2019 (7) TMI 1819 - AT - Central Excise

Wrongful availment of exemption N/N. 3/204-CE dated 08.01.2004 - non-nclusion of element of cost of transportation including average freight - inclusion of Irrecoverable taxes on average/equalized basis - HELD THAT - The appellant inter alia manufactured and cleared paints and varnishes classifiable under chapter 32 to M/s.Driplex Water Engineering Limited without payment of duty and claiming exemption under Notification No.3/2004-CE dated 08.01.2004. In order to claim such exemption, the appellant was required to furnish a certificate issued by the Collector/Deputy Commissioner/Dist.Magistrate of the district in charge of the project to the effect that the goods were cleared for the purposes specified in the said notification. It is the case of the appellant that the fact of exemption was duly disclosed in Form ER-1 returns and hence there was no suppression or willful misstatement on the part of the appellant. Further the exemption was availed on the strength of a certificate issued by the District Collector duly approved by the state Government - the appellant availed the benefit of the said notification with mala fide intention of evasion of payment of duty by resorting to suppression of facts or willful misstatement is not sustainable. It is at most a case of mistake in the proper and strict interpretation of an exemption notification and definitely not a case of fraudulent availment of notification by resorting to suppression of facts, willful misstatement, commissioning of fraud with mala fide motive of evasion of duty - there are no ingredient of misstatement, suppression of facts, with intent to evade payment of duty. Accordingly the penalty imposed cannot be sustained and the same is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Alleged wrong availment of exemption Notification No.3/2004-CE dated 08.01.2004.
2. Non-inclusion of transportation cost in assessable value.
3. Irrecoverable taxes on average/equalized basis in assessable value.
4. Imposition of penalty under Rule 25(1)(a) read with Rule 25(a)(d) of the Central Excise Rules, 2002.

Detailed Analysis:
1. The appellant, a manufacturer of paints and varnishes, was alleged to have wrongly availed the exemption under Notification No.3/2004-CE dated 08.01.2004. The appellant claimed exemption for supplying paints and varnishes to a water supply project based on a certificate issued by the District Collector. The Tribunal found that while paints and varnishes were not explicitly covered under the exemption notification, they were essential for the project's commissioning and maintenance. The appellant disclosed the exemption in their returns and had authorization from the project implementing authority, indicating no fraudulent intent. The Tribunal held that there was no suppression of facts or willful misstatement, allowing the appeal.

2. The issue of non-inclusion of transportation cost in the assessable value was raised. The adjudicating authority ordered recovery of a specific amount under the Central Excise Act, 1944, along with interest and penalty. The appellant contested this, arguing that they had paid the duty amount and had authorization for supplying paints and varnishes to the project. The Tribunal, after reviewing the records, found no evidence of misstatement or intent to evade duty. Consequently, the penalty imposed was set aside, and the appeal was allowed in favor of the appellant.

3. The allegation of including irrecoverable taxes on an average/equalized basis in the assessable value was also addressed. The Tribunal examined the appellant's compliance with the exemption notification and the authorization received for supplying paints and varnishes to the water supply project. It was established that there was no fraudulent intent or evasion of duty, as the appellant had acted based on the authorization and certification from the District Collector. As a result, the penalty imposed by the adjudicating authority was deemed unsustainable, and the appellant's appeal was upheld.

4. The imposition of a penalty under Rule 25(1)(a) read with Rule 25(a)(d) of the Central Excise Rules, 2002, was challenged by the appellant. The Tribunal, upon thorough review of the case records, concluded that there was no fraudulent intent or suppression of facts by the appellant. The penalty was set aside, emphasizing that the appellant's actions were based on a genuine interpretation of the exemption notification and proper authorization from the project implementing authority. Consequently, the appeal was allowed, and the penalty was not sustained.