2016 (12) TMI 88 - AT - Central Excise

Demand - short levy of duty due to claim of benefit in other notification - switchover from N/N. 6/2002-CE dated 01/3/2002 to N/N. 8/2003-CE dated 01/03/2003 and again switching over to N/N. 6/2002-CE dated 01/3/2002 - Held that - it is to be seen that the appellants have been filing due ER-1 returns on regular basis specifically indicating Notification 6/2003-CE and also showing clearances without payment of duty on such clearances to the Department. Even if bonafide mistake on the part of the appellant could not be believed, the availment of such exemption has been duly notified to the Department in statutory returns. We find the justification for extended period demand as made out by the lower Authorities is not legally tenable. It was observed by the lower Authorities that the ER-1 return was not complete. It is not recorded which aspect of the return is incomplete. It is sufficient to note here that the appellants indicated description of the product, clearances without payment of duty and notification number for such clearances. In such situation, allegation of fraud, suppression etc. cannot be sustained against the appellant for confirmed demand for extended period. Regarding the appellants duty liability, we note that the duty for the normal period of demand is liable to be paid by the appellant as they have not paid any duty while claiming based exemption for clearance in a financial year. However, the appellant s contended that the duty liability should be calculated in terms of the general exemption N/N. 8/2003-CE as they are otherwise eligible for the same. We find force in the contention of the appellant. The demand for normal period has to be reworked after considering the exemption available under Notification 8/2003-CE. - We find that an exemption from duty, if otherwise available on fulfillment of all conditions cannot be denied on the ground that another exemption was wrongly availed by the appellant. In the facts and circumstances of the case, we find the duty liability of the appellant has to be reworked for the normal period after extending the concession under Notification 8/2003-CE. The penalty imposed under Section 11AC is not sustainable. Accordingly, the same is set aside. Penalty imposed under Rule 25 of Central Excise Rules, 2002 is reduced to ₹ 1,00,000/- - appeal disposed off.

Summary

Issues:
1. Applicability of Central Excise duty exemptions under various notifications for the years 2002-2003, 2003-2004, and 2004-2005.
2. Claim of bonafide mistake by the appellant in availing exemptions.
3. Justification for extended period demand and duty liability calculation.
4. Applicability of penalties under Section 11AC and Rule 25 of Central Excise Rules, 2002.

Analysis:

Issue 1: Applicability of Central Excise duty exemptions
The appellants, registered small scale units, were engaged in manufacturing grey boards subject to Central Excise duty. They claimed exemption under Notification 6/2002-CE for the year 2002-2003, which was later amended to introduce 8% duty. Despite this change, the appellants continued to clear goods without paying duty. In subsequent years, they switched between general SSI exemption and quantity-based exemption, failing to pay 8% duty as required. This led to a demand for unpaid duty totaling &8377; 18,88,152, confirmed by the Original Authority and upheld on appeal.

Issue 2: Claim of bonafide mistake
The appellant argued that they intended to avail exemptions available to small scale units but mistakenly continued to claim the old exemption rates due to lack of awareness about the changes in the notifications. They contended that they regularly filed ER returns indicating clearances under the old exemption, and any errors were mutual between them and the Revenue. However, the Tribunal found the claim of bonafide mistake untenable, especially for the years 2004-2005 and 2005-2006, as the notifications clearly specified changes in duty rates.

Issue 3: Justification for extended period demand and duty liability calculation
While the Tribunal acknowledged that the appellants consistently filed ER returns indicating clearances under the old exemption, it found the justification for the extended period demand legally untenable. The duty liability was to be reworked considering the general small scale exemption under Notification 8/2003-CE, as the appellants were eligible for it. Citing legal precedents, the Tribunal held that if an exemption is available, it cannot be denied based on the incorrect availing of another exemption. Consequently, the penalty under Section 11AC was set aside, and the penalty under Rule 25 was reduced to &8377; 1,00,000.

Issue 4: Applicability of penalties
The Tribunal found the penalty under Section 11AC unsustainable due to the reworking of duty liability based on the correct exemption. The penalty under Rule 25 was reduced considering the circumstances of the case and legal principles regarding the grant of exemptions. The appeal was disposed of with the penalties adjusted accordingly.

This judgment highlights the importance of understanding and adhering to changes in duty exemptions, the implications of mistaken claims, and the recalibration of duty liabilities based on correct exemptions. It also underscores the legal principles governing penalties in excise duty matters, emphasizing the need for compliance with statutory provisions and the correct application of exemptions.