2017 (3) TMI 1206 - AT - Central Excise

Benefit of N/N. 17/2007-CE dated 01/03/2007 - manufacturers of excisable goods stainless steel patta/pattis - the operations of assessee's factory was banned in February, 2013, The ban on the factories was lifted by the Pollution Control Board in April, 2013. The assessee/appellants reinstalled the dismantled cold rolling machines and commenced operations with effect from 01/05/2013 - Proceedings were initiated against the assessee/appellants to recover central excise duty based on value of clearances during March to August, 2013 on the ground that they have failed to comply with the provisions and conditions of the notification No. 17/2007-CE during the said period. Held that - the assessee/appellant applied for permission to follow the special procedure in terms of the above notification. The same was granted by the jurisdictional officer of Central Excise. Nowhere in the proceedings before the Original Authority it is recorded that the assessee/appellant have opted out of the special scheme. Neither it is recorded that any of the deliberate action on the part of the assessee/appellant will indicate that they are not continuing in the said scheme. The central point of dispute is that due to forced closure of the unit by the State authorities, the assessee/ appellant could not manufacture or operate their machinery during March and April 2013. Such forced closure cannot be termed as a failure on the part of the assessee/appellant to avail the special procedure. The permission granted to the assessee/ appellant to avail the special procedure and all other circumstances which make them eligible for such concession is existing all along. The closure of units admittedly, beyond the control of the assessee/appellant, is not to be treated as a failure to comply with the provisions and conditions of the notification during the period of forced closure of the units. The nonproduction of excisable goods during these two months can more appropriately termed as ceasing to work rather than failure to comply with the provisions. The Original Authority himself recorded that the assessee/ appellant themselves did not cease to work under the special procedure but ceased the work due to disconnection of power supply and sealing of DG set by the electricity department which was beyond control of the assessee. As such considering the facts and circumstances of the case he found that penalty u/r 25 of CER, 2002 is not imposable. Appeal allowed - decided in favor of assessee.

Issues Involved:
1. Non-payment of excise duty during factory closure.
2. Applicability of Notification No. 17/2007-CE.
3. Interpretation of "failure to avail" the special procedure.
4. Authority's power to condone non-compliance.
5. Imposition of penalties on the assessee/appellants.

Issue-wise Detailed Analysis:

1. Non-payment of excise duty during factory closure:
The assessee/appellants did not pay excise duty for March and April 2013 due to the forced closure of their factories by the Rajasthan State Pollution Control Board. The Original Authority held that this non-payment amounted to a failure to avail the special procedure under Notification No. 17/2007-CE, leading to a demand for differential duty for March to August 2013. However, the Tribunal noted that the closure was beyond the control of the assessee/appellants and should be considered as ceasing to work rather than a failure to comply with the notification's provisions.

2. Applicability of Notification No. 17/2007-CE:
The assessee/appellants had opted for the special procedure under Notification No. 17/2007-CE, which allows payment of excise duty based on the number of cold rolling machines installed. The Tribunal found that the permission to follow this special procedure was granted by the jurisdictional Central Excise officer and that the assessee/appellants did not opt out of the scheme. The Tribunal emphasized that forced closure due to state authorities' orders should not be treated as a failure to comply with the notification.

3. Interpretation of "failure to avail" the special procedure:
The Tribunal analyzed the provisions of para 2(3) of Notification No. 17/2007-CE, which states that failure to avail the special procedure precludes the manufacturer from availing it for six months. The Tribunal concluded that the forced closure and non-production of excisable goods during March and April 2013 should not be considered a failure to avail the special procedure. The Tribunal referenced the Rajasthan High Court's decision in the case of CCE, Jaipur – II vs. Jupiter Industries, which held that no duty liability arises when there is no production or manufacture of excisable goods.

4. Authority's power to condone non-compliance:
The Tribunal noted that para 7 of Notification No. 17/2007-CE grants the Additional Commissioner or Joint Commissioner of Central Excise the discretion to apply the notification's provisions to a manufacturer who has failed to avail the special procedure. The Original Authority failed to consider the assessee/appellants' request to invoke this provision and did not provide reasons for not exercising this power. The Tribunal found this omission legally unsustainable.

5. Imposition of penalties on the assessee/appellants:
The Revenue appealed against the non-imposition of penalties by the Original Authority, arguing that the assessee/appellants' failure to follow the special procedure and non-payment of duty warranted penalties under Rule 25 of the Central Excise Rules, 2002. However, the Tribunal upheld the Original Authority's finding that the closure was beyond the control of the assessee/appellants and that penalties were not imposable. The Tribunal dismissed the Revenue's appeals for penalties.

Conclusion:
The Tribunal allowed the appeals filed by the assessee/appellants, setting aside the impugned orders confirming the differential duty. It dismissed the Revenue's appeals for imposition of penalties, finding the impugned orders legally unsustainable. The Tribunal emphasized that the forced closure of the factories should not be considered a failure to comply with the special procedure under Notification No. 17/2007-CE.

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