2017 (4) TMI 555 - AT - Central Excise

Benefit of N/N. 67/95 - captive consumption - In respect of the goods cleared under N/N. 10/1997 dated 1-3-1997 intermediate goods manufactured and captively consumed in the said goods is not eligible for N/N. 67/95 - personal penalties - Held that - the appellant have claimed exemption under N/N. 10/97 as well as 67/95 in respect of captively consumed goods, it was known to the department that appellant is clearing the final product under exemption N/N. 10/97-CE. Accordingly, it was not prevented to the department to take action immediately after receipt of the classification declaration wherein aforesaid exemption were claimed. Therefore, there is no malafide intention on the part of the appellant. Even though the demand was confirmed for the extended period which was accepted by the appellant that alone is not the reason for imposing penalty u/s 11AC. Penalty u/s 11AC can only be imposed when it is established that there is suppression of facts on the part of the appellant. Since there is no malafide proved, personal penalty on Shri. Hariharan is also not tenable - appeal allowed - decided partly in favor of appellant.

Summary

Issues: Classification of goods under Central Excise Tariff Act, 1985; Exemption notifications under 10/97-CE and 67/95-CE; Imposition of penalty under Section 11AC; Personal penalty on Excise Manager.

Classification of Goods: The appellant was engaged in the manufacture of specific goods falling under chapter sub-headings 8541.00 and 8504.00 of the Central Excise Tariff Act, 1985. They claimed exemption under notification No. 10/97-CE for goods cleared to research institutes and also claimed exemption for captively consumed goods under notification No. 67/95-CE. The issue arose when the department found that the intermediate goods captively consumed were not eligible for the exemption under notification No. 67/95. A demand was raised, confirmed in the adjudication order, and penalties were imposed.

Penalty under Section 11AC: The appellant's counsel admitted the correctness of the demand as the captively consumed goods were used in the manufacture of exempted goods cleared under notification No. 10/97. The appellant sought to waive the penalty under Section 11AC and the personal penalty on the Excise Manager, arguing that there was no malafide intention. They believed the exemption covered not only the equipment but also its accessories and spare parts supplied to research institutions. The appellant maintained that they had filed declarations claiming both exemptions and that the captively consumed parts were not used in the goods supplied under notification No. 10/97. They requested the setting aside of penalties, emphasizing the lack of suppression of facts.

Analysis of Penalties: The Revenue reiterated the findings of the impugned order, arguing that due to the demand being for an extended period, the penalty under Section 11AC was inevitable. However, the Tribunal noted that the department was aware of the appellant's claims for exemptions under both notifications. Since there was no malafide intention and no suppression of facts established, the penalties under Section 11AC and the personal penalty on the Excise Manager were deemed unsustainable. The Tribunal maintained the demand for duty payment along with interest but set aside the penalties, allowing the appeals partially and in favor of the Excise Manager.

This judgment highlights the importance of proper classification of goods for exemption claims, the necessity to establish malafide intent for penalty imposition, and the significance of filing accurate declarations to support exemption claims under relevant notifications.