2024 (7) TMI 1355 - AT - Central Excise

Approved 100% EOU under EHTP scheme - demand of duty - eligibility for the benefit of exemption N/N. 2/95-CE dated 04.01.1995 - reducing the penalty under Section 11AC of CEA. Whether the duty demanded by the Commissioner in the impugned order for Rs.15,19,610/- is liable to be confirmed or the original demand of Rs.2,54,01,776/- is to be confirmed as claimed by the Revenue in their appeal? - HELD THAT - With regard to Annexures II, the observations of the Commissioner have not been countered with any evidences by the appellant except to produce the same document that was placed before the Commissioner which has been disputed - the Commissioner observed that the Range Superintendent vide his letter dated 14.07.2008 had reported that no documents were produced by the assessee to show that the items were duty-paid. It is also stated that in respect of other clearances, the same has been admitted. In view of the above, the submissions of the learned counsel that subsequently duty was paid cannot be accepted. It is a settled issue that waste and scrap are liable to duty even if it is generated out of duty-paid raw material. In view of the above, the confirmation of the demand of Rs. 11,78,778/- is upheld. With regard to the amount confirmed under Annexure III, the learned counsel has argued that the report placed by the Superintendent only states that connected invoices duly verified but invoice date (date of removal) does not tally with the dispatch date - The assessee could not put forward any evidence to prove that the goods were properly accounted and duty was paid on clearing the same. In view of the above, there are no reason to disagree with the Commissioner. Coming to the demand at Annexure VI, it is very clear that the Commissioner had accepted the report dated 31.03.2009 from the Range Officer which states that duty was paid for Serial No.1,2,6 to 10 while for Serial No. 4 and 5 duty was not paid, hence duty was confirmed only for Serial No. 4 and 5. Therefore, this demand needs to be sustained. Whether the appellant-assessee is eligible for the benefit of exemption Notification No.2/95-CE dated 04.01.1995? - HELD THAT - Since the clandestine removals are beyond permissible limits by the Development Commissioner, the question of extending the benefit of Notification No.2/1995-CE does not arise. Hence, the entire demand of Rs.30,39,220/- is confirmed. Departmental appeal is partially allowed only to the extent of denying the benefit of N/N. 2/1995-CE dated 04.01.1995 to the appellant and the matter stands remanded to the original authority for re-determining the duty and with regard to penalty, to extend the benefit of Section 11AC(d) if the duty along with interest and reduced penalty is paid within the stipulated time as per law. The Revenue s appeal stands remanded, needless to say that an opportunity of being heard may be given to the appellant.

Summary

Issues Involved:
1. Confirmation of duty demand by the Commissioner.
2. Eligibility for the benefit of exemption Notification No.2/95-CE dated 04.01.1995.
3. Reduction of penalty under Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Confirmation of Duty Demand by the Commissioner:
The Commissioner confirmed a duty demand of Rs. 15,19,610/- out of the original demand of Rs. 2,54,01,776/-. The appellants contested the demands related to Annexures I, V, and VII, arguing that these were small quantities of samples sent to customers under a bona fide belief that no duty was payable. Upon being informed otherwise, they paid the duty along with interest. For Annexures II and XIII, the appellants claimed that the Commissioner misunderstood the Range Officer's report, which verified that duty had been paid on scrap cleared from specific serial numbers. However, the Commissioner found no correlating evidence to prove that clearances under proforma invoices were followed by duty-paid DTA invoices. The Commissioner's findings were based on factual reports by Range Officers and documents produced during adjudication, which were not sufficiently countered by the appellants. Hence, the confirmation of Rs. 11,78,778/- for waste and scrap clearances and other amounts under disputed annexures was upheld.

2. Eligibility for the Benefit of Exemption Notification No.2/95-CE:
The Commissioner extended the benefit of the exemption Notification No.2/95-CE based on the decision in Euro Cotspin Ltd. However, this decision was set aside by the Supreme Court, and the Tribunal in subsequent cases, such as Santogen Exports Ltd., held that clearances made without the Development Commissioner's permission do not qualify for the exemption. Thus, the clandestine removals beyond permissible limits by the Development Commissioner disqualified the appellant from the benefit of the notification. The entire demand of Rs. 30,39,220/- was confirmed as the exemption was not applicable.

3. Reduction of Penalty under Section 11AC:
The Commissioner reduced the penalty under Section 11AC from Rs. 15,19,610/- to Rs. 9,74,860/- after considering the amount already paid by the assessee during investigations. The Supreme Court in Rajasthan Spinning and Weaving Mills observed that payment of differential duty, whether before or after the SCN, does not alter the liability for penalty. Therefore, the penalty should have been equivalent to the confirmed duty amount of Rs. 30,39,220/-. The Tribunal remanded the matter to the original authority for re-determining the duty and penalty, with instructions to extend the benefit of Section 11AC(d) if the duty, interest, and reduced penalty are paid within the stipulated time.

Conclusion:
(i) The appellant-assessee's appeal was dismissed.
(ii) The departmental appeal was partially allowed, denying the benefit of Notification No.2/95-CE and remanding the matter to the original authority for re-determining duty and penalty, ensuring the appellant is given an opportunity to be heard.