2018 (9) TMI 908 - AT - Central Excise

Refund claim - destruction of rejected inputs and expired manufactured goods - rejection of refund on the ground that destruction was not carried out in the presence of Central Excise officer and that the prior permission for taking out of the goods of the appellants units was not taken before the destruction - Held that - Admittedly the noticee is a 100% Export Oriented Unit (EOU). Resultantly, a Notification No. 23/2003 dated 31.03.2003 as is stands amended vide Notification No. 30/2015 dated 25.05.2015 are applicable upon the appellant. As per this Notification, the duty shall not be leviable in case the capital goods or reject, waste or scrap material are to be destroyed. As per 2003 Notification, presence of Central Excise Officer was a mandate at the time of such destruction. However, after the amendment in the Notification, if the said destruction is within the unit, the intimation thereof is required to be given to the Customs Authorities and if it is outside the unit, a permission of Customs Authorities is required. The fact still is abundantly clear that the duty shall not be leviable on the impugned goods, appellant being an EOU. It is also apparent from the Show Cause Notice itself is that the appellant has destroyed not only the final and expired goods but the raw materials as well, after taking those out from their premises but to the premises of Madhya Pradesh Waste Management Project. It is observed that while such removal, the appellant has already paid the duty on the stuff removed - It is also apparent from record that while removing the products from appellant s unit, intimation was given by the appellant to the Customs Authorities. The prior permission or presence of the Custom Officer retains no further significance. Resultantly, the lapse on part of the appellant was not at all substantive in nature. It was merely procedural lapse. It is a substantive benefit of the appellant and as such cannot be denied on a mere procedural lapse on his part that too when it occurred due to no knowledge of the impugned Notification. Refund is to be allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund application for destruction of rejected inputs and expired goods outside EOU premises.
- Rejection of refund application due to lack of permission for destruction and absence of Central Excise officer during destruction.
- Interpretation of Notification Nos. 30/2015-CE and 34/2015-CE regarding duty exemption for destroyed goods.
- Applicability of Notification No. 23/2003 and subsequent amendments.
- Dispute over procedural requirements for destruction of goods and duty liability.
- Consideration of substantive benefit versus procedural lapse in claiming refund.

Analysis:
1. Refund Application for Destruction of Goods: The appellant, engaged in manufacturing pharmaceutical ingredients, filed a refund application for duty paid on destroyed rejected inputs and expired goods outside their EOU premises. The destruction was supervised by an approved body. The Department rejected the refund citing lack of Central Excise officer presence and prior permission for destruction.

2. Interpretation of Notifications: The appellant claimed ignorance of Notification Nos. 30/2015-CE and 34/2015-CE exempting duty for destroyed goods. The Department insisted on compliance with procedural requirements, including permission for destruction outside the unit.

3. Applicability of Notifications: The Tribunal noted the applicability of Notification No. 23/2003 and subsequent amendments, exempting duty for destroyed goods for EOUs. The duty was paid by the appellant despite exemption eligibility.

4. Procedural Requirements and Duty Liability: The Department emphasized the importance of prior permission for destruction to avoid revenue loss. The Tribunal observed that the duty was paid by the appellant even though not liable, and procedural lapses were not substantive in nature.

5. Substantive Benefit vs. Procedural Lapse: Relying on precedents, the Tribunal differentiated between substantive and procedural lapses. It held that the appellant, unaware of the relevant notification, was entitled to the refund despite procedural errors.

6. Judgment: The Tribunal set aside the Order denying the refund, emphasizing that procedural lapses should not deny substantive benefits. The appellant's payment of duty, despite exemption eligibility, due to lack of notification knowledge warranted the refund.

In conclusion, the Tribunal allowed the Appeal, highlighting the importance of substantive benefits over procedural lapses and ensuring justice in granting the refund to the appellant.