2015 (10) TMI 356 - SC - Central Excise

Denial of concessional rate of duty - Imposition of interest and penalty - Non fulfilment of conditions of notification - whether the respondent/assessee is entitled to the benefit of Notification No. 10/02-CE dated 01.03.2002 - Held that - It is an admitted case that duty was neither paid in cash nor through account current as the duty was paid through CENVAT Credit Account and therefore the assessee did not fulfill the second condition mentioned in the notification. - Tribunal has decided the case in favour of the assessee by observing that clearing of goods with payment of excise duty with current account was only an error and the assessee had not violated the more substantial condition viz no CENVAT Credit should be taken in regard to the goods. This is clearly a faulty approach on the part of the Tribunal. It is stated at the cost of repetition that the assessee was required to fulfill the condition in stricto senso viz to pay the duty either in cash or through account current if it wanted to avail the benefit of exemption notification and not through adjustment of CENVAT Credit which is not the mode prescribed in the aforesaid conditions. Once we find that the conditions have not been fulfilled the obvious consequence would be that the assessee was not entitled to the benefit of this notification. - However, Since the mistake is a bonafide mistake, Interest and penalty would not be charged - Decided partly in favour of Revenue.

Summary

Issues:
Interpretation of Notification No. 10/02-CE dated 01.03.2002 for concessional duty rates based on specified conditions.

Analysis:
The case involved determining whether the respondent/assessee was eligible for the benefit of Notification No. 10/02-CE dated 01.03.2002, which provided concessional rates of duty on specific excisable goods. The goods manufactured by the assessee fell under certain categories, with a normal duty rate of 16%. However, the notification allowed for a concessional rate of 4% under certain conditions. The critical issue revolved around the requirement that duty must be paid in cash or through account current to avail of the concessional rate, excluding the use of CENVAT Credit. The assessee fulfilled the first condition but failed to meet the second condition as duty was paid through CENVAT Credit, not in cash or through account current as specified in the notification.

Exemption notifications are to be strictly construed, with any doubts resolved in favor of the Department. The Tribunal had ruled in favor of the assessee, stating that the payment of excise duty through the current account was an error and did not violate the condition of not taking CENVAT Credit for the goods. However, this interpretation was deemed faulty by the Supreme Court. The Court emphasized that the assessee was required to strictly adhere to the conditions of paying duty in cash or through account current to benefit from the exemption notification, which was not fulfilled by using CENVAT Credit. Consequently, the assessee was not entitled to the notification's benefits.

Despite the assessee's bona fide mistake, which led to the denial of the exemption notification's benefits, the Court decided not to impose any penalty or interest. Therefore, the penalty and interest charged by the Revenue were set aside. The Court overturned the Tribunal's decision and allowed the appeal on the grounds discussed, highlighting the importance of complying with the specific conditions outlined in exemption notifications to avail of the associated benefits.