2007 (10) TMI 369 - HC - Central Excise

Exemption-Circular No. 796/29/2004-CX, dated 4.9.2004- Notification dated 1.3.2002- This appeal is by the Revenue. The dispute is in regard to the excise duty payable by the respondent in respect of Naptha stored in the warehouse of Mangalore. Naptha to be supplied to M/s. Tanir Bavi Power Project was not liable to pay Central Excise Duty as the same was exempted under the said notification. Thereafter, under Circular No. 796/29/2004-CX., dated 4-9-2004 Government of India has withdrawn warehousing facilities w.e.f. 6-9-2004, revenue called upon the respondent to pay duty plus Education Cess by exercising powers under Section 11A and interest under Section 11AB of the Central Excise Act, 1944. Held that- when there is an exemption for the use of such Naptha for such Power Project, we are unable to accept the arguments advanced by the counsel for the appellant. Therefore, we are of the opinion that the tribunal was justified in allowing the appeal of the assessee relying upon Para 4 of the circular dated 4-9-2004. Accordingly, this appeal is dismissed.

Summary

Issues: Dispute over excise duty on Naptha stored in a warehouse for supply to a project without paying Central Excise Duty as per a notification. Withdrawal of warehousing facilities and imposition of Central Excise Duty on stock remaining in the warehouse. Appeal challenging the demand for payment of excise duty, education cess, and interest under the Central Excise Act, 1944.

Analysis:
1. The appeal was filed by the Revenue regarding the excise duty payable by the respondent on Naptha stored in a warehouse for supply to a project without paying Central Excise Duty as per a specific notification. The Government withdrew warehousing facilities through a circular, making any stock remaining in the warehouse after a certain date liable to pay Central Excise Duty. The Revenue demanded payment from the respondent, leading to an appeal before the Customs, Excise, and Service Tax Appellate Tribunal, which ruled in favor of the respondent.

2. The substantial question of law raised in the appeal was whether goods in a bonded warehouse on the specified date were liable to Central Excise Duty if supplied to end-users under exemptions after the withdrawal of warehousing facilities. The court considered the circular's provisions, particularly Para 4, which allowed certain products to be cleared without duty payment to specified end-users. The court noted that the Naptha in question was intended for a specific project, thus falling under the exemption mentioned in the circular.

3. The court emphasized that since the Naptha in the warehouse was meant for the Tanir Bavi Power Project, which was exempted under the circular, the imposition of Central Excise Duty was not justified. By interpreting Para 4 of the circular, the court concluded that the respondent was entitled to supply the Naptha to the project without incurring the duty demanded by the Revenue. Consequently, the court dismissed the appeal, stating that no substantial question of law arose based on the circumstances and the provisions of the circular.

4. The judgment highlights the importance of interpreting specific circular provisions in excise duty disputes, especially regarding exemptions for certain end-users. It underscores the need to consider the purpose and intended use of the stored goods when determining the applicability of duty payments, as demonstrated in this case with the Naptha intended for a specific project exempted under the circular.