2025 (3) TMI 1183 - AT - Central Excise

Rejection of present application for considering the additional grounds - demand for Basic Excise Duty (BED) and National Calamity Contingent Duty (NCCD) for the period from 15.01.2020 to 31.12.2021 along with interest and penalty - HELD THAT - There are no reason to reject the present application for considering the additional grounds. However considering that the issue is also on sustainability of the demand as held by Hon ble Supreme Court and since the issues were not considered by the adjudicating authority it is proper for this Tribunal to remand the matter to Adjudicating Authority. As regards penalty and demand by invoking Rule 12(5) of the Central Excise Rules 2017 it is found that the appellant had challenged the Notification No. 3/2019-CE dated 06.07.2019 by filing Writ Petition No. 651/2020 and only consequent to the stay order passed by the Hon ble High Court of Karnataka Appellant had stopped payment of BED and NCCD on the manufacture and clearance of Chewing Tobacco with effect from 15.01.2020. They had also stopped filing the statutory returns in Form ER-1 for the said period. In such a situation no finding can be given that the appellant had failed to file statutory returns to invoke Rule 12(5) of the Central Excise Rules 2017 or failed to pay appropriate BED and NCCD during the impugned period on the manufacture and clearance of goods with an intent to evade payment of duty. Thus invoking the penal provision under Section 11AC (1)(a) of the Central Excise Act 1944 and demand under Rule 12(5) of the Central Excise Rules 2017 are unsustainable. Conclusion - i) The application for additional grounds is allowed. ii) The penalty under Section 11AC(1)(a) and the demand under Rule 12(5) were set aside. iii) The demand for BED and NCCD was remanded for reconsideration by the adjudicating authority. iv) The adjudicating authority was directed to pass an appropriate order within three months considering all issues and grounds raised by the appellant. Application allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the Tribunal can consider additional grounds not raised at the preliminary stage of adjudication.
• Whether the demand for Basic Excise Duty (BED) and National Calamity Contingent Duty (NCCD) for the period from 15.01.2020 to 31.12.2021, along with interest and penalty, is sustainable.
• Whether the penalty imposed under Section 11AC(1)(a) of the Central Excise Act, 1944, and the demand under Rule 12(5) of the Central Excise Rules, 2017, are justified.
• Whether the adjudicating authority properly considered the stay orders issued by the High Court of Karnataka in similar cases.

ISSUE-WISE DETAILED ANALYSIS

1. Consideration of Additional Grounds

The Tribunal addressed the appellant's request to consider additional grounds not initially raised. The appellant argued that these grounds are covered by a Supreme Court judgment, which held that when excise duty is exempted, any surcharge is also nil. The Tribunal found no reason to reject this application, indicating that the additional grounds could be considered, especially since they pertain to the sustainability of the demand.

2. Demand for BED and NCCD

The relevant legal framework includes the Central Excise Act, 1944, and the Central Excise Rules, 2017. The appellant had stopped paying BED and NCCD following a stay order from the High Court of Karnataka. The Tribunal noted that the appellant had challenged Notification No. 3/2019-CE, which imposed these duties, and that the High Court had issued stay orders in similar cases. The Tribunal found that the adjudicating authority did not consider these facts, leading to the decision to remand the matter for reconsideration.

3. Imposition of Penalty

The penalty was imposed under Section 11AC(1)(a) of the Central Excise Act, 1944, for the appellant's failure to pay BED and NCCD. The appellant argued that there was no deliberate attempt to evade duty, as they were acting under the protection of a stay order. The Tribunal agreed, noting that the adjudicating authority failed to consider the stay order and the appellant's reliance on it. Consequently, the penalty was deemed unsustainable.

4. Demand under Rule 12(5) of the Central Excise Rules, 2017

The adjudicating authority confirmed the demand under Rule 12(5), citing the appellant's failure to file statutory returns. However, the Tribunal found that the appellant's actions were in compliance with the High Court's stay order, which justified their non-compliance during the impugned period. Thus, the demand under Rule 12(5) was also set aside.

SIGNIFICANT HOLDINGS

The Tribunal allowed the application for additional grounds, setting aside the penalty and demand under Rule 12(5) of the Central Excise Rules, 2017. The demand for BED and NCCD was also set aside, and the matter was remanded to the adjudicating authority for reconsideration, allowing the appellant to present all issues and grounds.

Core Principles Established

• The Tribunal can consider additional grounds if they pertain to the sustainability of the demand and are supported by relevant legal precedents.
• Penalties and demands cannot be sustained if the appellant's non-compliance was due to reliance on a valid stay order from a higher court.

Final Determinations

• The application for additional grounds was allowed.
• The penalty under Section 11AC(1)(a) and the demand under Rule 12(5) were set aside.
• The demand for BED and NCCD was remanded for reconsideration by the adjudicating authority.
• The adjudicating authority was directed to pass an appropriate order within three months, considering all issues and grounds raised by the appellant.