2019 (3) TMI 1498 - AT - Central Excise

SSI Exemption - crossing of threshold limit - N/N. 8/2003-CE dt. 1.3.2003 - Applicability of Rule 3A of the Interpretative Rules - the items, cakes and pastries, are supplied with other items in a set - Held that - The appellant has brought this contention for the first time at the Tribunal stage. Also, as correctly pointed out by the Ld. A.R, they had themselves classified cakes, pastries etc. as per their individual tariff entries on which there was no dispute between them and the department. In the circumstances, we are afraid that this argument does not hold water. Time limitation - penalty - Held that - A number of related proceedings had earlier been initiated against the appellant, including one of denial of SSI exemption Notification No.8/2002-CE and 8/2003-CE. SCN has proposed penalty on him on the ground of non payment of central excise duty was within his knowledge . However, it is found that appellants were continuously reiterating with the department, at least from 2002, that they were eligible to claim small scale exemption. In the circumstances, employee of the appellant cannot then be saddled with such charge and penalty imposed under Rule 26 ibid - From the records, it is not forth coming that any appeal was preferred by the department against the said OIA. This being so, subsequent show cause notices proposing similar denial of SSI exemption should have been issued for the normal period of one year instead of invoking extended period of limitation as has been done in this case. It follows that there cannot also be any ingredients present for imposition of penalty under Section 11AC. The impugned demand per se cannot then be sustained, on the grounds of limitation, and will require to be set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Eligibility for SSI exemption under Notification No.8/2003-CE.
2. Allegations of suppression and evasion of Central Excise duty.
3. Invocation of extended period for recovery of duty, interest, and penalties.
4. Classification of goods supplied to airlines.
5. Discrepancies in duty payment and exemption claims.
6. Imposition of penalties on the appellant and the Manager-Finance.

Issue 1: Eligibility for SSI exemption under Notification No.8/2003-CE:
The appellants, manufacturers of cakes and food items, were availing SSI exemption under Notification No.8/2003-CE. However, the department alleged that they exceeded the prescribed limit of value of clearances of excisable goods, making them ineligible for the exemption. A show cause notice was issued, proposing recovery of duty, interest, and penalties for the years in question.

Issue 2: Allegations of suppression and evasion of Central Excise duty:
The department alleged that the appellants suppressed information regarding production and clearance of excisable food items, leading to evasion of Central Excise duty. The proviso to Section 11A of the Central Excise Act was invoked for the extended period, and penalties were proposed under Section 11AC of the Act.

Issue 3: Invocation of extended period for recovery of duty, interest, and penalties:
The original authority confirmed the duty amount, imposed penalties, and upheld the decision in appeal, reducing the penalty on the Manager-Finance. The appellants argued that the department was aware of their activities, and the charge of suppression was incorrect, impacting the limitation period for proceedings.

Issue 4: Classification of goods supplied to airlines:
The appellants argued that the items supplied to airlines, including cakes and pastries, were part of sets that required classification based on the material giving them their essential character. However, this argument was raised for the first time at the Tribunal stage, and the department contended that the classification had been done correctly by the appellants.

Issue 5: Discrepancies in duty payment and exemption claims:
The appellants highlighted past communications with the department where they claimed eligibility for SSI exemption and had disputes regarding the denial of the exemption under Notification No.8/2002-CE and 8/2003-CE. The Tribunal found merit in the argument that the proceedings were hit by limitation due to the department's awareness of the facts.

Issue 6: Imposition of penalties on the appellant and the Manager-Finance:
The Tribunal noted that the demand for duty, interest, and penalties exceeded the normal limitation period, rendering it unsustainable. As a result, the demand, along with related penalties, was set aside, and the appeals were allowed with consequential benefits as per law.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI covers the various issues involved in the case, including eligibility for SSI exemption, allegations of suppression and evasion, invocation of extended periods for recovery, classification of goods, discrepancies in duty payment, and imposition of penalties. The Tribunal's decision considered the arguments presented by both parties and ultimately set aside the demand and penalties due to limitations on the department's awareness of the facts and the extended period for recovery.

← Previous Next →