2023 (11) TMI 888 - AT - Central Excise

Clearance of some goods on payment of duty while availing the benefit of exemption - Benefit of exemption specified with a cap of maximum quantity - exemption under N/N.4/2006-CE dated 1.3.2006 as amended by N/N. 4/2008-CE dated 1.3.2008 with effect from 1.4.2008 - HELD THAT - A plain reading of the said Notification reveals that paper and paper board articles thereof were eligible for clearance at Nil rate of duty, with effect from 1.4.2008, subject to fulfilment of Condition No.10 prescribed under the said Notification - For the present purpose, clause (i) of the Condition No.10 is relevant. It is stipulated under the said clause (i) of Condition No.10 that the exemption shall apply only for clearances made for home consumption from a factory in any financial year up to first clearances of aggregate quantity not exceeding 3500 MTs. There are no other stipulation under the said subclause. The learned Commissioner reading the said Notification along with Section 5A(1A) came to the conclusion that since, it is an absolute exemption, therefore, payment of duty before completion of the stipulated quantity of 3500 MTs, is incorrect and thereby the condition of the Notification is violated, hence, the appellant would not be eligible to the benefit of the Notification - the said interpretation of the learned Commissioner would not stand the scrutiny of law. Firstly, neither Section 5A(1A) is applicable to the present scenario, since Notification No.4/2006-CE dated 1.3.2006 is a conditional, quantity-based exemption; and admissibility to Nil rate of duty is only to the first clearances of 3500 MTs; there is no other condition stipulated in the said Notification. On a plane reading of the condition as it is, it is opined that the appellants are entitled to avail Nil rate of duty for the first clearances of 3500 MTs in a financial year, irrespective of whether they discharged duty for 500 MTs in between the said clearance - Since, the benefit of Notification has been denied by demanding duty and no demand has been raised for availing credit irregularly, there are no reason to analyse applicability of Rule 11(2) of the CENVAT Credit Rules, 2004 to the facts of the present case which would be an academic exercise. The impugned order is set aside - Appeal allowed.

Summary

Issues involved: Determination of entitlement to the benefit of exemption under Notification No.4/2006-CE dated 1.3.2006 for the clearances of manufactured paper and paper boards during a specific period.

Facts: The appellant, engaged in manufacturing paper and paper boards, availed exemption under Notification No.4/2006-CE dated 1.3.2006. A show-cause notice was issued alleging that duty was paid on some clearances, making the appellant ineligible for exemption. The demand was confirmed, and penalty imposed. The appeal challenged this decision.

Appellant's Argument: The appellant cleared goods for home consumption and exports during the disputed period. They contend that the total clearances did not exceed the permissible exemption limit of 3500 MTs. They reversed CENVAT credit as required and cited relevant judgments to support their case.

Revenue's Argument: The Revenue argued that under Section 5A(1A) of the Central Excise Act, if goods are wholly exempted, the manufacturer cannot selectively pay duty. Once exemption is opted for, no duty should be paid until the stipulated quantity is cleared.

Decision: The main issue was whether the appellant was entitled to the exemption for clearances during the period. The Notification allowed clearance at a 'Nil' rate of duty subject to certain conditions. The condition specified a limit of 3500 MTs for the first clearances in a financial year. The Tribunal found that the appellant's actions did not violate the conditions of the Notification. The demand for duty was deemed incorrect, and the appeal was allowed.

Conclusion: The Tribunal set aside the impugned order, allowing the appeal with any consequential relief as per law.