2013 (2) TMI 493 - AT - Central Excise

Benefit of Notification No. 74/93-CE Whether State Electricity Board is a Department of the State Government to avail benefit of exemption notification - Held that - No, Following the decision in case of ASSTT. ENGINEER (CIVIL) (2008 (9) TMI 105 - CESTAT NEW DELHI) that notification lays down twin conditions, and unless both the conditions are satisfied exemption cannot be claimed. Admittedly, State Electricity Board is not a Department of the Government. Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. Hence the PCC poles manufactured in the factories which admittedly belong to the Electricity Board does not qualify for exemption. That apart, the intended or actual user of the poles also being the Board itself, and not any Department of the State Government, the other condition are is not fulfilled. Therefore, the appellants are not entitled for the benefit of Notification No. 74/93-CE In favour of revenue Demand Penalty u/s 11AC - Extended period of limitation Suppression of facts Intention to evade payment of duty Held that - Allegation of suppression with intent to evade payment of duty is not sustainable. Hence, demands invoking the extended period of limitation are not sustainable. The demands for the normal period of limitation as provided under Section 11A of the Central Excise Act are confirmed. Set aside the penalty In favour of assessee

Summary

Issues involved:
1. Entitlement for the benefit of Notification No. 74/93-C.E. under the Central Excise Tariff Act.
2. Allegation of suppression with intent to evade payment of duty.
3. Imposition of penalties under Section 11AC of the Central Excise Act.

Entitlement for the benefit of Notification No. 74/93-C.E.:
The appellants, engaged in manufacturing P.C.C. Poles, claimed exemption under Notification No. 74/93-C.E. which grants exemption from Central Excise duty to State Government factories for goods intended for use by any department of that Government. The Revenue denied this benefit, leading to a dispute. The Larger Bench of the Tribunal clarified that entities like State Electricity Boards, though considered 'State' under the Constitution, are not necessarily departments of the Government. The Tribunal held that for exemption, goods must be used by Government departments and manufactured in a factory belonging to the State Government. The appellants argued that their poles were used by various State Government departments and entities like Gram Panchayats. However, it was established that the Electricity Board, not being a Government department, did not fulfill the conditions for exemption. The Tribunal concluded that the appellants were not entitled to the benefit of the notification.

Allegation of suppression with intent to evade payment of duty:
The appellants contested the demand confirmed by invoking the extended period of limitation, arguing against the sustainability of the allegation of suppression with intent to evade duty payment. The Tribunal noted divergent views on this issue before a Larger Bench decision. Considering the lack of sustainability of the suppression allegation, demands under the extended period of limitation were deemed unsustainable. However, demands for the normal limitation period under Section 11A of the Central Excise Act were confirmed. Consequently, penalties under Section 11AC of the Act and Central Excise Rules were set aside, with directions for the revenue authorities to re-quantify the demands accordingly.

In summary, the judgment addressed the entitlement for the benefit of Notification No. 74/93-C.E. under the Central Excise Tariff Act, where the appellants, manufacturing P.C.C. Poles, were found ineligible due to the Electricity Board not being a Government department. Additionally, the issue of suppression with intent to evade payment of duty was discussed, leading to the sustainability of demands under the normal limitation period but not under the extended period. Penalties were set aside, emphasizing the need for re-quantification of demands by the revenue authorities.