2015 (10) TMI 1962 - AT - Central Excise

Benefit of Notification No. 101/66 - principal ingredients is less than 5% - Letter dated 3-2-1986 was issued to the appellant to deny the benefit of the said notification and thereafter another letter was issued on 21-5-1986 clarifying that the final decision will be taken at the time of adjudication of the case. The Revenue has proceeded on the premise that as the letter dated 21-5-1986 have not been challenged by the appellant; hence not entitled for the benefit of the said notification although the test reports are in their favour - Held that - As per letter dated 21-5-1986, which itself states that the final decision will be taken at the time of adjudication of the case. It means the issue is to be decided during the course of adjudication. Therefore, the appellants were not required to challenge the said order/letter and while adjudicating the case adjudicating authority has considered the fact that principal ingredients is less than 5%. Therefore, the appellants are entitled for benefit of Notification No. 101/66 ibid which has not been controverted by the Revenue in their appeal. The ld. Commissioner (Appeals) in the impugned order has not appreciated these facts, therefore, we do not find any merit in the impugned order same is set aside - Decided in favour of assessee.

Summary

Issues:
Appeal against order allowing Revenue's appeal - Classification list for exemption under Notification No. 101/66 - Chemical examination results conflicting - Denial of exemption benefit - Challenge of impugned order by the appellant.

Analysis:
The appellant, engaged in detergent powder manufacturing, sought exemption under Notification No. 101/66, which required the principal active ingredients to be less than 5%. Initially, chemical examination results showed more than 5%, leading to a denial of the exemption. Upon re-test, the ingredients were found to be 4.1%, prompting a show cause notice for duty demand. The adjudicating authority, based on a report confirming less than 5% ingredients, dropped the denial of exemption. However, the Revenue appealed, and the Commissioner (Appeals) allowed it without considering the favorable test results. The appellant contested this decision before the Tribunal.

The appellant argued that the re-test results should entitle them to the Notification No. 101/66 benefit, as the principal ingredients were below 5%. Contrarily, the Revenue claimed the issue was not contested before the Commissioner (Appeals), barring the appellant from raising it at the Tribunal. The Tribunal reviewed the case and found that the initial denial was based on the premise of exceeding 5% ingredients, but subsequent clarifications indicated the final decision would be made during adjudication. As the adjudicating authority acknowledged the ingredients were below 5%, the appellant was entitled to the exemption. The Commissioner (Appeals) failed to appreciate these crucial facts, leading to the reversal of the impugned order, with the appeal allowed and any consequential relief granted.

In conclusion, the Tribunal emphasized that the decision on the exemption benefit was to be made during adjudication, and since the ingredients were confirmed to be within the permissible limit, the appellant rightfully qualified for the Notification No. 101/66 benefit. The failure of the Commissioner (Appeals) to consider these facts led to the setting aside of the impugned order and the allowance of the appeal by the appellant.