2016 (11) TMI 272 - AT - Central Excise

Denial of exemption under N/N. 63/1995 CE dated 16.03.1995 - extended period of limitation - demand of duty with interest - imposition of penalties - Held that - The Notification No. 63/95 clearly restricts the exemption in serial no. 2 thereof only to manufacture of goods interalia, BEL for supply to Ministry of Defence for official purposes. There is no extension of this benefit to vendors or job workers. The appellant s argument that they started availing exemption after clarification by a department officer will not help their case. An erroneous clarification cannot be taken shelter of to claim erroneous benefit. Interestingly the appellant has also produced a letter dated 27.10.2009 from the Board to Chief Commissioner, LTU Bangalore clarifying that vendors would not be covered by the notification. Therefore, we are of the considered opinion that appellants are not entitled to the benefit of exemption under the notification 63/95. Hence on merits the appellants do not have a case. Extended period of limitation - Held that - the appellant had all along kept the department informed about the availment of benefit under the notification, not only through their monthly returns but also in written communication to the jurisdictional Range superintendant. On such score, the SCN covering the period December 2009 to February 2011 should have been issued within normal period of limitation provided under Section 11A of the Central Excise Act, 1944. However, said notice was issued only on 04.09.2013, hence the entire demand in the impugned order is hit by limitation and has to be set aside, which we hereby do. Refund of deposit made under protest during investigation allowed since extended period of limitation is not invokable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of exemption under Notification No. 63/1995 CE dated 16.03.1995 for clearances made between Dec 2009 to Feb 2011, invocation of extended period, imposition of penalties, and denial of refund claim.

Analysis:

1. Denial of Exemption:
The appellants, manufacturers of electronic and electrical machinery, cleared goods to M/s Bharat Electronics Ltd (BEL) under an exemption. The issue arose when the department denied the exemption for clearances made between Dec 2009 to Feb 2011, citing various grounds including that the exemption was only applicable to goods manufactured by BEL, not vendors. The adjudicating authority confirmed the denial, but the appellant argued they received clarification from the department that the exemption was available to all job workers and vendors supplying inputs. However, the tribunal held that the exemption was restricted to goods manufactured by BEL for the Ministry of Defence, and vendors were not covered. The appellant's claim based on the department's clarification was rejected.

2. Limitation Issue:
Regarding the limitation, the tribunal noted that the appellant consistently informed the department about availing the exemption through monthly returns and written communications. The show-cause notice (SCN) for the disputed period was issued on 04.09.2013, beyond the normal limitation period. As per Section 11A of the Central Excise Act, the tribunal found the demand for the period Dec 2009 to Feb 2011 to be time-barred. Therefore, the demand was set aside on grounds of limitation.

3. Refund Claim:
The appeal also involved a refund claim of &8377; 1,23,95,319 paid under protest due to a denial of the exemption benefit. The appellant informed the department about the payment and filed a refund claim, which was rejected by the original authority. The tribunal, considering the decision on the denial of exemption and limitation, allowed the refund claim, stating that the appellant was eligible for the refund amount.

In conclusion, the tribunal allowed Appeal No. E/23491/2014 on grounds of limitation and also allowed Appeal No. E/20717/2014 for the refund claim with consequential reliefs. The judgment highlighted the importance of strict adherence to exemption provisions and the significance of timely issuance of show-cause notices within the limitation period.