2017 (2) TMI 670 - AT - Central Excise

Benefit of N/N. 8/97-CE - appellants have made substantial purchases of raw materials from the domestic market in addition to imports - whether exemption can be denied merely because the appellants had not made proper records that is procedural lapse? - Held that - When there was no evidence produced, the impugned order holds that the appellant was not entitled to the exemption - the appellants deserve to be given sufficient opportunity for submission of evidences and documents, if any, to support their submissions. The Central Excise Officers had been in the knowledge that the appellants had been availing concessional rate of duty for clearances also needs to be examined - The issue of invocation of extended period of limitation therefore needs examination. Appeal allowed by way of remand.

Summary

Issues:
- Denial of exemption under Notification No. 8/97-CE
- Failure to prove fulfillment of conditions of the notification
- Denial of benefit based on input-output ratio and proportionate ratio
- Invocation of extended period of limitation

Denial of Exemption under Notification No. 8/97-CE:
The appellants contested the denial of exemption under Notification No. 8/97-CE by the Commissioner of Central Excise, arguing that the Commissioner erred in not appreciating the correct factual position. The appellants emphasized that the Commissioner's decision was based on inadequate appreciation of facts and records, as exemplified by the lack of multiple examples provided for denying the exemption. They also highlighted that the Commissioner's denial of exemption without proper examination of the premise that substantial purchases of raw materials were made should not result in denial of substantive rights.

Failure to Prove Fulfillment of Conditions of the Notification:
The Revenue contended that the appellant failed to strictly comply with the conditions of Notification No. 8/97-CE, citing data and facts on record that indicated non-compliance. The impugned order concluded that the appellant did not produce relevant records to establish a clear linkage between indigenous raw materials and goods cleared in DTA, leading to the determination that the condition of manufacturing goods wholly out of indigenous raw materials was not met. Additionally, the order highlighted the lack of evidence to establish that certain products were manufactured wholly from indigenous inputs, further justifying the denial of exemption.

Denial of Benefit Based on Input-Output Ratio and Proportionate Ratio:
The Revenue argued that the input-output ratio and proportionate ratio of DTA and export sales did not support the appellant's case for claiming the benefit of the notification. Emphasizing the need for strict compliance with notification conditions, the Revenue asserted that substantial compliance was insufficient and that the claimant must prove fulfillment of conditions beyond doubt. Citing relevant case laws, the Revenue maintained that even a small portion of imported raw material usage could disqualify the party from benefiting under the notification.

Invocation of Extended Period of Limitation:
The issue of invoking the extended period of limitation was raised, with the appellants contending that there was no wilful suppression of facts justifying such invocation. They argued that since Excise Officers were aware of the concessional rate of duty for DTA clearances, the extended period should not be invoked. The Tribunal agreed that the issue of invoking the extended period required further examination, directing a de novo adjudication by the Adjudicating Authority within four months to consider all facts on record and provide necessary opportunities for submission of evidence.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals by remanding the case for de novo adjudication, emphasizing the importance of a thorough examination of evidence and proper consideration of all relevant factors to determine the eligibility for exemption under Notification No. 8/97-CE.