2016 (9) TMI 424 - AT - Central Excise

SSI Exemption - Demand for January 1998 to March 1998 - manufacture of plastic spoon for Complan and Farex - availment of ineligible concessional rate of duty under SSI notification 4/97 - appellant claimed that they had not availed modvat/ cenvat credit in respect of inputs used for manufacture of Farex spoon - Held that - Notification 4/97 dated 01.03.1997, clearly envisages the exemption to final product to SSI only if modvat credit is not availed. In the absence of any evidence indicating that the appellant had not availed the modvat credit on the inputs, the impugned order confirming the demand of the duty with interest is correct. Imposition of penalty - Rule 173Q of the erstwhile Central Excise Rules, 1944 - Held that - it is found that the adjudicating authority as well as the first appellate authority has not indicated under which sub-rule of Rule 173Q the penalty has been imposed. It is a settled law that for imposing penalty under Rule 173Q, specific sub-rule needs to be invoked. In any case, we find that the appellant could have entertained a bona fide belief that he can avail the benefit of SSI exemption in respect of Farex spoon which are manufactured out of inputs on which modvat credit was not availed. Therefore, the appellant need not be visited with any penalty under Rule 173Q. - Decided partly in favour of assessee

Summary

Issues:
Confirmation of demand for availing ineligible concessional rate of duty under SSI notification 4/97 for specific periods.
Penalty imposition under Rule 173Q of the Central Excise Rules, 1944.

Analysis:

Issue 1: Confirmation of demand for availing ineligible concessional rate of duty under SSI notification 4/97
The appeal challenged the confirmation of demand on the appellant for availing an ineligible concessional rate of duty under SSI notification 4/97 for the periods January 1998 to March 1998 and April 1998 to December 1998. The appellant claimed the benefit of the notification for plastic spoons manufactured for specific clients, arguing they did not avail Cenvat Credit for certain spoons. However, upon scrutiny, it was revealed that the appellant failed to provide evidence that they did not avail modvat/cenvat credit on inputs used for manufacturing certain spoons, as required by the notification. The Tribunal found that without such evidence, the demand confirmation was appropriate, as the exemption under the notification was contingent upon not availing modvat credit. The Tribunal distinguished the case from cited case laws, emphasizing the lack of justification for claiming SSI benefit for certain spoons, ultimately upholding the demand confirmation.

Issue 2: Penalty imposition under Rule 173Q of the Central Excise Rules, 1944
The penalty imposed on the appellant under Rule 173Q of the Central Excise Rules, 1944 was scrutinized. It was noted that neither the adjudicating authority nor the first appellate authority specified the sub-rule of Rule 173Q under which the penalty was imposed. The Tribunal highlighted the requirement for invoking a specific sub-rule for imposing such a penalty. Additionally, it was acknowledged that the appellant might have genuinely believed they were eligible for the SSI exemption concerning certain spoons. Due to this belief, the Tribunal determined that the appellant should not be penalized under Rule 173Q. Consequently, the penalty imposed on the appellant for the period January 1998 to March 1998 was set aside, while upholding the confirmation of the duty demand along with interest.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's findings regarding the confirmation of demand and penalty imposition in the case.