2019 (5) TMI 41 - AT - Central Excise

CNC machines and other goods which were supplied by them to various scientific and research institutions such as ISRO, BARC, etc. - Benefit of N/N. 10/1997-CE dated 01.03.1997 - case of Revenue is that the appellant s products are machinery falling under Chapter 84 and do not fall in any of the categories mentioned in the notification - HELD THAT - A plain reading of the exemption notification would show that unlike some other notifications, this notification did not restrict the benefit to goods falling under chapter heading. Therefore, regardless of which chapter heading of CETH the goods fall, the exemption would apply as long as they match the description of the goods and fulfil other conditions. There is no dispute regarding fulfilment of the conditions of the notification. The only question is whether the CNC machines and other equipment manufactured by the appellants specifically for supply to scientific institutions can be called scientific equipment or otherwise. This issue is no longer res integra and in the case of GODREJ APPLIANCES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI 2008 (2) TMI 393 - CESTAT AHMEDABAD , this exemption notification has been interpreted by the Tribunal to cover the equipment supplied to scientific and research institutions for the purpose of scientific research whether or not such goods fall under chapter 90. In the present case, CNC machines and other equipment which have been manufactured are no doubt meant for and supplied to scientific institutions for their research and we find no reason to hold that these cannot be called scientific and technical equipment within the meaning of the notification 10/1997-CE. We, therefore, find that the assessee is entitled to the benefit of exemption notification 10/1997-CE on merits. Time Limitation - HELD THAT - When the assessee has been audited regularly and has not clandestinely removed any goods and has supplied all goods to Government research institutions. The appellants are themselves Public Sector Undertaking and the department has made no case whatsoever to allege that there was fraud, collusion, wilful misstatement or suppression of facts with an intent to evade payment of duty on behalf of the appellant - the extended period of limitation is wrongly invoked and entire demand is hit by limitation as well. The appellant had made out a case both on merits and on limitation. Consequently, the question of penalty under Sec.11AC does not arise. he appellant had made out a case both on merits and on limitation. Consequently, the question of penalty under Sec.11AC does not arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of exemption notification 10/1997-CE dated 01.03.1997 for goods declared as scientific and technical equipment.
2. Validity of invoking extended period of limitation for duty demand.
3. Imposition of penalty under Sec.11AC of the Central Excise Act, 1944.

Detailed Analysis:
Issue 1:
The appeal addressed whether the appellant is entitled to the benefit of exemption notification 10/1997-CE for goods declared as scientific and technical equipment. The appellant, a subsidiary of a government undertaking, manufactured various machine tools and claimed exemption for goods supplied to scientific institutions. The revenue contended that the goods did not fall under the specified categories for exemption. However, the Tribunal found that the notification did not restrict benefits based on chapter heading and interpreted the exemption broadly. Previous judgments supported this interpretation, including treating Air Conditioners as scientific equipment. The Tribunal concluded that the appellant's goods, specifically manufactured for scientific institutions, qualified as scientific and technical equipment under the notification, entitling them to the exemption.

Issue 2:
Regarding the invocation of the extended period of limitation for duty demand, the appellant argued against its applicability. They highlighted regular audits and a lack of fraudulent intent, asserting that they believed in their exemption eligibility. The Tribunal agreed, finding no evidence of fraud or intent to evade duty. As the appellant was a Public Sector Undertaking supplying goods to government research institutions, the extended limitation period was deemed wrongly invoked, rendering the demand time-barred.

Issue 3:
The imposition of penalties under Sec.11AC was also contested by the appellant, citing their genuine belief in exemption eligibility as a defense. The Tribunal, having ruled in favor of the appellant on both merit and limitation issues, found no grounds for penalty imposition. With the appellant meeting the conditions for exemption and lacking fraudulent intent, the question of penalty did not arise, leading to the allowance of the appeal and setting aside of the impugned order.

In conclusion, the Tribunal upheld the appellant's entitlement to the exemption notification, rejected the extended period of limitation for duty demand, and dismissed the imposition of penalties under Sec.11AC, ultimately allowing the appeal.