2016 (2) TMI 248 - AT - Central Excise

SSI Exemption - Interpretation of notification 8/2002-CE dated 01/3/2002 existed prior to the Notification which came into effect on 01/3/2003 - suppression of facts - bifurcation of exempted goods to two categories - Penalty imposed - Held that - On perusal of both notifications we find that the clause in the Notification pertaining to calculation of aggregate value in regard to exempted goods is clearly worded and does not give reason for any doubt. The condition for availing exemption is the same in both notifications i.e., the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers does not exceed 300 lakhs in the preceding year. The value of exempted goods is not to be taken into account for calculating the first clearances of ₹ 100 lakhs. The appellant seems to be making an effort to mix both these conditions together and put forward a plea that there was a confusion whether exempted goods have to be included while calculating the aggregate clearances applicable for the preceding financial year. Moreover, the authorities below have observed that the appellant has bifurcated the exempted goods to two categories. Items like badam-summer sip and Thandai are seen declared in the ER-I return. Whereas certain other exempted goods like Orange Crush, Aam Pannaa, Lime Crush etc. are not declared in the ER-I returns at all. It is the case of Department that if appellants had included these exempted items in their return, then the value of total clearances would have crossed the limit of 300 lakhs and has suppressed certain exempted goods in the monthly returns. The learned counsel though confronted with this issue was not able to give a plausible explanation why the appellant chose not to declare certain exempted items in the ER-1 return, while some exempted items were being declared. We therefore have to endorse the view of the authorities below that there has been suppression of facts on the part of the appellant. This being so, though the duty and penalty was paid before the issuance of show cause notice, we are not inclined to set aside the penalty imposed. With regard to the penalty imposed on Shri M.L. Agarwal, Director, except for his statement there is no other evidence placed before us. There is no evidence that he was directly involved in keeping the accounts. We therefore set aside the penalty imposed.

Summary

Issues:
1. Applicability of SSI exemption under Notification No. 8/2003-CE dated 01/3/2003.
2. Interpretation of Notification regarding calculation of aggregate value of clearances.
3. Imposition of penalty on the appellant.
4. Suppression of facts by the appellant in monthly returns.

Analysis:
1. The appellants were availing the SSI exemption under Notification No. 8/2003-CE dated 01/3/2003, which granted exemption on first clearances up to an aggregate value of Rs. 100 lakhs subject to certain conditions. The issue arose when it was found that the appellants had crossed the clearance value of Rs. 300 lakhs during the preceding financial year 2002-2003, leading to the imposition of duty liability, penalty, and interest.

2. The main contention revolved around the interpretation of the notification in question. The appellant argued that there was confusion in the industry regarding whether the value of exempted goods should be included in calculating the aggregate value of clearances. However, the Circular issued by CBEC clarified this aspect. The Tribunal examined both the old and new notifications and concluded that the condition for availing exemption remained consistent, emphasizing that the value of exempted goods should not be considered when calculating the aggregate clearances.

3. The imposition of penalty on the appellant was challenged during the appeal. The appellant contended that since they had already paid the duty and a portion of the penalty before the show cause notice, there was no basis for further penalty. On the contrary, the Department justified the penalty, highlighting that the appellant had not declared certain exempted goods in their monthly returns, leading to a suppression of facts. The Tribunal upheld the penalty, citing the appellant's failure to explain the non-declaration of specific exempted items.

4. The issue of suppression of facts by the appellant in their monthly returns was crucial in determining the penalty. The authorities noted that certain exempted goods were not declared in the ER-1 returns, while others were declared. This selective declaration raised suspicions of deliberate concealment. The Tribunal found that the appellant's failure to declare all exempted items indicated suppression of facts, justifying the penalty imposed. However, the penalty imposed on Shri M.L. Agarwal, Director, was set aside due to lack of concrete evidence implicating his direct involvement in the accounting practices.

In conclusion, the Tribunal modified the impugned order by setting aside the penalty imposed on Shri M.L. Agarwal while dismissing one appeal and allowing another. The judgment underscored the importance of adhering to notification conditions, avoiding suppression of facts, and ensuring accurate declaration in monthly returns to prevent penalties and legal consequences.