2003 (7) TMI 133 - AT - Central Excise

Summary

Issues:
- Duty exemption for goods supplied as stores for consumption on board ships of the Indian navy or coast guard.
- Imposition of penalty for clearing goods without payment of duty.

Analysis:
1. Duty Exemption Issue:
The appellant claimed duty exemption for supplying diesel internal combustion engines to a shipyard for fitting onto ships being constructed for the Indian navy or coast guard. The Commissioner imposed duty and penalty, contending that the engines were not stores for consumption on board ships but were meant for fitting onto ships under construction. The appellant argued that the engines were supplied for fitment on ships, relying on the definition of a new ship under the Merchant Shipping Act. However, the Tribunal held that the exemption notification under the Central Excise Act cannot be construed using provisions of the Merchant Shipping Act. The definition of "stores" under the Customs Act was applied, clarifying that the engines were not stores as they could only be used in a vessel after fitting, making them ineligible for the exemption.

2. Penalty Imposition Issue:
Regarding the penalty imposed, the appellant contended that it was not applicable as they genuinely believed the goods were meant for use on navy or coast guard ships. The Commissioner found the extended limitation period inapplicable due to no suppression or misstatement of facts by the appellant. However, the Tribunal disagreed with the appellant's argument, stating that the purchase orders and discussions clearly indicated the engines were for ship construction. The appellant's reliance on a certificate issued by the coast guard was deemed ambiguous, as the appellant knew the actual use of the goods. Despite reducing the penalty, the Tribunal found the appellant's reliance on the certificate misleading, suggesting an attempt to project a false position.

In conclusion, the Tribunal partially allowed the appeal, addressing both the duty exemption issue and the penalty imposition issue, ultimately reducing the penalty to Rs. 20 lakhs.