2016 (5) TMI 741 - HC - Central Excise

Grant of benefit of Small Scale Industry exemption - Notification No.08/2003-CE dated 1 March 2003 - total value of clearance of excisable goods for home consumption exceeded ₹ 3 crores during the preceding financial years 2002-03 and 2003-04 without payment of central excise duty - Held that - for a long period of seven years, the appellant did not take up any plea that the declarations dated 14 April 2003 and 12 April 2004 which the assessee claimed to have filed were actually not filed and only photostat copies were filed. This plea was also not taken up during the process of adjudication or during the pendency of the appeal before the Tribunal and it was only after a period of six months after the final order was passed by the Tribunal that the original receipt registers were forwarded on the basis of which the department concluded that the order was obtained on the basis of fraud and interpolations. No explanation whatsoever has been given as to why such a plea was not taken up at the first instance. Therefore, there is no substantial question of law arises. - Decided against the revenue

Issues Involved:
1. Whether the benefit of Notification No.08/2003-CE dated 1 March 2003 can be extended to the party.
2. Whether the benefit of exemption notifications can be extended to the party based on forged documents prepared subsequently.

Detailed Analysis:

Issue 1: Benefit of Notification No.08/2003-CE
The primary issue was whether the respondent could claim the benefit of the Small Scale Industry (SSI) exemption notification dated 1 March 2003. The notification stipulated that the aggregate value of clearance of all excisable goods for home consumption should not exceed ?300 lakhs in the preceding financial year. The respondent, engaged in the manufacture and clearance of PVC soles (dutiable at 16%) and rubber sheets (nil duty), was denied this benefit because the total value of their clearances exceeded ?3 crores in the financial years 2002-03 and 2003-04.

A show cause notice was issued demanding central excise duty and penalties, which the respondent contested, claiming they had filed declarations for the relevant years. The Assistant Commissioner confirmed the demand, which was upheld by the Commissioner (Appeals). However, the Tribunal allowed the respondent's appeal on the grounds of limitation, noting that the declarations were filed and the show cause notice was issued beyond the limitation period.

Issue 2: Forged Documents and Exemption Notifications
The department argued that the respondent's declarations for the years 2002-03 and 2003-04 were not genuine and were fraudulently inserted into the records. This claim was based on forensic analysis indicating overwriting in the receipt registers. However, this defense was not raised during the adjudication process or the initial appeal stages. The High Court noted that the department did not provide substantive evidence linking the respondent to the tampering of records and failed to contest the declarations for seven years.

The Tribunal dismissed the department's miscellaneous applications seeking to recall the order on the grounds of fraud, stating that the department did not establish a nexus between the interpolations and the respondent. The Tribunal emphasized that no departmental officers were found guilty of tampering, and no inculpatory statements were recorded from the respondent.

Conclusion:
The High Court dismissed the appeal, stating that no substantial question of law arose for consideration. The court highlighted the department's failure to raise the issue of fraudulent declarations during the initial stages and the lack of evidence connecting the respondent to the alleged fraud. The appeal was dismissed, affirming the Tribunal's decision to allow the respondent's appeal on the point of limitation.

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