2017 (10) TMI 132 - AT - Central Excise

Classification of goods - whether the imported goods is cans with leads or it is aluminium semi-finished electrolytic capacitors as contended by the Revenue on the basis of report of technical expert? - whether they are eligible for exemption N/N. 13/1997-Cus. dt. 1.3.1997 (Sr. No.50)? - Held that - though the technical report was provided to the appellant but the cross-examination could not be conducted for one or other pretext. The appellants have taken this matter very strongly that the reports is very cryptic for the reason that except giving views/opinion that the goods are in the nature of aluminium semi-finished electrolytic capacitors, did not discuss anything above the cans with leads which was admittedly imported though along with other components - the order was passed in violation of principles of natural justice by not conducting the cross-examination of the technical expert namely Shri S.A. Khan, Project Manager of BITS Pilani, and Dr. G.V. Prabhu-Gaunkar, Principal, College of Engineering. If for any reason the cross-examination of these persons are not possible then these reports cannot be taken into consideration for deciding the case. As regard reports of Kiran Electronics and the technical details retrieved from internet from Website of Nichicon Corporation. We are of the opinion that since in the earlier two orders this Tribunal has clearly directed the Commissioner to examine the technical aspect only through the report of Government Institutes/Department of Electronics. Therefore it was not open for Commissioner to rely on the opinion of Kiran Electronics and website, therefore we direct the Commissioner not to rely on these documents - matter related to the issue on exemption N/N. 13/97-Cus remanded to the Commissioner. We direct the Commissioner to first cross-examine authors of the report given by BITS Pilani and College of Engineering, Goa if the cross-examination is not possible the said reports to be ignored and the matter may be decided afresh on the basis of other available records - matter on remand. Whether the modvat credit to the appellant on the aforesaid goods can be denied for want of correct declaration made under Rule 57G of erstwhile Central Excise Rules, 1944? - Held that - the credit was disallowed by the Commissioner not only on the ground that the appellant have wrongly declared the input as cans with leads whereas the goods was found to be aluminium semi-finished electrolytic capacitors. In this regard, we find that even if it is accepted the appellant have wrongly declared the inputs the modvat credit only for this reason cannot be denied. The fact is that whatever input imported by the appellant was received by the appellant in their factory and used in the manufacture of aluminium semi-finished electrolytic capacitors which was cleared on payment of duty. Since this fact is not under dispute modvat, credit only for want of correct declaration cannot be denied. In terms of amended Rule 57G by N/N. 7/99-CE dt. 9.3.1999, whereby it was clarified that the credit cannot be denied for non-filing of declaration under Rule 57G - the modvat credit is admissible to the appellant - demand set aside. Penalty - Held that - the issue involved is of grave interpretation on the technical aspect of the product - the major amount relates to the issue on modvat credit which was held to be allowed by us, personal penalty is not warranted therefore the personal penalties imposed on both the persons are set aside. Appeal allowed in part and part matter on remand.

Summary

Issues involved:
Determining whether imported goods are cans with leads or semi-finished aluminium electrolytic capacitors, eligibility for exemption under Notification No.13/1997-Cus., and denial of modvat credit due to incorrect declaration under Rule 57G of Central Excise Rules, 1944.

Analysis:

1. Nature of Goods:
The issue revolves around the classification of imported goods as cans with leads or aluminium semi-finished electrolytic capacitors. The appellant argued that the reports used against them lacked basis and were not subject to cross-examination, violating principles of natural justice. The reports from unauthorized sources were deemed irrelevant, and reliance on technical reports not previously disclosed was criticized. The Tribunal found the reports lacking in detail and concluded that without proper cross-examination, they cannot be considered. The Commissioner was directed to examine the technical aspect through authorized reports only.

2. Exemption Eligibility:
The Tribunal highlighted the necessity of following principles of natural justice, emphasizing the importance of cross-examination for a fair decision. The reports provided were deemed insufficient, and reliance on unauthorized sources was criticized. The Commissioner was directed to re-examine the issue of exemption eligibility based on authorized reports and other available records.

3. Modvat Credit Denial:
The denial of modvat credit was based on the assertion that the goods were mis-declared as cans with leads instead of aluminium semi-finished electrolytic capacitors. The Tribunal ruled that even if there was a misdeclaration, the credit cannot be denied if the goods were used in the manufacturing process and duty was paid. Citing legal precedents, the Tribunal held that credit cannot be denied for non-filing of declaration under Rule 57G, setting aside the demand for modvat credit and associated penalties.

4. Personal Penalties:
Regarding personal penalties imposed on individuals, the Tribunal found the issue to be technical and related to modvat credit, which was deemed admissible. As a result, the personal penalties were set aside, and the appeals related to the matter were allowed.

In conclusion, the Tribunal remanded one appeal to the Commissioner for re-examination based on authorized reports, while allowing other appeals related to the issue. The judgment emphasized the importance of following principles of natural justice, proper examination of technical aspects, and adherence to legal precedents in determining exemption eligibility and modvat credit.