ground for the Revenue is that appellants have not shown any evidence that the parts have been used for service or maintenance or repair. It has to be noted that appellants could not have done more than what they have already done since investigation powers are not with them and they cannot ensure that the goods are to be for end-use for which they are meant. The department which has the power to investigate has not done so but is relying on technicalities to hold appellants are ineligible for exemption. Prima facie, we find that the appellant have made out a case for eligibility to the exemption Notification benefit which they have claimed. Therefore, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues:
1. Interpretation of Notification No. 6/2006-C.E. regarding duty exemption for aircraft parts.
2. Requirement of end-use certificate for claiming exemption.
3. Evidence of usage for servicing, repair, or maintenance of aircraft parts.

Issue 1: Interpretation of Notification No. 6/2006-C.E.:
The case involved the appellant manufacturing aircraft parts supplied to HAL for PTA-Lakshya, a reusable aerial target system developed by ADE under DRDO Ministry of Defence. The dispute centered around whether the supplied parts qualified for duty exemption under Notification No. 6/2006-C.E. The department argued that the parts did not meet the criteria for exemption as they were not used for servicing, repair, or maintenance of the aircraft. The appellant claimed exemption based on certificates from HAL and Indian Navy confirming the parts' association with PTA-Lakshya.

Issue 2: Requirement of End-Use Certificate:
The appellant obtained certificates from HAL and Indian Navy to validate the end-use of the supplied aircraft parts. The appellant's counsel argued that while the Notification did not explicitly mandate an end-use certificate, they sought validation to ensure compliance with exemption conditions. The department contended that mere association with the aircraft was insufficient, emphasizing the necessity of actual usage for servicing, repair, or maintenance.

Issue 3: Evidence of Usage for Servicing, Repair, or Maintenance:
The department highlighted a statement from an appellant's employee indicating the parts were for fitment to PTA-Lakshya, questioning the actual usage for maintenance purposes. The appellant, however, defended their position by pointing out the lack of evidence showing diversion or alternate use of the supplied parts. The Tribunal noted that the appellant had proactively obtained end-use certificates and that HAL and Indian Navy confirmed the parts' association with PTA-Lakshya, supporting the appellant's claim for exemption.

In the final analysis, the Tribunal found that the appellant had sufficiently demonstrated compliance with the conditions of the Notification and qualified for the duty exemption claimed. The Tribunal waived the requirement for pre-deposit and granted a stay against recovery during the appeal's pendency, emphasizing the lack of evidence showing misuse or diversion of the supplied aircraft parts.