2009 (9) TMI 402 - AT - Central Excise

Export Oriented unit- The appellants are 100% EOU registered manufacturer under the provisions of Central Excise Rules 1944 and have bonded warehousing licence under the provisions of the Customs Act 1962 to manufacture under bond a product being Instant Tea Powder falling under Chapter Heading 2101.20 of the Central Excise Tariff Act 1985. The Revenue Department alleged that appellants had exported the said product without payment of cess payable in terms of Section 3(n) of the Tea Act 1953. The adjudicating authority confirmed the demand of duty as well as imposed penalty as described in the table hereinabove. By the impugned order the Commissioner (Appeals) dismissed the appeals as far as they relate to the merits of the case and also confirmed the penalties Being aggrieved the appellants have preferred the present appeals. Held that- . It is well settled that once the Department issues the show cause notice for a particular period the Department normally thereafter on the same set of facts and grounds cannot issue second show cause notice by invoking the extended period of limitation relating to earlier period thereto. The appellants are justified in contending that the respondents were not entitled to initiate proceedings on the basis of show cause notice dated 2nd March 2001. As regards the issue relating to penalty held that- as rightly pointed out by the appellants the dispute related to the interpretation of statutory provisions and it did not disclose intension to evade the payment of duty and therefore there was no justification for imposition of penalty in the matter. Hence the penalty imposed under the impugned order is liable to be set aside. Thus duty demanded thereunder and also interest are confirmed. All the appeals are disposed of in the above terms.

Issues Involved:
1. Exemption of Instant Tea Powder from cess under the Tea Act, 1953.
2. Applicability of Exemption Notification No. 125/84-C.E.
3. Multiple levy of cess.
4. Limitation period for issuing show cause notices.
5. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Exemption of Instant Tea Powder from cess under the Tea Act, 1953:
The appellants contended that Instant Tea Powder is a different commodity from tea as defined under the Tea Act, 1953, and thus should be exempt from cess. However, the Apex Court in the case of CCE, Cochin v. Tata Tea Ltd. concluded that Instant Tea Powder is a variety of tea and falls within the definition of tea under Section 3(n) of the Tea Act, 1953. Therefore, cess can be levied on it under Section 25 of the Act. The Tribunal upheld this view, stating that the product in question is indeed tea and subject to cess.

2. Applicability of Exemption Notification No. 125/84-C.E.:
The appellants argued that the Exemption Notification No. 125/84-C.E., dated 26-5-1984, should exempt them from paying cess. The Tribunal noted that this notification pertains to the exemption of excise duty under Section 3 of the Central Excise Act, 1944, and does not extend to cess, which is levied under a different statute. The Apex Court in Modi Rubber Ltd. held that exemptions under Rule 8(1) of the Central Excise Rules, 1944, apply only to duties under the Central Excises and Salt Act, 1944, and not to other duties like cess. Hence, the appellants cannot claim exemption from cess based on this notification.

3. Multiple levy of cess:
The appellants claimed that cess should not be levied multiple times at different stages of production. The Tribunal found no material evidence to support this claim and noted that it was merely an argument without factual basis. Therefore, the contention regarding multiple cess payments was dismissed.

4. Limitation period for issuing show cause notices:
The appellants argued that the show cause notice dated 2nd March, 2001, for the period 1995-96 to December 1998, was barred by limitation since the Department had already issued a notice on 4th August, 1999, for a similar cause of action. The Tribunal agreed, stating that once a show cause notice is issued for a particular period, the Department cannot issue a second notice invoking the extended period of limitation for an earlier period based on the same facts. Consequently, the demand of Rs.3,94,475/- and the corresponding penalty were quashed.

5. Imposition of penalties:
The Tribunal found that the dispute was related to the interpretation of statutory provisions and did not indicate an intention to evade duty. Therefore, the imposition of penalties was deemed unjustified and was set aside. However, the demand for duty and interest was confirmed.

Conclusion:
The appeal regarding the show cause notice dated 2nd March, 2001, was allowed, and the demand and penalty were quashed. Penalties in all other appeals were set aside, but the duty and interest demanded were confirmed.

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