2022 (12) TMI 451 - AT - Central Excise

Area based exemption - benefit of cum-duty value - whether the appellant is entitled to Area based exemption under exemption Notification No. 49/2003-CE dated 10.06.2003 r/w subsequent Notification No. 50/2003-CE (as amended)? - penalty u/s 11AC of CEA - HELD THAT - The appellant is entitled to the benefit of recalculation of demand on cum-duty basis in accordance with explanation to Section 4(1)(b) of the Central Excise Act. Admittedly appellant have not collected Central Excise duty in addition to the sale price, in view of their claim of Area based exemption. Thus, the appellant shall be entitled to benefit of calculation of duty on cum-duty-price. The appellant shall be entitled to the benefit of Cenvat credit on inputs and input services and the demand payable shall be re-calculated accordingly, in view of the clear mandate of the Central Excise Act r/w Cenvat Credit Rules - the appellant shall be entitled to SSI benefit for the period April, 2015 to December 2015, subject to compliance of other conditions under the said notification, if any. Penalty under Section 11AC - HELD THAT - There is no case of mis-representation, misstatement, suppression or fraud on the part of the appellant. The appellant were under bona fide belief in claiming the Area based exemption from Central Excise duty, as several other manufacturers located in the same locality, where also extended the benefit of Area based exemption. Under such undisputed facts, the penalty imposed under Section 11AC both on the appellant-company and its Managing Director Mr. Akhilesh Pratap Singh is set aside. The appeals are partly allowed and the impugned orders are modified to the extent of allowing cum-duty benefit and exemption available to Small Scale Industries to the extent admissible. CENVAT Credit will be admissible subject to verification by the officers. Penalties imposed on the appellant manufacturer and personal penalty imposed on Shri Akhilesh Pratap, Managing Director are set aside.

Summary

Issues involved:
Whether the appellant is entitled to 'Area based exemption' under exemption Notification No. 49/2003-CE dated 10.06.2003 r/w subsequent Notification No. 50/2003-CE (as amended).

Analysis:

Issue 1: Area based exemption entitlement
The appellant claimed entitlement to the Area based exemption, citing a bona fide belief supported by the practice of other units in the same locality enjoying the exemption. The appellant demonstrated not collecting excise duty from customers through sample invoices. The Tribunal noted the appellant's reliance on the amended provision of Section 4 of the Act to argue for re-quantification of duty based on the cum-duty value concept.

Issue 2: Cum-duty value calculation
The appellant contended that the price charged should be considered as cum-duty when excise duty is not collected separately, excluding sales tax and other taxes. The Tribunal referred to the explanation in Section 4(1)(b) to support the appellant's argument, emphasizing the concept of price-cum-duty and the deductibility of the excise duty element in arriving at the transaction value.

Issue 3: Cenvat credit entitlement
The appellant asserted entitlement to re-quantification of duty by considering the Cenvat credit on inputs used in manufacturing final products. The Tribunal referenced relevant rulings to support the appellant's claim for Cenvat credit under the Central Excise Act and Cenvat Credit Rules.

Issue 4: Small Scale Industries (SSI) benefit
The appellant claimed SSI benefit under Notification No. 8/2003-CE for the relevant period, as the total clearance value of goods was below a specified threshold. The Tribunal acknowledged the appellant's claim for SSI benefit, subject to compliance with conditions under the notification.

Issue 5: Penalty under Section 11AC
The appellant argued against the imposition of penalties under Section 11AC, contending no suppression or intent to evade duty due to a bona fide belief in claiming the exemption. The Tribunal agreed with the appellant, setting aside the penalties imposed on both the appellant-company and its Managing Director.

In conclusion, the Tribunal allowed the appeals partly, granting the appellant the benefit of cum-duty calculation, Cenvat credit entitlement, SSI benefit, and setting aside penalties under Section 11AC. The impugned orders were modified accordingly, with CENVAT Credit subject to verification by officers, and penalties on the appellant and its Managing Director were overturned.