2008 (9) TMI 333 - AT - Central Excise

Exemption under notification no. 108/95 CE period of limitation - the bonafides of the appellant cannot be doubted once the certificate was signed by the specified authority who requested the jurisdictional Assistant Commissioner to allow exemption - The appellants cannot be said to have a mala fide intention as duty was required to be paid by the customers, who were government authorities and therefore, could not have colluded with the manufacturer for evasion of duty - The manufacturer did not stand to gain anything by evading duty which was to be paid by the various government organizations - The fact that the Japan Bank of International Cooperation was not an international organization approved duly in terms of the explanation attached to Notification No.108/95 was not readily forthcoming by any records to which the manufacturer had access and therefore he was dependent upon the project implementing authority and the Secretary to the state governments, who were in the better know of the facts demand is not sustainable.

Issues Involved:
1. Applicability of exemption under Notification No.108/95-C.E.
2. Invocation of the extended period of limitation.
3. Imposition of penalties on the appellant and its commercial manager.

Issue-wise Detailed Analysis:

1. Applicability of Exemption under Notification No.108/95-C.E.:

The appellant, engaged in manufacturing electric wires and cables, supplied these to M/s. Maharashtra State Electricity Board (MSEB) and M/s. West Bengal State Electricity Board (WBSEB), claiming exemption under Notification No.108/95-C.E. This notification exempts goods supplied to projects financed by international organizations, subject to certain conditions, including the submission of duty exemption certificates. The certificates, issued by the project authorities and countersigned by the Principal Secretary of the respective state governments, certified that the goods were intended for use in projects financed by Japan Bank for International Cooperation (JBIC).

The Revenue initiated proceedings against the appellant, arguing that JBIC is not an international organization as per the explanation attached to the notification, thus disqualifying the appellant from the exemption. The appellant conceded that JBIC is not an international organization but contended that the exemption was claimed based on bona fide belief supported by the certificates issued by the project authorities.

2. Invocation of the Extended Period of Limitation:

The core dispute revolved around whether the extended period of limitation could be invoked. The appellant argued that there was no suppression of facts or mala fide intent, as the exemption was claimed based on duly issued and countersigned certificates. The certificates were considered valid by the authorities, who assessed the RT-12 returns without objection. The appellant relied on precedent decisions where similar demands were quashed due to the bona fide belief of the assessees.

The Tribunal, in its majority decision, found that the benefit was availed based on certificates issued by project authorities, and any error was on the part of the certificate issuing authorities, not the assessees. The Tribunal held that the demand raised beyond the normal period of limitation was time-barred, and only the demand within the normal period should be confirmed.

However, a separate opinion by one member emphasized that the certificates were not produced before the Assistant Commissioner before the clearance of goods, as required by the notification. This non-compliance constituted suppression, justifying the invocation of the extended period.

3. Imposition of Penalties on the Appellant and its Commercial Manager:

The appellant argued against the imposition of penalties, stating there was no mala fide intent. The Tribunal, in its majority decision, agreed that there was no mala fide on the appellant's part, and thus, penalties should not be imposed. Consequently, the penalties were set aside.

The separate opinion, however, upheld the penalties, reasoning that the appellant failed to comply with the notification's requirements and did not produce the certificates before the Assistant Commissioner. The commercial manager's penalty was reduced to Rs.10,000, considering his role as an employee.

Final Order:

In the majority decision, the Tribunal concluded that the demand of duty and interest should be recalculated applying the normal period of limitation, and the penalties imposed on both the appellant and its commercial manager were set aside. The matter was returned to the referral bench for passing appropriate orders in line with this determination.

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