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2012 (9) TMI 493 - HC - Central ExciseSSI Exemption - Supply of OEM - manufacturing of parts and accessories of motor vehicles and tractors including trailers - department in SCN has alleged availing of exemption wrongly and irregularly through mis-statement alleged that appellant availing two notification simultaneously Held that - Department could at best have added the value of OEMs at Rs. 43158 to the OEMs of Rs. 41358/- to the value of home consumption of Rs. 4,99,805.41 and after reducing therefrom the amount of Rs. 5 lacs allowed for clearance without payment of excise duty under Notification 71/78 to the small scale units. It is because of the reason that Notification No. 71/78-C.E., dated 1st March, 1978 provides that clearance for original equipment manufacturer shall be made at nil rate and in all cases, the value shall not exceed Rs. 5 lacs - petitioner availed remainder of excess duty under Notification No. 101/71 to the tune of Rs. 43158 but for this, he would have been entitled to avail the duty exemption on the entire value of home consumption of Rs. 4,99,805.41 under Notification No. 71/78 as this figure was below Rs. 5 lacs - even when it is to be treated as a case of non-disclosure under Notification 71-78, it occurred due to bona fide error on the part of the petitioner in mis understanding the provisions of two notifications. Petition is thus partly allowed. Order of the authorities below is set aside and it is held that the department would be entitled to recover the excise on the value of OEMs of Rs. 43158/- and the benefit claimed by the petitioner under Notification No. 71/78 shall be maintained. In the above circumstances no penalty or interest would be charged.
Issues Involved:
1. Timeliness of the Show Cause Notice (SCN). 2. Applicability of Rule 10 of the Central Excise Rules, 1944. 3. Interpretation and application of Notification No. 101/71-C.E. and Notification No. 71/78-C.E. 4. Effect of Notification No. 237/79-C.E. on Notification No. 71/78-C.E. 5. Calculation of duty and benefit entitlement under the respective notifications. Issue-Wise Detailed Analysis: 1. Timeliness of the Show Cause Notice (SCN): The petitioner contended that the SCN issued on April 6, 1979, was barred by time since it was issued eleven months after the submission of the classification list on March 30, 1978, whereas the limitation period is six months. The court noted that the proviso to Rule 10 of the Excise Rules allows a five-year limitation period if fraud, collusion, willful misstatement, or suppression is involved. The Tribunal found that the petitioner's remarks in the classification list were vague and misleading, justifying the application of the five-year limitation period. The court agreed with this view, holding that the SCN was not barred by time. 2. Applicability of Rule 10 of the Central Excise Rules, 1944: The court examined whether the conditions for invoking the extended limitation under Rule 10 were met. The Tribunal had concluded that the petitioner's vague remarks in the classification list amounted to suppression of facts. The court concurred, noting that the petitioner's failure to mention the specific notifications led to a misstatement that justified the invocation of the extended limitation period under Rule 10. 3. Interpretation and Application of Notification No. 101/71-C.E. and Notification No. 71/78-C.E.: The petitioner argued that Notification No. 101/71-C.E. pertained to Original Equipment Manufacturers (OEMs) and not to the petitioner, who should benefit from Notification No. 71/78-C.E. The court noted that para 2 of Notification No. 71/78-C.E. explicitly precluded manufacturers availing benefits under Notification No. 101/71-C.E. from also availing benefits under Notification No. 71/78-C.E. The court held that the petitioner's interpretation was incorrect and that the two notifications must be harmoniously construed, recognizing that they operate in different fields. 4. Effect of Notification No. 237/79-C.E. on Notification No. 71/78-C.E.: The petitioner claimed that Notification No. 237/79-C.E., which deleted para 2 of Notification No. 71/78-C.E., was clarificatory and should apply retrospectively. The court disagreed, noting that Notification No. 237/79-C.E. explicitly stated it would come into force on August 1, 1979, indicating prospective application. The court held that the deletion of para 2 did not apply retrospectively and did not affect the period in question. 5. Calculation of Duty and Benefit Entitlement Under the Respective Notifications: The court found merit in the petitioner's argument that there was confusion created by para 2 of Notification No. 71/78-C.E., leading to a bona fide error in understanding the provisions of the two notifications. The court concluded that the petitioner should not be deprived of the substantial duty exemption on home consumption under Notification No. 71/78-C.E. Instead, the petitioner should be deprived of the benefit received under Notification No. 101/71-C.E. for the value of Rs. 43,158. The court held that the department could recover excise duty on this amount, but the petitioner should retain the benefit under Notification No. 71/78-C.E. for home consumption. Conclusion: The petition was partly allowed. The court set aside the orders of the lower authorities and held that the department could recover excise duty on the value of Rs. 43,158 related to OEMs, while the petitioner retained the benefit under Notification No. 71/78-C.E. for home consumption. No penalty or interest would be charged, and the writ petition was disposed of without any order as to costs.
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