2014 (10) TMI 559 - AT - Central Excise

Area Based Exemption - whether the non-filing of declaration in terms of notification would result in denial of benefit of notification - assessee filed the declaration on 14.3.2008. - difference of opinion - Majority order - Exemption notification No. 50/2003-CE - Bar of limitation - Held that - the condition regarding filing of declaration in the prescribed format as prescribed in the first para of the Exemption Notification has been prescribed to prevent the mis-use this exemption and to enable the Jurisdictional Central Excise Officers to detect well in time if an assessee is wrongly availing of the exemption whether deliberately or otherwise. - the Appellant Company is not eligible for exemption for the period prior to 14.03.08. Moreover when the notification itself provide that the option for exemption shall courts cannot extend the benefit of this exemption for the period prior to the date of opting for the exemption, therefore, on merits, the case is in the Department s favour. Demand is barred by limitation having been raised by show cause notice dated 31.3.11 for the period 20.5.2006 to 13.3.2008 invoking the extended period of limitation. In terms of section 11 A of the Central Excise Act, 1944, the extended period is available to the Revenue in case duties have not been paid by reason of fraud, suppression or any willful mis-statement with intent to avail payment of duty. When the appellant was not required to pay any duty, if they would have exercised their option in writing, where is the question of malafide intention to evade payment of duty. Otherwise also we find that investigations were made by the Revenue with the appellants authorised representative, immediately after filing of declaration by them on 14.3.08, even then the show cause notice was issued in 2011. We find no justification for the same and agree with the learned advocate that the demand is wholly barred by limitation. The same is accordingly set aside along with setting aside of the penalties imposed upon both the appellants. - Decided in favour of assessee.

Issues Involved:
1. Eligibility for exemption under Notification No. 50/2003-CE.
2. Non-filing of the declaration as required by the amended notification.
3. Procedural versus substantive conditions in exemption notifications.
4. Limitation period for issuing a show cause notice.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 50/2003-CE:
The appellant's manufacturing unit, located in a specified industrial area, was eligible for exemption under Notification No. 50/2003-CE. The goods manufactured were not excluded by the notification. The exemption was intended to promote industrial development in specified areas.

2. Non-filing of Declaration:
The notification was amended on 5.11.03 to include a condition requiring manufacturers to file a declaration before effecting the first clearance to avail the exemption. The appellant did not file this declaration until 14.3.2008, which led to the denial of the exemption for the period from 20.5.2006 to 13.3.2008. The appellant argued that the non-filing was due to ignorance and that the declaration was a procedural requirement, not affecting their eligibility for the exemption.

3. Procedural vs. Substantive Conditions:
The Tribunal analyzed whether the non-filing of the declaration was a procedural lapse or a substantive condition. It was concluded that the filing of the declaration was a procedural requirement meant to inform the authorities and prevent misuse of the exemption. The substantive conditions-location of the unit and the nature of goods-were fulfilled. The Tribunal cited various judgments to support that procedural lapses should not deny substantial benefits if the eligibility conditions are met.

4. Limitation Period for Issuing a Show Cause Notice:
The show cause notice was issued on 31.3.2011 for the period 20.5.2006 to 13.3.2008. The Tribunal found that the extended period of limitation under Section 11A of the Central Excise Act, 1944, could not be invoked as there was no intent to evade duty. The appellant had filed the declaration on 14.3.2008, and the authorities conducted inquiries but delayed issuing the notice. The demand was deemed time-barred.

Judgments Delivered:
1. Majority Decision: Both members agreed that the demand was time-barred. The appeals were allowed on the ground of limitation, setting aside the duty demand and penalties.
2. Separate Judgment by Technical Member: While agreeing on the limitation, the Technical Member opined that the appellant was not eligible for the exemption for the period prior to 14.3.2008 due to the mandatory nature of the declaration requirement.

Conclusion:
The appeals were allowed on the ground of limitation, providing consequential relief to the appellant. The procedural lapse of not filing the declaration was not sufficient to deny the exemption, given the substantive conditions were met, and the demand was time-barred due to delayed action by the authorities.

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