2015 (7) TMI 344 - HC - Central Excise

Denial of exemption claim - Whether the Tribunal is right in law in holding that the first respondent is entitled to the exemption under the notification No.62/95 CE dated 16-03-1995 and No.89/95 CE dated 18-05-1995 when such notifications stipulate certain conditions which were admittedly not complied with by the first respondent - Held that - The assessee availed the benefit of this Notification in respect of clearance of waste scraps arising out of manufacture of exempted goods. Though exemption in respect of manufactured goods is available in S.No.16(i) of the Table annexed to Notification No.62/95-CE dated 16.3.1995 (as amended), the problem arose because the first respondent cleared the exempted goods on payment of duty during the period in dispute. The erroneous payment of duty caused the Department to hold that the goods are other than exempted goods and therefore demand was made. On adjudication, the demand was sustained. The Tribunal came to hold that the show cause notice as well as the adjudication order proceeds on the misconception of the term exemption . In otherwords , the Tribunal relying upon the Explanation to Notification No.89 of 1995-CE dated 18.05.1995 came to the conclusion that since the manufactured goods are exempted goods, the benefit of Notification No.89 of 1995 dated 18.5.1995 would be applicable. The Tribunal rightly held that proviso to this Notification would not apply to the facts of the case and the erroneous payment of duty would not render the goods other than exempted goods. So long as the goods manufactured are exempted goods, waste parings, scrap arising in the course of the manufacture of exempted goods would be entitled for exemption as per Notification No.89 of 1995 CE dated 18.5.1995. we approve this finding of the Tribunal as correct. - Decided against Revenue.

Summary

Issues:
1. Interpretation of exemption under Notification No.62/95 CE and No.89/95 CE.
2. Applicability of Notification No.62/95 CE and No.89/95 CE in the case.

Issue 1: Interpretation of exemption under Notification No.62/95 CE and No.89/95 CE

The case involved the appeal against an order of the Tribunal regarding the entitlement to exemption under Notification No.62/95 CE and No.89/95 CE. The appellant, a government-owned factory, claimed exemption under No.89/95 CE for clearing scrap without payment of Central Excise duty. The Adjudicating Authority rejected the claim, leading to an appeal before the Tribunal. The Tribunal analyzed the proviso and Explanation to the Notification, emphasizing that the goods remained exempted despite erroneous duty payment. The Tribunal concluded that the appellant was entitled to the exemption under No.89/95 CE, as the manufactured goods were exempted goods. The Court upheld the Tribunal's decision, stating that the demand of duty was not sustainable due to the misinterpretation of the term "exemption" by the Department and the Commissioner.

Issue 2: Applicability of Notification No.62/95 CE and No.89/95 CE in the case

The Court examined Notification No.89/95 CE, which exempted waste scraps arising from the manufacture of exempted goods from excise duty. Despite the appellant clearing exempted goods on duty payment during the disputed period, the Tribunal ruled in favor of the appellant, citing the Explanation to No.89/95 CE. The Tribunal clarified that as long as the manufactured goods were exempted, waste scraps were also entitled to exemption under this Notification. The Court concurred with the Tribunal's interpretation, rejecting the Revenue's argument. The Court dismissed the appeal, upholding the Tribunal's decision and emphasizing the correct application of the Notifications in the case.

In conclusion, the High Court of Madras analyzed the issues related to the interpretation and applicability of Notification No.62/95 CE and No.89/95 CE. The judgment favored the appellant, a government factory, by affirming their entitlement to exemption under No.89/95 CE for waste scraps arising from the manufacture of exempted goods. The Court upheld the Tribunal's decision, highlighting the misinterpretation of the term "exemption" by the Department and the Commissioner, ultimately dismissing the appeal filed by the Department.