2017 (9) TMI 1654 - AT - Central Excise

Interpretation of statute - scope of the expression twelve calendar months in N/N. 42/2001-CE(NT) dated 26th June 2001 - justification foe levy of duty - restriction on validity of undertaking against which exports are effected to the period upto 31st December of the year of issue - levy of Excise duty - Held that - The expression used in the prescribed procedure is twelve calendar months ; a calendar year which, by definition, would be coterminous with the twelve months ending in December. Such a description would restrict the validity to part of such year if issued after the first day of January. Similarly, the expression twelve calendar months would encompass exactly twelve months with any part of month computed as a month. Such expression cannot extend to 365 days which is used for reckoning term of one year. The possession of a valid undertaking would permit business activity without permanent oversight or scrutiny - In the present dispute, the exports have been subjected to scrutiny arising from suspicion and, except for a technical irregularity, there is no justification for levy of duty. Duty demand not tenable - appeal allowed - decided in favor of appellant.

Summary

Issues: Interpretation of the expression 'twelve calendar months' in a notification regarding duty on exports.

Analysis:
1. The appeal involved a dispute regarding the interpretation of the expression 'twelve calendar months' in a notification related to duty on exports. The appellant, M/s VAKO Seals Pvt Ltd, challenged the order upholding a demand of duty and other penal detriment by the Commissioner of Central Excise (Appeals-I), Mumbai Zone-I.

2. The main contention was whether the validity of an 'undertaking' against which exports are effected should be restricted to the period up to 31st December of the year of issue, as argued by the lower authorities, or if it should be effective until twelve months have elapsed, as contended by the appellant.

3. The facts revealed that the appellant had executed an undertaking on 23rd January 2012. The jurisdictional authorities objected to six consignments of exports between 1st January 2013 (after the existing undertaking had expired) and 16th January 2013 (when a fresh undertaking was submitted). Duty foregone on these consignments was ordered for recovery, leading to the appeal.

4. The appellant argued that the interpretation by the lower authorities was erroneous and inconsistent with practices in other jurisdictions. They highlighted undertakings and exports by other units to support their claim that the plea was ignored.

5. The Tribunal analyzed the expression 'twelve calendar months' and clarified that it would restrict the validity of an undertaking to part of a calendar year if issued after the first day of January. The undertaking in question was deemed valid only until 31st December 2012 based on this interpretation.

6. However, the Tribunal also considered the purpose of the procedure, which aims to prevent diversion of goods under the guise of exports. Despite the technical interpretation, the exports in question had been subjected to scrutiny and there was no justification for the levy of duty, except for a technical irregularity.

7. The Tribunal emphasized that the facilitation procedure should not disadvantage genuine exporters. Therefore, it concluded that the demand of duty and consequential detriment were not justified. The impugned order upholding the demand was set aside, and the appeal was allowed.