2024 (6) TMI 300 - AT - Central Excise

Scope of SCN - invocation of the provisions of the Customs N/N. 21/2002 at the adjudication stage which were not cited in the SCN - goods supplied against International Competitive Bidding - benefit of Sr. No. 91 of Notification No. 6/2006-CE and Sr. No. 336 of notification no. 12/2012-CE denied - non-observance of the condition with respect to furnishing of undertaking by the Chief Executive Officer - Failure to produce the requisite certificate to the Deputy Commissioner of Central Excise. Scope of SCN - HELD THAT - Invoking of the provisions of the Customs N/N. 21/2002 at the adjudication stage which were not cited in the show cause notice was clearly beyond the scope of SCN as rightly contended by the Ld. Counsel of the appellant and further the argument of the Ld. Counsel is agreed upon that the provisions of the Custom notification no. 21/2002 cannot be applied to the appellant who is not the importer of the goods. Therefore, the benefit of Sr. No. 91 of Notification No. 6/2006-CE and Sr. No. 336 of notification no. 12/2012-CE could not be denied to them as the goods were duly certified by the jurisdictional Assistant Commissioner to the effect that all the invoices were for the goods supplied against International Competitive Bidding. Non-observance of the condition with respect to furnishing of undertaking by the Chief Executive Officer - HELD THAT - In view of the categorical findings of the Jurisdictional Assistant Commissioner that the genuineness of the quantum of the claim of the appellant on the verification of the invoices is not disputed and the appellant was duly in possession of the requisite certificate from the Chief Engineer in the Central Electricity Authority, copy of which was also marked to the department, it is found that the appellant had substantially complied with the provisions of the relevant notification and mere non-submission of undertaking was only a procedural infringement and substantial benefit cannot be decided merely for a bonafide procedural lapse whereas the provisions of the notification were otherwise fully complied substantially by the appellant - thus, no demand is sustainable against the appellant under Sr. No. 91 of Notification 6/2006-CE and Sr. No. 91A of Notf. 6/2006-CE as amended by Notf. 46/2008 as well as notification 12/2012-CE. Failure to produce the requisite certificate to the Deputy Commissioner of Central Excise issued by the Deputy Secretary to the Government of India in the Ministry of Non-Conventional Energy Sources/ Ministry of New and Renewable Energy as well as an undertaking that the goods will be used only in the said project and not for any other use - HELD THAT - It is found that the copy of the requisite certificate has been supplied by the Ministry directly to the department this fact has not been disputed by the department. Further, it is also not disputed that the invoices were issued according to the project Certificate. Once these conditions are satisfied, merely that the requisite certificate was not furnished by the appellant is merely procedural. Further, the purpose of required undertaking was merely to ensure that the exemption is not being misused. Once the genuineness of the invoices has been verified and found to be justify the quantum of claim of the appellant as verified by the Jurisdictional assistant Commissioner, the non-submission of undertaking by the appellant is merely procedural and the appellant should not be denied the substantial benefit merely for procedural lapse. There was a substantial compliance of the provisions of the exemption notifications under reference and the substantial benefit could not be denied merely for procedural lapse - The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Demand of Central Excise duty due to non-compliance with conditions of various notifications.
2. Imposition of penalties on the appellant and their authorized signatories.

Summary:

Issue 1: Demand of Central Excise Duty
The appellant, engaged in the manufacture of electric wires and cables, was issued a show cause notice (SCN) proposing a demand of Central Excise duty amounting to Rs. 4,42,30,084/- for allegedly availing exemptions under various notifications without furnishing the required undertakings/certificates to the competent authority. The Principal Commissioner confirmed the demand of Rs. 4,38,73,549/- under Sr. No. 91 & 91A of Notification No. 6/2006-CE as amended, Sr. No. 336 of Notification No. 12/2012-CE, Notification No. 15/2010-CE, and Notification No. 33/2005-CE, but dropped the demand related to Sr. No. 338 of Notification No. 12/2012-CE.

The appellant argued that they had substantially fulfilled the conditions prescribed under the relevant notifications and that the demand was not sustainable. They contended that the Commissioner's order was beyond the scope of the SCN, as it introduced additional grounds not mentioned in the SCN. The Tribunal agreed with the appellant, stating that invoking provisions of Customs Notification No. 21/2002 at the adjudication stage was beyond the SCN's scope and that the provisions of the Customs notification could not be applied to the appellant, who was not the importer of the goods. Therefore, the benefit of Sr. No. 91 of Notification No. 6/2006-CE and Sr. No. 336 of Notification No. 12/2012-CE could not be denied.

Regarding the non-observance of the condition with respect to furnishing an undertaking by the Chief Executive Officer, the Tribunal found that the appellant had substantially complied with the provisions of the relevant notification, and the mere non-submission of the undertaking was a procedural infringement. The substantial benefit could not be denied for a bona fide procedural lapse.

Issue 2: Imposition of Penalties
The Principal Commissioner imposed penalties u/s 11AC of the Central Excise Act, 1944, and personal penalties of Rs. 5,00,000/- each on the authorized signatories under Rule 26 of the Central Excise Rules, 2002. The Tribunal, however, found that the appellant had substantially complied with the conditions of the exemption notifications and that the non-submission of certain documents was merely procedural. Therefore, the substantial benefit could not be denied, and the penalties were not justified.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, holding that no demand was sustainable against the appellant under Sr. No. 91 of Notification No. 6/2006-CE, Sr. No. 91A of Notification No. 6/2006-CE as amended by Notification No. 46/2008, and Notification No. 12/2012-CE. The substantial compliance with the provisions of the exemption notifications was sufficient, and procedural lapses did not warrant the denial of benefits or imposition of penalties.