2012 (12) TMI 98 - AT - Central Excise

Denial of exemption under Notification No. 5/99-C.E. - alleged that required certificate was not produced at the time of clearance the appellants were not eligible for the exemption - manufacture of Cotton and Synthetic yarn - sale to National Handloom Development Corporation Lucknow Held that - Condition involved in this case is of a type where compliance after clearance of goods cannot be fatal to the claim - whether the certificates produced cover the quantities issued, whether it is issued by the proper authority etc. have not been verified by the lower authorities - matter remanded to the lower authority

Summary

Issues:
1. Whether the appellants are eligible for exemption under Notification No. 5/99-C.E. and Notification No. 6/2000-C.E. for dispatching yarn to National Handloom Development Corporation.
2. Whether the appellants' failure to produce the required certificate at the time of clearance renders them ineligible for exemption.
3. Whether the Tribunal's previous decision in the appellants' own case supports their claim for exemption.
4. Whether compliance with the certificate requirement after clearance of goods is fatal to the exemption claim.

Analysis:
1. The appellants were involved in the manufacturing of Cotton and Synthetic yarn and dispatched the yarn to National Handloom Development Corporation claiming exemption under specific notifications. The exemption required certain conditions to be met, including the purchase by a registered Apex Handloom Co-operative Society and the production of a certificate from an authorized officer confirming the yarn's use on handlooms.

2. While the substantial conditions for exemption were satisfied, the appellants failed to produce the required certificate at the time of clearance, leading the Revenue to argue that they were ineligible for exemption. A show cause notice was issued, demanding duty, interest, and penalties. The lower authorities upheld this decision, emphasizing the importance of producing the certificate at the time of clearance.

3. The appellants cited a previous Tribunal decision in their favor, where it was ruled that late production of the certificate should not be a reason to deny the exemption, referencing legal precedents to support their argument. The Tribunal acknowledged this previous ruling and found no reason to differ from it, especially considering the nature of the compliance issue in this case.

4. The Tribunal noted that the compliance issue in question, regarding the certificate's timing, was not fatal to the exemption claim based on the nature of the condition involved. While remitting the matter to the lower authority for verification of certain aspects related to the certificates produced, the Tribunal clarified that denial of exemption solely on the grounds of late certificate production after clearance was not justified.

In conclusion, the Tribunal allowed the appeal, emphasizing that compliance with the certificate requirement after clearance should not automatically disqualify the appellants from claiming the exemption. The decision highlighted the importance of considering the specific circumstances and nature of the compliance issue in determining eligibility for exemption under the relevant notifications.