2019 (2) TMI 438 - AT - Central Excise

Benefit of exemption - fly ash - actual user condition - Scope of N/N. 06/2002-CE dated 01.03.2002 and N/N. 05/2006 dated 01.03.2006 - Whether the fly ash used in the manufacture of Flex-O-Board (by the sister unit of the appellant) should also be reckoned or only the fly ash used in the manufacture of Aerocon panels should be considered for determining the eligibility of exemption? Held that - a plain reading of the exemption notification shows that of the various materials used in the manufacture of final products 25% must be fly ash. It does not indicate this 25% will also include any fly ash that might have been used in the course of manufacture of the inputs by the suppliers of the assessee. It also does not indicate on the other hand that the fly ash must be used in the manufacture of final products itself. Therefore two views are possible in interpreting this notification The Department took the first view and the assessee argues the second. This is a matter of doubt and the benefit of doubt must go in favour of the Revenue and against the assessee in view of the law laid down by the constitutional bench by the Hon ble Apex Court. 2018 (7) TMI 1826 - SUPREME COURT OF INDIA - Hence on merits we find that the assessee is not entitled to the notification. Time Limitation - Held that - The assessee have not failed in his duties in maintaining the records as required. The trade notice issued by the Commissioner does not mandate the assessee maintain batch wise records. They also produced the details of the records maintained by them - the extended period of limitation cannot be invoked. The demand of duty and interest within the normal period is confirmed and the demand for the extended period is set aside - the penalty imposed under Section 11AC is set aside - appeal allowed in part.

Issues Involved:
1. Eligibility for exemption under Notification No. 06/2002-CE and Notification No. 05/2006-CE.
2. Interpretation of the term "25% by weight of fly ash" in the context of exemption notifications.
3. Applicability of extended period of limitation.
4. Imposition of penalty under Section 11AC of Central Excise Rules, 2002.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 06/2002-CE and Notification No. 05/2006-CE:
The appellants, engaged in manufacturing Aerocon Panels, claimed exemption under Notification No. 06/2002-CE and later under Notification No. 05/2006-CE, both of which required the use of at least 25% by weight of fly ash or phospho-gypsum in the final product. The dispute arose over whether the fly ash used in the manufacture of Flex-O-Board (FOB) sheets by the parent unit should be considered for the exemption. The Revenue argued that only the fly ash used directly in the manufacture of Aerocon Panels should be counted, while the appellants contended that the fly ash in the FOB sheets should also be included.

2. Interpretation of the Term "25% by Weight of Fly Ash":
The central issue was whether the fly ash content in the inputs (FOB sheets) should be included in the 25% requirement. The appellants argued that the FOB sheets, containing more than 25% fly ash, should be considered, making the final Aerocon Panels compliant with the exemption criteria. They cited precedents like Eternit Everest Ltd. v. CCE and Minwool Rock Fibres Ltd., where the courts allowed the inclusion of materials used in inputs for exemption purposes. Conversely, the Revenue maintained that the exemption should be strictly interpreted, and only the fly ash directly used in the final product should be considered, citing the principle laid down by the Apex Court in Dilip Kumar & Co. & Others.

3. Applicability of Extended Period of Limitation:
The appellants argued against the invocation of the extended period of limitation, asserting that they had maintained proper records and filed returns as required, with all relevant information available to the Department. The Revenue, however, invoked the extended period, alleging suppression of facts. The Tribunal found no evidence of fraud, collusion, or willful misstatement by the appellants, thus ruling that the extended period of limitation was not applicable.

4. Imposition of Penalty under Section 11AC of Central Excise Rules, 2002:
Given the Tribunal's findings on the limitation period and the absence of any fraudulent intent or suppression of facts by the appellants, the penalty imposed under Section 11AC was set aside. The Tribunal noted that the appellants had complied with the record-keeping requirements and had not contravened any provisions with intent to evade duty.

Conclusion:
The Tribunal concluded that the benefit of the exemption notifications could not be granted based on the strict interpretation principle established by the Apex Court. However, the demand for duty and interest was confirmed only for the normal period, and the extended period demand was set aside. Additionally, the penalty under Section 11AC was also set aside due to the lack of evidence for fraudulent intent or suppression of facts. The appeal was thus partially allowed, modifying the impugned order accordingly.

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