2018 (6) TMI 4 - AT - Central Excise

Liability to pay duty on the goods cleared prior to 1.3.2002 - Effect of withdrawal of N/N. 3/2001-CE dated 1.3.2001 - Budget day clearances - removal of cotton plain reel hanks from the factory without payment of duty after withdrawal of exemption notification - Duty Demand - According to department, the appellant had removed cotton plain reel hanks from the factory after the withdrawal of exemption on 28.2.2002 without payment of central excise duty - whether the appellants are liable to pay duty on the goods cleared by them prior to 1.3.2002? - Held that - Even if it is considered that the goods are cleared on 28.2.2002, the withdrawal of exemption by Notification No. 13/2002 dated 1.3.2002 would be effective as per the Notification only from 1.3.2002. Restrictions on removal of Capital Goods - Rule 30A of Central Excise (No.2) Rules, 2001 - the appellants have neither obtained permission nor filed undertaking - Held that - Rule 30A provides that the manufacturer who intends to clear goods during the period mentioned in the Rule has to obtain permission and also file an undertaking - In the present case, there is no such undertaking filed by the appellant. Even if we consider that there has been procedural infraction on the part of the appellant in not taking permission from the Commissioner to clear the goods on Budget day, the notification rescinding the exemption has come into force only from 1.3.2002. Their clearances have been made on 28.2.2002 when the exemption notification was still in force - duty demand do not sustain. The Tribunal in the case of Vellamalai Tea Factory 2013 (12) TMI 394 - CESTAT CHENNAI has considered an identical issue with regard to Budget day clearances and Tribunal after taking cognizance of Sections 3 and 4 of Provisional Collection of Taxes Act, 1931, held that duty cannot be collected for the clearances made by the appellant before midnight when the notification came into existence (1.3.2002). Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the appellants are liable to pay central excise duty on goods cleared prior to 1.3.2002.
2. Applicability and interpretation of Rule 30A of Central Excise (No.2) Rules, 2001.
3. Validity of the show cause notice issued based on the presumption of clearance date.
4. Relevance of the Provisional Collection of Taxes Act, 1931.
5. Applicability of precedents, specifically Vikrant Tyres Ltd. and Vellamalai Tea Factory cases.

Issue-wise Detailed Analysis:

1. Liability to Pay Central Excise Duty on Goods Cleared Prior to 1.3.2002:
The appellants argued that the exemption from duty was rescinded by Notification No. 13/2002-CE dated 1.3.2002, effective from 1.3.2002. The show cause notice was issued on the presumption that the exemption was withdrawn from 11:00 a.m. on 28.2.2002, coinciding with the Finance Minister's Budget speech. The Commissioner admitted that the exemption was withdrawn from midnight of 28.2.2002, yet demanded duty on goods cleared prior to 1.3.2002. The Tribunal held that even if the goods were cleared on 28.2.2002, the withdrawal of exemption took effect only from 1.3.2002, thus the demand for duty on goods cleared before this date could not be sustained.

2. Applicability and Interpretation of Rule 30A of Central Excise (No.2) Rules, 2001:
Rule 30A restricts the removal of goods from the factory between the presentation of the Annual Budget and midnight of the same day unless permission is obtained and an undertaking is filed to pay the enhanced rate of duty if applicable. The appellants did not obtain permission or file an undertaking. The Tribunal noted that while there was a procedural infraction, the notification rescinding the exemption came into force only from 1.3.2002. Thus, the clearances made on 28.2.2002 were still under the exemption, and the duty demand could not be justified.

3. Validity of the Show Cause Notice Based on Presumption of Clearance Date:
The department presumed that the goods were cleared on 28.2.2002 after the Budget speech based on intelligence gathered. However, the appellants provided evidence, including statements from their General Manager, that the goods were cleared on 27.2.2002. The Tribunal found no reliable evidence to support the department's presumption and held that the clearances prior to 1.3.2002 should benefit from the exemption.

4. Relevance of the Provisional Collection of Taxes Act, 1931:
The appellants argued that the Provisional Collection of Taxes Act, 1931, allows for immediate effect of duty changes only when declared in the Bill. The Tribunal noted that the notification clearly stated the withdrawal of exemption effective from 1.3.2002. Therefore, the clearances before this date were exempt from duty, aligning with the Act's provisions.

5. Applicability of Precedents:
The Commissioner relied on the case of Vikrant Tyres Ltd., where the appellant had given an undertaking to pay enhanced duty. The Tribunal distinguished this case, noting that the appellants here did not file any such undertaking. The Tribunal also referenced the Vellamalai Tea Factory case, where it was held that duty could not be collected for clearances made before the new duty imposition came into effect at midnight. Applying this precedent, the Tribunal concluded that the demand for duty on goods cleared before 1.3.2002 could not be sustained.

Conclusion:
The Tribunal concluded that the demand for duty on goods cleared prior to 1.3.2002 could not be sustained due to the effective date of the exemption withdrawal being 1.3.2002. The procedural infraction of not obtaining permission or filing an undertaking under Rule 30A did not justify the duty demand. The appeals were allowed with consequential relief.

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