2024 (1) TMI 81 - AT - Central Excise

100% EOU - goods cleared by the appellant under CT-3 certificates - eligible for the benefit of the Notification No. 22/2003-CE dated 31.03.2003 or not - extended period of limitation - HELD THAT - On perusal of the copies of the CT-3 certificate issued by jurisdictional Central Excise officer of the user industry, wherein the CT-3 certificate specifies the items as (a) accessories for air-conditioning equipment (b) air-conditioning accessories (c) parts of air-conditioner (d) parts of air-conditioning system - it is found that the benefit of Notification is denied on the grounds that the items supplied against the CT-3 certificates are not the items allowed under the CT-3 certificate. The appellant has supplied ducting for an airconditioning system to the user industry (100% EOU), which is essential for the Air Conditioning System. Hence, the items supplied are a part of the air-conditioning system. The ducting system is customized as per the building layout of the user industry. Revenue has contended that the goods are classified under Chapter sub heading 7304.10 and 7304.90 and not as parts of air conditioner, and also that the appellant does not know where the goods will be used - the goods supplied by the appellant against the CT-3 certificates are ducts customized for the Air Conditioning System, hence, they can be considered as part of an air conditioning system and are eligible for the benefit of Notification No. 22/2003-CE dated 31.03.2003. Thus, the goods cleared under the impugned CT-3 certificates are used as ducting for an Air Conditioning system, hence they are covered by entry at Sl. No.3 to the Notification No. 22/2003-CE dated 31.03.2003, therefore the demand is not sustainable. Since the demand is not sustainable, the demand of interest and imposition of penalty also do not survive. Appeal allowed.

Summary

Issues involved:
The issues involved in this case are whether the items supplied by the appellant to the user industry against CT-3 certificates are eligible for the benefit of Notification No. 22/2003-CE dated 31.03.2003 under entry No. 3, and whether the larger time limit invoked based on audit observations is justified.

Issue 1: Benefit of Notification No. 22/2003-CE:
The appellant, engaged in the manufacture of Galvanized Iron (G.I) hollow profiles and Aluminum Hollow Profiles, supplied goods to 100% EOU based on CT-3 certificates. The Department contended that the goods cleared were not eligible for the benefit of Notification No. 22/2003-CE. The appellant argued that the goods supplied were part of an air-conditioning system, as certified by a chartered engineer, and were custom-made for such systems. The Tribunal found that the items supplied were indeed part of the air-conditioning system and eligible for the benefit under the said Notification. The demand, interest, and penalty imposed were deemed unsustainable.

Issue 2: Larger Time Limit based on Audit Observations:
The appellant argued that the larger time limit invoked based on audit observations was not justified. They cited various case laws to support their contention that the larger time limit cannot be invoked solely based on audit observations. The Tribunal agreed with the appellant, stating that they had not suppressed any information or resorted to misstatement in their clearances against valid CT-3 certificates. Therefore, the larger time limit invoked by the Department was not sustainable.

Conclusion:
In conclusion, the Tribunal allowed the appeals, finding in favor of the appellant on both issues. The goods supplied were deemed eligible for the benefit of Notification No. 22/2003-CE as they were integral parts of an air-conditioning system. The demand, interest, and penalty imposed were held to be unsustainable. The larger time limit invoked based on audit observations was also deemed unjustified.