2019 (2) TMI 136 - AT - Central Excise

Benefit of reduced penalty of 25% u/s 11AC - SSI Exemption in respect of Unit I - crossing of threshold limit - Held that - The said request of the appellant is legal and proper for the reason that the adjudicating authority ought to have given the option to pay the reduced penalty of 25% under section 11AC. Thus, the impugned order stands modified to the extent of granting the option to pay reduced penalty of 25% of the duty amount only. Demand of duty in respect of Unit II is ₹ 2,68,455/- - period 1997 98 - benefit of SSI exemption - Held that - The appellant is eligible for the SSI benefit under Notification 38/97. It is also to be noted that the adjudicating authority for the period 1996 97 has excluded the value of ₹ 84,585/- and thus the turnover for the year 1996 97 which is the preceding financial year would be less than ₹ 300 lakhs. Therefore, the appellant in Unit II would be rightly eligible for notification 38/97 - The demand for this period which is ₹ 1,54,519/- is therefore set aside along with the penalties. However, since the appellant is not contesting the duty liability and the penalty for the period prior to 1997 98, in respect of Unit II, the same does not require interference. Appeal allowed in part.

Issues:
1. Eligibility for SSI exemption under Notification No.1/93-CE.
2. Duty liability and penalties imposed for exceeding SSI exemption limit.
3. Appeal regarding reduced penalty of 25% under section 11AC.
4. Contesting duty liability for specific periods for Unit - II.
5. Availing SSI exemption under Notification 38/97 and MODVAT credit.
6. Correct application of Notification 38/97 and eligibility criteria.
7. Exclusion of turnover value for determining eligibility for SSI exemption.
8. Decision on duty demand and penalties for Unit - II.

Analysis:
1. The appellants, manufacturers of cranes and parts, were availing SSI exemption under Notification No.1/93-CE. However, they exceeded the exemption limit, leading to duty demand and penalties for the years 1994-95 to 1997-98.

2. The original authority confirmed duty demand and penalties for both units of the appellants. The Commissioner (Appeals) upheld the demand but modified the penalties. The appellants contested these decisions and approached the Tribunal.

3. The appellant in Unit - I did not contest the duty liability but requested the benefit of reduced penalty of 25% under section 11AC. The Tribunal modified the order to grant this option for Unit - I.

4. For Unit - II, the appellant contested duty liability for specific periods. The Tribunal found that for the period 1997-98, the appellant was eligible for SSI exemption under Notification 38/97, as they had not availed SSI exemption under Notification 1/93 or 16/97. The demand for this period was set aside along with penalties.

5. The appellant in Unit - II had paid duty at the normal rate and availed MODVAT credit. When Notification 38/97 was introduced, they claimed SSI exemption under this notification, which allowed reduced duty without barring MODVAT credit.

6. The Tribunal determined that the appellant was rightly eligible for the SSI benefit under Notification 38/97, as the turnover for the preceding financial year was below the threshold. The authorities' denial of this benefit based on MODVAT credit and previous notifications was found incorrect.

7. By excluding certain turnover values, the Tribunal established the appellant's eligibility for Notification 38/97 for Unit - II. The duty demand and penalties for the period 1997-98 were set aside, while those for previous periods were not contested and upheld.

8. The Tribunal partly allowed the appeals, granting relief based on the correct application of SSI exemption notifications and eligibility criteria. The decision was pronounced in court on 13.11.2018.

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