2023 (11) TMI 56 - AT - Central Excise

Demand of duty by denying the benefit of exemption - Capital goods for specific use - Clearance of hydraulic excavators to contractors/construction companies - violation of Notification No.108/95 CE dated 28.08.1995 - goods withdrawn from the project or not - HELD THAT - Regarding scope of denovo adjudication, while remanding the matter to adjudication authority, this Tribunal has not considered the plea of appellant that they have not removed the goods before completion of the project and only held that demand against the appellant can be sustained only for one year period which is within the period of limitation - Hence considering the issue whether the appellant violated the condition of exemption notification by removing the goods before completion of the project cannot be considered beyond the scope of remand order. There are strong force in the submissions made by the appellant that the goods supplied during the relevant period by availing the exemption notification whether withdrawn from the project has to be examined and only if it is removed before completion of the project, the benefit of notification can be denied. Merely based on presumption that few of the hydraulic excavators procured from appellant have been withdrawn from the project, few are in the process of being withdrawn and others to be withdrawn once the project is completed, no finding can be made to deny the benefit of ibid notification - There is no averment in SCN or impugned order regarding date of sale, date of removal of the goods and date of completion of the project to ascertain whether the goods were removed from the project prior to completion of the project for one year where duty confirmed. Hence in the absence of any evidence regarding removal of the goods before completion of the project, the benefit of the notification cannot be denied and the demand against the appellant is unsustainable - appeal allowed.

Issues involved:
The issues involved in the judgment are related to the exemption claimed by the appellant under Notification No.108/95 CE, alleged violation of conditions of the notification, initiation of proceedings, examination of contractors/construction companies, evasion of Central Excise duty, confirmation of demand by Adjudication Authority, prospective operation of the notification, sustainment of demand for one year, dismissal of appeals by Hon'ble Karnataka High Court and Supreme Court, de novo adjudication, and denial of exemption based on the removal of goods before completion of the project.

Summary:

1. Alleged Violation of Exemption Conditions:
The appellant cleared hydraulic excavators claiming exemption under Notification No.108/95 CE but was alleged to have violated the conditions of the notification. The Adjudication Authority confirmed a demand of Central Excise duty, education cess, and secondary education cess against the appellant.

2. Tribunal's Decision and Subsequent Appeals:
The appellant approached the Tribunal, which held that the demand against the appellant could be sustained only for one year within the period of limitation. The penalty imposed was set aside. Appeals to the Karnataka High Court and Supreme Court were dismissed. Subsequently, de novo adjudication was considered.

3. Lack of Evidence on Goods Removal:
The appellant denied diverting goods and highlighted the absence of evidence supporting the allegation of goods being removed from the project. The Adjudication Authority confirmed the demand based on the presumption that goods may be removed after project completion.

4. Legal References and Interpretations:
The appellant cited legal precedents, including a judgment of the Hon'ble High Court of Kerala, to support their argument that the benefit of the notification can only be denied if goods are removed before project completion. The Tribunal's decision in another case was also referenced to emphasize the correct interpretation of the exemption conditions.

5. Tribunal's Decision on Exemption Denial:
The Tribunal, after considering the evidence and legal arguments, found that the benefit of the notification cannot be denied in the absence of proof of goods being removed before project completion. The demand against the appellant was deemed unsustainable, and the appeal was allowed with consequential relief.

Conclusion:
The Tribunal's decision in favor of the appellant was based on the lack of evidence regarding the premature removal of goods from the project. The judgment emphasized the correct interpretation of the exemption conditions and concluded that the demand against the appellant was unsustainable. The appeal was allowed, providing consequential relief if any.

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