2017 (6) TMI 1024 - AT - Central Excise

Area based exemption - N/N. 50/2003-CE dated 10/06/2003 as amended by N/N. 76/2003-CE dated 05/11/2003 - denial on the ground that appellant failed to comply with the condition of notification is as much the appellants started manufacturing the excisable goods from 15/06/2005 and effected first clearance on 17/06/2005. In terms of the said notification, they were required to file their option to avail exemption before affecting first clearance and such option shall be effective from the date of exercising the same. Held that - the N/N. 50/2003-CE dated 10/06/2003 did not contain the conditions regarding exercising option in writing, when it was first issued. The said notification was amended on 05/11/2003 which brought in specifically three conditions for availing the notification - these are basic and substantial requirements to avail the exemption. These are specifically inserted after the issue of notification and clearly are intended to counter any misuse of the area based exemption and also to make aware the jurisdictional officer about the exemption being availed by the assessee. These conditions do have specific legal implication and by no means be considered as a simple procedural requirement, infringement of which is condonable - the conditions inserted in Notification No. 50/2003-CE are mandatory and cannot be held as mere procedural requirement - appeal dismissed - decided against appellant.

Summary

Issues:
1. Appeal against denial of exemption under Central Excise duty notification.
2. Interpretation of procedural vs. substantial requirements for availing exemption.
3. Application of the doctrine of substantial compliance in fiscal statutes.

Analysis:

1. The appeal was filed against the denial of exemption under Central Excise duty notification by the Commissioner (Appeals). The appellants, engaged in manufacturing corrugated cartons, failed to comply with the condition of filing a declaration before affecting the first clearance, as required by Notification No.50/2003-CE. The Revenue proceeded to deny the exemption for the period in question, leading to a confirmation of Central Excise duty liability and imposition of penalties by the Original Authority and the Commissioner (Appeals).

2. The appellant argued that the failure to fulfill the procedural requirement of filing a declaration should not result in denial of the substantial benefit provided by the exemption notification, which aims to encourage industrial units in backward areas. The appellant contended that the requirement to exercise the option in writing before the first clearance was procedural in nature, citing a Supreme Court decision that non-observation of procedural conditions can be condonable. However, the Authorized Representative emphasized that exercising the option in writing before the first clearance was a substantial requirement, not merely procedural.

3. The Tribunal analyzed the conditions laid down in the notification and noted that they were introduced later to prevent misuse of the area-based exemption and to inform the jurisdictional officer about the exemption being availed. Referring to a Supreme Court judgment on substantial compliance in fiscal statutes, the Tribunal held that the conditions were mandatory and not mere procedural requirements. The Tribunal concluded that the failure of the appellants to fulfill the condition precluded them from availing the exemption, upholding the impugned order and dismissing the appeal.

In conclusion, the Tribunal's decision highlighted the distinction between procedural and substantial requirements for availing exemptions under Central Excise duty notifications. The application of the doctrine of substantial compliance in fiscal statutes was crucial in determining the outcome of the case, emphasizing the importance of strict adherence to statutory prerequisites for availing exemptions.