2015 (9) TMI 40 - AT - Central Excise

Availment of exemption on chewing tobacco under Notification No. 8/2004-CE dated 21/01/2004 - whether the appellants are eligible for exemption on compound under Notification No.52/2002 as their finished products i.e. chewing tobacco are wholly exempt under Notification No. 8/2004 - Held that - Notification exempts all goods falling under tariff item 21069020 and chapter 24 of the first schedule to the CETA 1985 manufactured in a factory and used within the said factory for manufacture of final products. The benefit of this notification is however not applicable where the final products are exempt from the whole of the duty of excise leviable. - Commissioner has discussed as to how the benefit of Notification No. 8/2004 is not applicable to the compound. However he has not recorded any findings in regard to the submission of the appellants that while calculating the duty payable but for exemption the duty payable on compound is to be taken as zero. It is the contention of the appellants that by adopting the above methodology duty payable for the purpose of investment works out to excise duty payable on the final products but for the said exemption and the said amount is already invested and therefore no duty is leviable on the compound. The facts were however not available before the adjudicating authority while passing the order. It is the contention of the appellants that notification 52/2002 is not applicable to the inter-mediate products where the final products are wholly exempt from duty. Since in their case the final products are exempt subject to certain conditions the said final products cannot be said to be wholly exempt. Matter requires a fresh look by the adjudicating authority - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues involved:
1. Eligibility for exemption under Notification No. 8/2004-CE for compound used in manufacturing chewing tobacco.
2. Interpretation of duty payable for investment under Notification No. 8/2004-CE.
3. Applicability of Notification No. 52/2002-CE to intermediate products when final products are exempt.
4. Time bar for duty demand on compound.
5. Requirement of declaration for availing exemption benefits.

Analysis:

Issue 1: Eligibility for exemption under Notification No. 8/2004-CE for compound used in manufacturing chewing tobacco:
The appellants manufactured compound for captive consumption in their factory for making chewing tobacco exempt under Notification No. 8/2004-CE. The dispute arose as the Department contended that compound was not eligible for exemption. The appellants argued that the compound fell under specified sub-headings of the notification, satisfying eligibility conditions.

Issue 2: Interpretation of duty payable for investment under Notification No. 8/2004-CE:
The appellants claimed that duty payable on compound should be considered zero, as it was used for captive consumption in manufacturing dutiable chewing tobacco. They argued that this fulfilled the investment condition under Notification No. 8/2004-CE, but the Ld. Commissioner did not consider this argument.

Issue 3: Applicability of Notification No. 52/2002-CE to intermediate products when final products are exempt:
The Ld. Special Counsel contended that since compound was used in making finished goods wholly exempt from duty, the benefit of Notification No. 52/2002-CE could not be extended to the compound. The appellants argued that the conditional nature of Notification No. 8/2004-CE allowed for exemption on intermediate products.

Issue 4: Time bar for duty demand on compound:
The Ld. Special Counsel argued that the demand was not time-barred as the appellants did not disclose the production of compound despite a judgment holding it dutiable. The appellants claimed that the demand was time-barred due to the Department's knowledge of compound production.

Issue 5: Requirement of declaration for availing exemption benefits:
The Ld. Advocate argued that no declaration was needed for availing the exemption under Notification No. 8/2004-CE. He emphasized that substantive benefits could not be denied for procedural reasons, reiterating views on limitation.

The Tribunal found the issues in all appeals identical and set aside the impugned order for fresh consideration by the adjudicating authority. The matter required a reevaluation of all raised issues, with a directive for a new decision within three months, ensuring a fair hearing for the appellants. The appeals were allowed by way of remand.