2018 (10) TMI 520 - AT - Central Excise

Benefit of N/N. 63/95 dated 16.03.95 - finished goods manufactured by them supplied to Bharat Electronics Limited - whether to be considered as supply to Ministry of Defence or not? - Penalty - Held that - The Notification exempts the goods supply to the Ministry of Defence for official purposes if they are manufactured by the entities/ PSU for supply to MOD. The said notification does not give any leverage to the suppliers by vendors to such entities as mentioned in notification - the benefit of the notification restricts the exemption only to units indicated in the above reproduced relevant portion of the notification. The claim of the appellant in the case in hand is incorrect as to that they are eligible for the benefit of notification. Penalty - Held that - The issue involved in this case being in respect of interpretation of the Notification No. 63/95, appellant may have entertained a bonafide belief and also may be guided by various decisions of the Tribunal - In view of this confused situation prevailing during the period in question, appellant should not be visited with any penalties - penalty set aside. Appeal allowed in part.

Summary

Issues:
Interpretation of Notification No. 63/95-CE dated 16.03.95 for duty exemption on goods supplied to Ministry of Defence.

Analysis:
The appeal involved a dispute regarding the appellant's claim of duty exemption under Notification No. 63/95-CE dated 16.03.95 for goods supplied to Bharat Electronics Limited (BEL) and subsequently used for defense purposes. The appellant contended that as per communication from the Ministry of Finance to BEL, vendors were also eligible for the exemption if supplying to entities like BEL. The Departmental Representative argued that the exemption was specific to goods manufactured by certain units for direct supply to the Ministry of Defence. The Tribunal analyzed the notification's language, which clearly stated that the exemption applied to goods manufactured by specific units for direct supply to the Ministry of Defence, without extending the benefit to vendors. The Tribunal cited a previous case to support this interpretation, emphasizing that erroneous clarifications could not justify erroneous benefit claims. Consequently, the Tribunal held that the appellant was not entitled to the exemption under the notification.

Regarding the penalty imposed, the Tribunal considered the appellant's bonafide belief, guided by previous Tribunal decisions and Ministry of Defence letters indicating exemption benefits for vendors. Acknowledging the confusion surrounding the interpretation of the notification during the relevant period, the Tribunal concluded that the appellant should not face penalties. Consequently, the penalty imposed by the Adjudicating Authority was set aside. The Tribunal upheld the duty demand and interest but disposed of the appeal by setting aside the penalties, considering the circumstances and interpretations involved in the case.