2020 (1) TMI 1482 - HC - Central Excise

Levy of penalty - tractors are exempt goods or not - HELD THAT - The decision having been rendered in the Appellant s favour on merits, the issue of penalty will have to be answered in favour of the Appellant. Appeal disposed off.

Summary

Issues:
1. Interpretation of exemptions under Central Excise Act, 1944
2. Denial of credit under Cenvat Credit Rules, 2002/2004
3. Application of Rule 6(1) of CCR, 2004
4. Invocation of extended period of limitation

Interpretation of exemptions under Central Excise Act, 1944:
The appeal challenged the final order of the Customs, Excise & Service Tax Appellate Tribunal, Mumbai, regarding the exemption of tractors from Basic Excise Duty. The appellant questioned the correctness of the Tribunal's decision in treating tractors as exempted goods despite the education cess being levied on them. The issue revolved around whether the education cess, though a duty of excise, should exempt tractors from Basic Excise Duty. The High Court noted that similar questions had been decided against the Revenue in a previous decision. Consequently, this issue did not arise for consideration in the present appeal.

Denial of credit under Cenvat Credit Rules, 2002/2004:
Another issue raised was the denial of credit by the CESTAT concerning the definition of "exempted goods" under the Cenvat Credit Rules, 2002/2004. The appellant contested the conclusion that only duties specified in the First and Second Schedules of the Central Excise Tariff Act, 1985, along with Section 3(1) of the Central Excise Act, 1944, should be considered for exempted goods. The appellant argued that education cess, specified in Rule 3(1) and Rule 3(3) of the Cenvat Credit Rules, 2004, should also be included. However, the High Court did not delve into this issue as it had already been decided against the Revenue in a previous judgment.

Application of Rule 6(1) of CCR, 2004:
The third issue pertained to the applicability of Rule 6(1) of the Cenvat Credit Rules, 2004, despite the levy and payment of excise duties in the form of education cess and cess under the Industrial (Development and Regulation) Act, 1951, on tractors. The appellant contested the conclusion of the CESTAT in applying Rule 6(1) to the case. However, since the decision was rendered in favor of the appellant on the merits, the High Court held that the issue of penalty, related to the invocation of an extended period of limitation, should also be decided in favor of the appellant.

Invocation of extended period of limitation:
The final issue concerned the correctness of confirming the invocation of the extended period of limitation despite setting aside the penalty imposed on the appellant. The High Court ruled in favor of the appellant on this issue, as the decision had already been rendered in the appellant's favor on the merits. Consequently, the question of law related to the penalty was answered in favor of the appellant. The appeal was disposed of accordingly.