2017 (8) TMI 888 - AT - Central Excise

Penalty - clearance of pipes without payment of duty - N/N. 3/2004-C.E., dated 8-1-2004 - denial of benefit on the ground that there is no storage facility in the pipes - Held that - the District Collector will be in a position to know the details of the scheme and has authorized procurement of pipes without payment of duty, as per requirement. Hence, once the District Collector issued the certificate, after considering the water scheme, the benefit of notification should be extended - The penalty stands imposed under Rule 26 for dealing in excisable goods which are liable for confiscation. The imposition of penalty is totally unjustifiable and liable to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against penalty upheld by Commissioner (Appeals) - Interpretation of Notification No. 3/2004-C.E. - Use of pipes for water supply scheme - Benefit of exemption under the notification - Imposition of penalty under Rule 26.

Analysis:
The appeal was filed against the Order-in-Appeal upholding a penalty of ?3,17,308 on the appellant, a Co-operative Society involved in providing water supply for agricultural purposes in a village. The appellant procured pipes under Notification No. 3/2004-C.E. without payment of duty, based on certificates from the District Collector. Subsequently, an investigation found the pipes were used differently from the intended purpose under the notification, leading to duty demand and penalty imposition. The Commissioner (Appeals) upheld the penalty.

The Notification No. 3/2004-C.E. exempts certain items, including pipes for water delivery, from excise duty subject to specific conditions. The dispute arose as the Revenue argued that the pipes were used contrary to the notification's requirement of transporting water to a storage facility, which was allegedly absent in the appellant's scheme. The appellant contended that the water chambers in agricultural lands served as storage facilities, supported by layout plans and drawings submitted.

The purpose of the notification was to aid rural agricultural water supply schemes, overseen by District Collectors who authorized duty-free procurement based on scheme details. The Tribunal held that once the District Collector issued the necessary certificate after assessing the scheme, the notification's benefits should apply. The penalty under Rule 26 for dealing with goods liable for confiscation was deemed unjustified and set aside, leading to the appeal being allowed.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal against the penalty imposed on the appellant. The judgment emphasized the importance of adhering to the specific conditions of exemption notifications and the role of District Collectors in authorizing duty-free procurement for rural schemes.