2022 (6) TMI 204 - AT - Central Excise

Applicability of Exemption Notification No. 4/2006-C.E. - manufacture of Uncoated Kraft Paper, falling under Chapter sub-heading No. 48043100 of the Schedule to the Central Excise Tariff Act, 1985 - Sl. No. 90 prescribing the concessional rate of duty @ 8% advalorem or Sl. No.91 prescribing the concessional rate of duty of 12% advalorem or Sl. No.93, which was unconditional, also prescribing concessional rate of 12% advalorem - HELD THAT - Section 5A of the Central Excise Act, 1944 recognizes two categorizes of exemption notification. The first category being that of an absolute exemption, where there was no condition attached to the exemption entry and the other one is a conditional exemption, which was subject to fulfilment of the conditions attached to the exemption entry. In the present case, the exemption entry at Sl. No.90 of Notification No. 4/2006-Central Excise was attached with two conditions for availing of the benefit of duty exemption and therefore, it was a conditional exemption and not an absolute exemption, as contemplated by Section 5A(1A) ibid. Since, the appellant had opted for payment of duty on clearance of the finished products and availed cenvat credit of Central Excise duty, such option exercised by the appellant cannot be questioned by the department inasmuch as there was no stipulation contained in the subject notification that only condition No. 90 appended thereto had to be followed and not otherwise. The appellant had correctly assessed the duty liability as provided under Sl. No. 93 contained in notification dated 01.03.1998, as amended. Thus, there was no contravention of the Cenvat statute. Further, it is not the case of Revenue that the duty amount collected by the appellant was not deposited with the Government Exchequer. Hence, under such circumstances, the provisions of Section 11D ibid cannot be invoked for recovery of the duty amount in question. There are no merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of exemption notifications under the Central Excise Tariff Act, 1985; Correct assessment of duty liability under specific entries of exemption notifications; Validity of self-assessment by the appellant; Invocation of Section 11D of the Central Excise Act, 1944 for recovery of duty amount.

Analysis:
The case involved the appellant, engaged in manufacturing Uncoated Kraft Paper, subject to exemption notifications under the Central Excise Tariff Act, 1985. The dispute arose when the Department objected to the appellant's payment of duty at 4% advalorem instead of self-assessing at 'NIL' rate under a specific entry of the notification. The Department initiated show cause proceedings, alleging non-compliance with the conditions of the exemption entry. The Original Authority confirmed the proposals made in the show cause notice, leading to the appellant's appeal before the Tribunal.

Upon examination, the Tribunal delved into the legal framework provided by Section 5A of the Central Excise Act, 1944, distinguishing between 'absolute' and 'conditional' exemptions. The Tribunal noted that the exemption entry in question was conditional, requiring fulfillment of specific conditions for duty exemption. Since the appellant opted to pay duty at 4% advalorem and utilized cenvat credit, the Tribunal held that the appellant's assessment of duty liability under a different entry was valid. The Tribunal emphasized that the Department could not challenge the appellant's chosen method of duty payment unless explicitly restricted by the notification.

Furthermore, the Tribunal referenced a previous order related to a similar issue, highlighting that appellants were not obligated to pay duty under a particular entry and had the option to choose alternative entries for duty payment. In light of this precedent and the appellant's compliance with duty payment and depositing the collected amounts, the Tribunal concluded that Section 11D of the Central Excise Act, 1944, could not be invoked for recovery of the duty amount.

Ultimately, the Tribunal found no merit in the impugned order confirming the demands on the appellant. Citing the legal principles and precedents, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The judgment provided clarity on the correct interpretation of exemption notifications and upheld the appellant's right to choose the appropriate entry for duty payment within the legal framework.