2018 (7) TMI 282 - HC - Central Excise

No export of goods - Clandestine removal - recovery of Central Excise Duty by invoking Section 11-A of the Central Excise Act, 1944 - The principle contention of the appellant is that when the Tribunal had come to the conclusion that all the leather uppers manufactured by the appellant and sold to M/s.Metro & Metro had been exported and that there is no finding that these goods were sold in the local market, the appellant should not be made to pay duty on the goods - benefit of Notification Nos.42 of 2001 and 43 of 2001. Held that - Conditions have been laid in the Notification to ensure that only such goods are exempted from duty which are actually exported. The authorities have to satisfy themselves of the claim for exemption and it is only after such satisfaction by the authorities that the manufacturer or processor can remove the excisable goods to a place outside the factory in order to avail the benefit of exemption from paying excise duty - In the present case, the appellant was not registered under Rule 9 of the Central Excise Rules, 2001. The appellant has also not informed the department about the clearance of the goods. Complete non-observance of procedure cannot be said to be a mere procedural lapse. The appellant has not fulfilled any of the conditions. Merely stating that they have not paid the Central Excise Duty as they felt that they would be used by M/s.Metro & Metro for export purposes would not be sufficient. It is well settled that the stringency and the mandatory nature of any notification is decided on the basis of the purpose it seeks to achieve. The purpose of Notification No.43 of 2001 dated 26.06.2001 is to ensure that excise duty should not be evaded under the garb of export sales. The appellant has removed the goods without informing the Department. The appellant has also not registered under Rule 9 of the Central Excise Rules. The contention, even if the appellant is not registered under Rule 9, still the appellant can avail exemption from paying excise duty cannot be accepted. The removal of goods came to light only after the visit of the officers to the factory and perusal of the documents - the authorities were justified in invoking Section 11-A for recovery of excise duty. The order of the Customs, Excise and Service Tax Appellate Tribunal in confirming the levy of duty by invoking extended period of limitation, does not requires any interference. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the confirmation of the demand of duty on the appellant is justified merely on the ground of procedural lapse when the substantive condition of export of goods has been complied with.
2. Whether the invocation of the extended period under the proviso to Section 11A of the Central Excise Act, 1944, is justified in the absence of any intent to evade payment of duty on the part of the appellant.

Detailed Analysis:

Issue 1: Procedural Lapse vs. Substantive Condition of Export
- The appellant, a manufacturer of leather shoe uppers, did not register with the Central Excise Department, did not pay excise duty, and did not file returns, believing that the goods would be used for export by the buyer, M/s. Metro & Metro.
- The Commissioner of Central Excise rejected the appellant's defense, emphasizing that the appellant did not follow the procedures prescribed under Notification No. 43 of 2001, which mandates registration and adherence to specific conditions for duty exemption on exported goods.
- The appellate authority and the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the Commissioner's order, stating that non-observance of the procedure cannot be considered a mere procedural lapse. The Tribunal set aside the penalty but confirmed the duty demand and interest.
- The High Court reiterated that Rule 19 of the Central Excise Rules, 2002, and Notification No. 43 of 2001, require strict adherence to procedures to ensure that only goods actually exported are exempt from duty. The appellant's complete non-observance of these procedures disqualified them from claiming duty exemption.

Issue 2: Invocation of Extended Period under Section 11A
- The show cause notice alleged that the appellant willfully suppressed the fact of removal of goods without payment of duty, invoking the extended period under the proviso to Section 11A of the Central Excise Act, 1944.
- The appellant argued that their non-disclosure was not intentional and that there was no intent to evade duty.
- The High Court, however, held that the complete non-adherence to the prescribed procedure led to a presumption of intent to evade duty. The appellant's failure to register and inform the Department about the clearance of goods justified the invocation of the extended period for recovery of duty.
- The Court emphasized the importance of procedural compliance to prevent duty evasion under the guise of export sales, referencing the stringent requirements of Notification No. 43 of 2001.

Conclusion:
- The High Court dismissed the appeal, affirming the Tribunal's decision to uphold the duty demand and interest while setting aside the penalty. The Court held that the appellant's failure to comply with mandatory procedural requirements disqualified them from duty exemption, and the extended period under Section 11A was rightly invoked due to the presumption of intent to evade duty.