2018 (4) TMI 1149 - AT - Central Excise

Valuation - captive consumption - N/N. 217/86-CE dated 2.4.1986 - Held that - The description of inputs as well as final products in the above notification shows that the exemption would be eligible for inputs falling under Chapter 39 even if the finished products also fall under Chapter 39 - in the case of Narmada Plastics P. Ltd. Vs. Commissioner of Central Excise, Raipur 2000 (5) TMI 527 - CEGAT, NEW DELHI in which the benefit of exemption was given to the captively consumed HDPE tapes under Notification No. 217/86. The appellant is eligible for the benefit of N/N. 217/86 - The demand of duty after 2.4.1986 cannot sustain and requires to be set aside - appeal allowed in part.

Issues:
1. Exemption eligibility under Notification No. 221/86-CE for captively consumed HDPE tapes.
2. Applicability of Notification No. 217/86-CE for the appellant.
3. Duty demand, interest, and penalties imposed by the department.
4. Interpretation of finished products falling under Chapter 39.

Analysis:
1. The appellant, engaged in manufacturing HDPE fabrics, faced a show cause notice proposing denial of exemption under Notification No. 221/86-CE due to the finished products falling under Chapter 3923 instead of 540690. This led to a demand for duty, interest, and penalties. After rounds of litigation, the duty demand was confirmed by the original authority and Commissioner (Appeals) with penalties on directors. The appellant contested this before the Tribunal.

2. The appellant argued that although the finished products fell under Chapter 3923, they were eligible for exemption under Notification No. 221/86-CE. The appellant overlooked claiming the benefit under Notification No. 217/86-CE, which was applicable to the captively consumed inputs falling under Chapter 39. The appellant cited legal precedents to support the claim that not claiming a refund initially does not bar them from claiming it later. It was acknowledged that duty liability existed for a brief period before the introduction of Notification No. 217/86-CE.

3. The department maintained its stance from the impugned order during the hearing. After considering both sides, the Tribunal reviewed the notifications to determine the eligibility for exemption based on the classification of inputs and finished products. The Tribunal analyzed the provisions of Notification No. 221/86-CE and Notification No. 217/86-CE to decide on the duty demand and interest imposed.

4. The Tribunal found that the finished products falling under 5406.90 allowed the appellant to claim exemption on captively consumed inputs falling under 39.20. The introduction of Notification No. 217/86-CE expanded the scope of exemption to include inputs under Chapter 39, regardless of the classification of finished products. Citing legal precedents, the Tribunal concluded that the appellant was eligible for the benefit under Notification No. 217/86-CE, leading to setting aside the demand for duty post the notification's introduction. The appeal was partly allowed with consequential relief.

*(Operative portion of the order was pronounced in open court)*

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