2017 (12) TMI 148 - AT - Central Excise

Remission of duty - case of Revenue is that Since the appellant had not applied for remission of duty, therefore, the entire duty is required to be paid - case of appellant is that application u/r 21 is a mere procedural one and in absence of such application duty cannot be confirmed against them - Held that - it is crystal clear that on making an application for remission of duty, the proper officer will decide the same after taking into consideration various factors and imposition of such conditions as he deems fit. Therefore, it is not an absolute right but subject to condition that has to be prescribed by the proper officer. Hence, it cannot be considered as a mere procedural or technical formality. Since the applicant has not complied with said provisions, therefore, the duty is required to be paid on the goods claimed to have been destroyed but not cleared to M/s Hindustan Lever Limited and duty was collected from them - appeal dismissed - decided against appellant.

Summary

Issues:
- Appeal against order in appeal No.COMMR.(A)/177/VDR-II/2011
- Applicability of Rule 21 of Central Excise Rules, 2002 for remission of duty
- Duty liability on destroyed packing material
- Proper application for remission of duty
- Interpretation of provisions for remission of duty

Analysis:

The appeal was filed against the order in appeal No.COMMR.(A)/177/VDR-II/2011, dated 26.04.2011, passed by the Commissioner of Central Excise (Appeals) Vadodara. The case involved the manufacturing of packaging material by the appellant under Chapter heading 48 of Central Excise Tariff Act, 1995. The appellant had manufactured packaging materials for a company but it was not lifted by them, resulting in compensation paid to the appellant for non-lifting of the material, including excise duty amounting to ?15,24,742. A differential duty of ?64,178 was demanded with interest and penalty due to the non-payment of duty on the destroyed packing material.

The appellant contended that they were eligible for remission of duty on the destroyed packing material as per Rule 21 of Central Excise Rules, 2002, even though they did not file a formal application for the same. The Revenue argued that duty liability arises once goods are manufactured and entered into the register, and since no application for remission was made, the duty must be paid.

Upon examination, the Tribunal found that the appellant had received compensation for the unlifted packaging material, claiming entitlement to remission of duty subject to certain conditions. The Tribunal referenced the judgment of the Hon’ble Supreme Court in Shaw Wallace Co. Ltd. Vs Deputy Commissioner of Customs, emphasizing that duty collection is postponed until removal from the factory. The Tribunal analyzed Rule 21 of Central Excise Rules, 2002, which allows for remission of duty under specific circumstances, subject to conditions imposed by the proper officer.

The Tribunal concluded that the application for remission of duty is not an absolute right but subject to conditions set by the proper officer. Since the appellant did not comply with the provisions of Rule 21 by not filing the necessary application, the duty on the destroyed packing material needed to be paid. Consequently, the Tribunal upheld the decision of the lower authorities, dismissing the appeal for lack of merit.

In summary, the judgment clarified the requirement of following proper procedures for remission of duty under Rule 21 of Central Excise Rules, 2002, emphasizing that duty liability must be fulfilled unless the conditions for remission are met through a formal application.