2003 (5) TMI 156 - AT - Central Excise

Exemption - Notification No. 108/95-C.E. - Project finance - Demand - Limitation - Suppression

Summary

Issues:
1. Entitlement to excise duty exemption under Notification 108/95 for supply of electrical transformers financed by Japan Bank for International Cooperation.
2. Allegation of suppression and misstatement by the appellant.
3. Imposition of penalty and interest under Sections 11AB and 11AC of the Act.
4. Applicability of extended period of limitation.

Entitlement to Excise Duty Exemption:
The appellant, Danke Electrical Ltd., entered into a contract with Asea Brown Boveri Ltd. for supplying electrical transformers to the Maharashtra State Electricity Board, financed by the Japan Bank for International Cooperation. The issue arose when the Director General of Central Excise Intelligence Unit concluded that the goods were not eligible for the exemption under Notification 108/95 as the Japan Bank for International Cooperation was not recognized as an international organization. The Commissioner upheld this decision, leading to the imposition of duty and penalties. The appellant contended that it relied on the information provided by the Maharashtra State Electricity Board and Asea Brown Boveri Ltd., and hence, the extended period of limitation should not apply.

Allegation of Suppression and Misstatement:
The department alleged that the appellant suppressed facts regarding the eligibility for exemption, leading to the imposition of penalties and interest under Sections 11AB and 11AC of the Act. However, the appellant argued that it was guided by the representations made by the Maharashtra State Electricity Board and Asea Brown Boveri Ltd., and did not intend to deceive the department. The Appellate Tribunal noted that the appellant's actions were not deliberate, and there was no suppression or misstatement. Therefore, the extended period of limitation, penalty, and interest were deemed inapplicable.

Imposition of Penalty and Interest:
The department contended that the appellant should have clarified its entitlement to the exemption, but the Tribunal observed that the appellant acted in good faith based on the information provided by the concerned parties. The Tribunal emphasized that the appellant's intention was not to mislead the department, and the penalty under Rule 173Q was not warranted. Consequently, the Tribunal set aside the penalties and interest imposed, confirming only the liability for duty within the normal period of limitation.

Applicability of Extended Period of Limitation:
The Tribunal held that since the appellant was guided by the representations of the Maharashtra State Electricity Board and Asea Brown Boveri Ltd., it could not be faulted for not verifying the status of the Japan Bank for International Cooperation. The Tribunal concluded that the department had multiple avenues to seek clarification within the normal period of one year but failed to do so. Therefore, the Tribunal ruled that there was no suppression or misstatement by the appellant, leading to the rejection of the extended period of limitation and penalties under Sections 11AB and 11AC.