2016 (8) TMI 447 - AT - Central Excise

Whether the benefit of Sl.No.158 of the table annexed to Notification No.6/2002-CE dated 01.03.2002 can be extended to the Pozzolona pipes manufactured by the appellant - Held that - as per this exemption notification if percentage of fly ash by weight is more than 25% then the benefit of exemption notification is admissible to the appellant subject to the condition prescribed at Sl.No.36 of the conditions to exemption notification no.6/2002-CE. It is observed that declaration made by the appellant for the period from 23.08.2007, on which sample was drawm by the department, has not been found to be correct in as much as percentage of fly ash was less than 25%. Accordingly, demand raised for the period from 23.08.2007 is required to be confirmed, along with interest, and penalty under Section 11AC of the Central Excise Act is imposable. Since the duty demand from 23.08.2007 is not separately quantified in the proceedings and was also not made available to the bench by either sides, therefore, Adjudicating Authority is directed to quantify such amount of duty on AC pipes, claimed as Pozzolona pipes, for the period from 23.08.2007 till the end of demand period involved in these proceedings. For this purpose appellant should be given an opportunity to explain their case on quantification of demand and thereafter calculation of amount of penalty under Section 11AC will stand imposed upon the appellant on the re-determined duty demand. Appellant should also be given an option of paying reduced penalty under Section 11AC of the Central Excise Act. Interest on the above confirmed demand is also required to be paid by the appellant. - Appeal partly allowed

Summary

Issues:
1. Interpretation of exemption notification regarding the percentage of fly ash in manufacturing pipes.
2. Applicability of test report results on the entire period of production.
3. Calculation of duty demand, interest, and penalty under Section 11AC of the Central Excise Act.

Issue 1: Interpretation of Exemption Notification:
The appellant manufactured Pozzolona pipes using fly ash and claimed exemption under Sl. No.158 of Exemption Notification No.06/2002-CE. The department drew a sample on 23.08.2007 and found the percentage of fly ash to be less than 25% based on a test report from IIT, Roorkee. The appellant argued that the test report should have prospective application, relying on the case law of Pattani Chemicals vs. Collector of Central Excise. The Tribunal agreed that the test report cannot be applied to clearances before 23.08.2007. However, for the period from 23.08.2007, where the percentage of fly ash was indeed less than 25%, the demand was confirmed along with interest and penalty under Section 11AC. The Adjudicating Authority was directed to quantify the duty demand for the specified period, allowing the appellant to explain their case on the calculation of the demand and penalty.

Issue 2: Applicability of Test Report Results:
The central issue revolved around whether the test report results from 23.08.2007 should be applied retrospectively to the entire production period. The appellant argued that the test report should only have prospective application, citing relevant case laws. The Tribunal concurred, emphasizing that the test report dated 13.10.2008 for the sample drawn on 23.08.2007 cannot be extended to clearances before that date. The appellant's declaration for the period from 23.08.2007 was found incorrect, leading to the confirmation of demand, interest, and penalty for that specific period.

Issue 3: Calculation of Duty Demand, Interest, and Penalty:
The Tribunal directed the Adjudicating Authority to quantify the duty demand for the period from 23.08.2007 onwards, allowing the appellant to present their case on the quantification of the demand and penalty under Section 11AC. The appellant was given the option to pay a reduced penalty under the Act. It was emphasized that interest on the confirmed demand also needed to be paid by the appellant. Ultimately, the appeal was allowed to the extent indicated in the order.

This detailed analysis of the judgment highlights the key legal interpretations, arguments presented by both parties, and the Tribunal's decision on each issue involved in the case.