2016 (10) TMI 954 - AT - Central Excise

Demand of duty - Compounded levy scheme - manufacture of stainless steel pattas/pattis - N/N. 34/2001-CE dated 28/6/2001 - failure to file the requisite declaration under the scheme - Held that - The levy of excise duty stands only when goods are manufactured and cleared from the factory. In the absence of any evidence to show that any goods have been manufactured and cleared there can be no justification for demand of excise duty. In terms of the provisions of the notification which are in the nature of concession, in exceptional circumstances (such as the one in the present cases in which the declaration regarding the number of machines has not been filed) the manufacturer will be liable to pay duty on the entire production. However, Revenue has failed to undertake any serious investigation to establish the manufacture, if any of the stainless steel patta/pattis under the circumstances, I have no option but to set aside the demands and allow the appeals - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Failure to establish manufacturing activities in factories under compounded levy scheme.
2. Dispute regarding duty liability due to non-compliance with application requirements.

Analysis:
1. The appeals were made against orders-in-appeal dated 14/2/2011 concerning two factories that opted for the compounded levy scheme for manufacturing stainless steel pattas/pattis under Notification No. 34/2001-CE. Despite taking registration, no manufacturing operations commenced, leading to Revenue issuing show cause notices for duty demand. The case was remanded back to ascertain manufacturing activities, but the Original Authority failed to conclusively establish any. The Commissioner (Appeals) upheld the demand, prompting the present appeal.

2. The appellants argued that since no manufacture occurred, no duty liability should arise, despite applying for permission under the scheme. The Revenue contended that permission granted based on the application triggers duty liability, which the appellants failed to discharge. The compounded levy scheme under Central Excise Rules, 2015, requires manufacturers to file applications and pay lump-sum duty per machine. Non-compliance disentitles them from concessional rates, necessitating duty payment at regular rates. As the appellants did not comply with the application indicating machines and duty payable, they would be liable for duty only if goods were manufactured and cleared. The absence of evidence of manufacturing justified setting aside the duty demands.

In conclusion, the judgment emphasized the importance of establishing actual manufacturing activities to determine duty liability under the compounded levy scheme. Failure to comply with application requirements does not automatically trigger duty liability if no goods were manufactured and cleared. The Revenue's lack of investigation to prove manufacturing activities led to setting aside the duty demands.