2017 (9) TMI 151 - AT - Central Excise

Benefit of N/N. 84/94 - Change of opinion - Revenue entertained a view that since M/s. Maccas Automotive was not a manufacturing unit but was a trading unit, they were not entitled to the benefit of the notification - Held that - A manufacturing unit, who is in business, proceeds on the basis of documents produced before him and cannot be held to be a legal expert so as to come to a conclusion, on his own that the benefit of notification was not available to M/s. Maccas Automotive, being a trading firm, especially when an undertaking was produced before them and no objection was ever raised by the Revenue, prior to the period in question - Admittedly, the Assistant Commissioner is more knowledgeable about the legal position and having granted the permission to a trading unit to follow the procedure of exemption notification in question, the duty liability cannot be subsequently fastened on the manufacturing unit, who had acted according to the documents produced before him - such subsequent change in the opinion of the Revenue, resulting in confirmation of demand against the manufacturing unit or confiscation of the goods or imposition of penalties, cannot be appreciated - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of duty against M/s. Maccas Brakes for manufacturing goods on job-work basis, applicability of notification No. 84/94, liability to pay Central Excise duty, imposition of penalties.

Analysis:

Confirmation of Demand of Duty:
The case involved the confirmation of demand of duty against M/s. Maccas Brakes for manufacturing goods on job-work basis for M/s. Maccas Automotive. The Revenue argued that since M/s. Maccas Automotive was not a manufacturing unit but a trading unit, they were not entitled to the benefit of notification No. 84/94. However, it was found that M/s. Maccas Automotive sent the material to M/s. Maccas Brakes under the cover of challans, following the due procedure as required by the notification. The Assistant Commissioner did not raise any objections at that time, permitting M/s. Maccas Automotive to follow the procedure. The Tribunal noted that M/s. Maccas Brakes acted based on the documents produced before them and could not be expected to be a legal expert to determine the eligibility of M/s. Maccas Automotive for the notification's benefit. Therefore, the subsequent change in Revenue's opinion leading to the confirmation of demand against M/s. Maccas Brakes was deemed unjustified.

Applicability of Notification No. 84/94:
The dispute also revolved around the applicability of Notification No. 84/94, which required the principal manufacturer to give an undertaking to account for the goods and discharge any duty liability. M/s. Maccas Automotive had provided the necessary undertaking to their Assistant Commissioner, and M/s. Maccas Brakes proceeded based on this undertaking. The Tribunal emphasized that the Assistant Commissioner, being more knowledgeable about the legal position, had accepted the undertaking without objections, thereby legitimizing M/s. Maccas Brakes' belief in the availability of the notification's benefit to their principal manufacturer.

Liability to Pay Central Excise Duty:
The liability to pay Central Excise duty was a crucial aspect of the case. The Revenue contended that since M/s. Maccas Automotive was not entitled to the notification's benefit, the duty liability fell on M/s. Maccas Brakes as the manufacturer. However, the Tribunal held that M/s. Maccas Brakes had acted in good faith based on the documents and permissions granted by the Assistant Commissioner. The sudden change in Revenue's interpretation could not be used to impose duty liability retroactively on M/s. Maccas Brakes, especially when they had followed the prescribed procedures diligently.

Imposition of Penalties:
In addition to the demand of duty, penalties were also imposed on the appellants. The Tribunal, after considering the arguments and reasoning of the lower authorities, found that the penalties were unjustified given the circumstances of the case. As the demand of duty itself was set aside due to the erroneous interpretation by the Revenue, the penalties imposed were also deemed unwarranted. Therefore, all the appeals were allowed with consequential relief to the appellants, and the impugned orders were set aside.

This comprehensive analysis of the judgment highlights the key issues surrounding the confirmation of duty demand, applicability of the notification, liability determination, and imposition of penalties, providing a detailed understanding of the Tribunal's decision in the case.