2022 (6) TMI 609 - AT - Central Excise

Jurisdiction - power of Tribunal to review it s order - benefit of N/N. 29/89-C.E. dtd. 01.03.1989 - Applicability of benefit of Notification to Kerosene or not - classification of goods - classifiable under Chapter 2710.29 or under 2710.99 - case of appellant is that once it has been held and decided that the final products i.e. LABFS cleared by the Appellant to the manufacture of liner alkyl benzene (LAB) is classifiable under Chapter 2710.29 and not under 2710.99, the benefit of Notification No. 29/89-C.E. dated 01.03.1989 is available to the Appellant - levy of penalty - HELD THAT - The present review application is filed by the applicant on the basis of Hon ble Supreme Court order in INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER 2016 (4) TMI 929 - SC ORDER and the Hon ble apex court also held that if such review petition is filed within a month s time from today, the Tribunal is requested to decide those two abovementioned issues on merits, without reference to the period of limitation. It is also noticed that as per the provision of the Central Excise Act, Tribunal has no power to review the order. However, it is well settled law that all subordinate courts/tribunals/authorities were bound by the decision of the Apex Court until it was reviewed or corrected by the same court. The decisions rendered by the Apex Court being the highest judicial fora are binding on all subordinate courts. However, this apex court order can also be considered as remand for deciding the issue on merit. Considering the said facts, we now decide the issues on merits related to applicability of Notification No. 29/89-CE dtd. 01.03.1989 and legality of penalty of Rs. 36,00,000/- under Rule 173-Q of the Central Excise Rules, 1994 addressed by the Hon ble apex court. Whether the benefit of Notification 29/89-C.E. dtd. 01.03.1989 admissible to Applicant or not? - HELD THAT - From the plain reading of above notification, it is clear that in above notification benefit was granted to the Kerosene falling under heading No. 27.10 of the Schedule of the Central Excise Tariff Act, 1985 (5 of 1986) intended for use in the manufacture of liner alkyl benzene or heavy alkylate. Clearly the above notification ibid is a conditional exemption notification, benefit of which is admissible subject to fulfillment of the conditions - Only product Kerosene falling under chapter heading 27.10 and consumed in the manufacture of linear alkyl benzene or heavy alkylate will be eligible for exemption under above Notification. Since the said factual position, related to conditions of notification cannot be ascertain at this stage specifically when the said issue was raised before the Tribunal first time. Now adjudicating authority must decide and verify the matter first whether products of applicant can be considered as Kerosene for the purpose of above exemption notification and thereafter, verify the use of products for manufacture of liner alkyl benzene / heavy alkylate. As per observations, the first issue is disposed off by way of remand to the adjudicating authority for passing a fresh order in the above terms - Adjudicating authority should complete the remand proceedings within three months of the receipt of this order and the applicant shall be allowed adequate opportunity of hearing and submission before a fresh decision is taken. Levy of penalty - HELD THAT - It is a settled legal position that in cases where issue involved is the classification dispute and interpretation of rules / law /exemption notification are involved, no penalty can be imposed. In the present matter no penalty is imposable upon the appellant under Rule 173Q of the Central Excise Rules 1944 as the applicant has not violated any Rules / provisions with intention to evade payment of duty. It is only a matter of difference of opinion regarding classification of goods between the applicant and by the department. Therefore penalty needs to be set aside - Further, since the Applicant are public-sector undertaking, the allegation of mis-statement, or suppression of fact or contravenes provisions of Rule with intent to evade the payment of duty can not be alleged. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Applicability of Notification No. 29/89-CE dated 01.03.1989.
2. Legality of penalty of Rs. 36,00,000/- under Rule 173Q of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 29/89-CE dated 01.03.1989:

The Appellant contended that the eligibility for Notification No. 29/89-CE flows from the reply to show cause notices and was specifically dealt with by the Commissioner. They argued that the final products, LABFS, cleared for the manufacture of linear alkyl benzene (LAB) should be classifiable under Chapter 2710.29, making them eligible for the benefit of the said notification. The Appellant emphasized that the exemption applies to any mineral oil (Kerosene) falling under heading 27.10 intended for use in the manufacture of linear alkyl benzene or heavy alkylate. They referenced the Supreme Court judgment in IOCL Vs. CCE, which clarified that the exemption would be available only if kerosene is supplied for industrial purposes.

The Respondent countered that the Tribunal had no power to review its final order and that the issue of the applicability of Notification No. 29/89 was not raised in the appeal memorandum or during the hearing. They argued that the Tribunal could not be faulted for not deciding on an issue that was not presented to them. The Respondent also noted that the products LABFS and LARO, though classifiable as 'Kerosene' under CETH 2710, were not sold through PDS but supplied for industrial purposes, thus not eligible for the exemption.

The Tribunal, adhering to the Supreme Court's directive, decided to remand the matter to the adjudicating authority to verify whether the products could be considered as "Kerosene" for the purpose of the exemption notification and to confirm their use in the manufacture of linear alkyl benzene or heavy alkylate. The adjudicating authority was instructed to complete the proceedings within three months and provide the Appellant adequate opportunity for hearing and submission.

2. Legality of Penalty of Rs. 36,00,000/- under Rule 173Q of the Central Excise Rules, 1944:

The Appellant argued that the imposition of the penalty was illegal as all required documents and records were maintained and disclosed to the department. They cited various decisions stating that penalties cannot be imposed in cases involving classification disputes or interpretation of notifications.

The Respondent maintained that there was no specific plea in the appeal memorandum seeking annulment or modification of the penalty. They argued that the Tribunal had rightly assumed that the Appellant had not pressed the penalty issue during the hearing.

The Tribunal concluded that penalties should not be imposed in cases involving classification disputes or interpretation of rules/laws/exemption notifications. They noted that the Appellant, being a public-sector undertaking, could not be accused of willful suppression of facts or intent to evade duty. Citing precedents, the Tribunal emphasized that penalties should be imposed only in cases of deliberate defiance of law or dishonest conduct, not in cases of bona fide belief or technical breaches.

Conclusion:

The Tribunal remanded the issue of the applicability of Notification No. 29/89-CE to the adjudicating authority for fresh verification and decision. On the matter of the penalty, the Tribunal set aside the penalty imposed, acknowledging the public-sector status of the Appellant and the absence of any intent to evade duty. The appeal was disposed of in these terms.