2008 (4) TMI 247 - AT - Central Excise

Commissioner (Appeals) confirmed the demand of duty denying the benefit of SSI exemption to the assessee since when department granted certificate to assessee u/r 57E, department became aware of assessee availing SSI exemption, demand notice after 21 months is barred by limitation duty payment certified by department - if the assessee believed that it was paying duty in accordance with law it cannot be penalized on a subsequent finding that the duty payment was not in accordance with law

Summary

Issues:
1. Eligibility for SSI exemption in excise duty.
2. Time limitation for recovery of SSI benefits.
3. Penalty imposition on the appellant and another individual.

Analysis:

Issue 1: Eligibility for SSI exemption in excise duty
The case involved the appellant, a manufacturer of excisable goods, who cleared goods without paying duty during a specific period. The appellant claimed eligibility for the Small Scale Industries (SSI) exemption for these clearances. However, the original authority found that the appellant had availed Modvat credit on duty paid for capital goods, making them ineligible for the full exemption. The Commissioner (Appeals) upheld this decision, stating that availing Modvat credit disqualified the appellant from the SSI benefit. The appellant argued that they had paid the duty due as per the SSI Notification and had obtained a certificate for the payment of any differential duty. The Tribunal examined the records and found that the appellant had indeed paid the differential duty under the SSI Notification, making them eligible for the exemption. Therefore, the demand notice denying the SSI benefit was deemed time-barred, and the order confirming the demand was set aside.

Issue 2: Time limitation for recovery of SSI benefits
The Tribunal determined that the demand notice issued to recover SSI benefits availed by the appellant was time-barred. The appellant had obtained a certificate for payment of any short-paid duty, which the department was aware of, making the subsequent demand notice invalid due to exceeding the time limit for recovery. The Tribunal held that the appellant's payment of duty in accordance with the SSI Notification, as certified by the Range Officer, prevented any penalty imposition based on subsequent findings. It emphasized that penalties must be justified by evidence of deliberate non-compliance with the law, which was not the case here. Consequently, the penalty imposed on the appellant was set aside.

Issue 3: Penalty imposition on the appellant and another individual
The Tribunal also addressed the penalty imposed on the appellant and another individual, Shri N. Ramachandran. It concluded that the appellant's conduct was bona fide, as they believed they were complying with the law in paying the duty. Therefore, the penalty imposed on the appellant was unwarranted and set aside. Additionally, the Tribunal found no justification for penalizing Shri N. Ramachandran, who was not proven to have committed any offense warranting a penalty. As a result, the Tribunal allowed the appeal filed by the appellant and dismissed the Revenue's appeals, effectively overturning the penalties imposed on both parties.