2016 (7) TMI 984 - AT - Central Excise

SSI exemption - procedural conditions of Notification No.9/2003-CE, dt.01.03.2003, for the period March 2004 and April 2004 to June 2004 not fulfilled - Held that - A plain reading of the said notification, particularly the condition in clause 2, it is clear that the assessee-manufacturer requires to exercise their option to avail exemption under this notification i.e. to pay duty at 60% of the normal rate of duty at the beginning of the financial year itself and the option once exercised, cannot be changed in the same financial year. The said condition 2 cannot be designated as a mere procedural one and to avail the benefit of the Notification need not be fulfilled. - non-fulfillment of the said mandatory condition would dis-entitle the Appellant in availing the benefit of the SSI exemption notification no. 09/2003-CE dt.01.03.20003. However, we find that the Appellants had recorded all facts in their statutory records and the demand has been issued for the normal period. Thus, in our view, imposition of penalty of ₹ 1.00 lakh in the circumstances of the case, appears to be too harsh. - Decided partly in favor of assessee.

Summary

Issues:
Appeal against OIA No.RKA/482/SRT-I/08 - Incorrect availing of SSI Notification No.9/2003-CE - Non-fulfillment of procedural conditions - Imposition of penalty under Rule 25 of Central Excise Rules, 2002.

Analysis:
1. Facts of the Case: The appellants were engaged in manufacturing Metallised Yarn and Lacquered Metllised Polyester Film, and incorrectly availed the benefit of SSI Notification No.9/2003-CE without fulfilling all conditions. A demand notice was issued for recovery of short-paid duty and penalty under Rule 25 of Central Excise Rules, 2002.

2. Appellant's Argument: The appellants claimed they fulfilled all eligibility conditions of the SSI exemption notification but did not comply with a minor procedural condition of exercising the option at the beginning of the financial year. They argued that non-fulfillment of this procedural condition should not disqualify them from the benefit, citing relevant tribunal judgments.

3. Revenue's Argument: The Revenue contended that the condition in the notification, requiring the manufacturer to exercise the option before the first clearance and not withdraw it during the financial year, is mandatory. They referenced Supreme Court judgments to support their stance that non-compliance with this condition renders the appellant ineligible for the exemption.

4. Tribunal's Analysis: The tribunal examined the relevant clause of Notification No.09/2003-C.E., emphasizing the mandatory nature of the condition to exercise the option at the start of the financial year. They highlighted that this condition is fundamental to availing the exemption and must be adhered to strictly. Citing a Supreme Court case, they reiterated that failure to meet such conditions results in disqualification from the notification's benefits.

5. Decision: The tribunal concluded that non-fulfillment of the mandatory condition in the notification disentitled the appellant from the SSI exemption benefits. However, considering the circumstances, they deemed the original penalty of &8377; 1.00 lakh too severe and reduced it to &8377; 25,000. The appeal was partially allowed, modifying the penalty imposition.

In summary, the judgment upheld the mandatory nature of the condition to exercise the option at the beginning of the financial year for availing the SSI exemption notification benefits. Non-compliance with this condition led to disqualification from the exemption, but the penalty was reduced for being overly harsh in the circumstances.