2025 (1) TMI 1085 - AT - Central Excise

Denial of the benefit of exemption under N/N. 10/97-CE dated 01.03.1997 on for aircraft parts supplied to specified research institutions - goods fall under the specified categories in the notification or not - suppression of facts or not - levy of penalty u/r 25 of CER 2002 - HELD THAT - In fact on a perusal of the notification which provides for exemption to specified goods supplied to specified institutions it is evident that in case of public funded research institution specified in Sl.No.1 when goods of the description provided in column (3) are supplied condition specified in column (4) at (i) (a) stipulates that if the institution is a public funded research institution under the administrative control of the Department of Space or Department of Atomic Energy or the Defence Research Development Organisation of the Government of India and produces a certificate to that effect from an officer not below the rank of a Deputy Secretary to the Government of India in the concerned department to the manufacturer at the time of clearance of the specified goods. That is to say if the institution is a public funded research institution under the administrative control of the Department of Space or Department of Atomic Energy or the Defence Research Development Organisation of the Government of India all that the institutions specified in condition (i)(a) are required to do is to produce a certificate simplicter from an officer not below the rank of a Deputy Secretary to the Government of India in the concerned department to the manufacturer at the time of clearance of the specified goods stating that the institution is a public funded research institution under the administrative control of the Department of Space or Department of Atomic Energy or the Defence Research Development Organisation of the Government of India. The Department cannot therefore without adducing any positive evidence from any subject matter professional or expert stating that the goods in question do not satisfy the description of goods covered under the said notification arbitrarily reject the claim for exemption duly supported by such certificates issued by the public funded research institutions that are specified in condition (i) (a) of the notification and when such institutions that are specified in condition (i)(b) additionally also certify that the goods are required for research purposes only. In the Appellant s own case this Bench in M/S. TANEJA AEROSPACE AND AVIATION LTD. VERSUS THE COMMISSIONER OF CGST CENTRAL EXCISE 2024 (7) TMI 1586 - CESTAT CHENNAI has held that It is seen that the Commissioner (Appeals) for subsequent period has considered the very same issue and allowed the exemption observing that the gods which are in the nature of parts of air craft would fall under the category of Engineering Goods . We do not find any grounds to take a different view We hold that the appellant is eligible for the exemption as per Notification No.10/1997-CE . Conclusion - The Department has evidently erred in sitting in judgement over such certification without any proof or evidence to the contrary. The appellants are eligible for the exemption. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appellants are eligible for the benefit of exemption under Notification No. 10/97-CE dated 01.03.1997 for aircraft parts supplied to specified research institutions.
Whether the denial of exemption by the Department, based on the argument that the goods do not fall under the specified categories in the notification, is justified.
Whether the penalties imposed under Rule 25 of CER, 2002 are sustainable given the circumstances.
Whether the suppression of facts can be alleged when the notice is a second show cause notice without new evidence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Exemption under Notification No. 10/97-CE

Relevant legal framework and precedents: Notification No. 10/97-CE provides exemption from excise duty for specific goods supplied to public-funded research institutions, subject to certification by the institution. The case of M/s Sanghvi Aerospace Pvt. Ltd. was cited as a precedent.
Court's interpretation and reasoning: The court interpreted that the exemption applies if the goods are certified as required for research purposes by competent authorities. The court emphasized the need for a liberal interpretation of the notification once eligibility is certified by specified authorities.
Key evidence and findings: The appellants provided certificates from recognized institutions like DRDO and Hindustan Aeronautics Limited, certifying the goods' use for research purposes.
Application of law to facts: The court found that the goods were indeed covered under the notification as they were used for research, supported by certificates from competent authorities.
Treatment of competing arguments: The Department's argument that the goods did not fall under the specified categories was rejected due to a lack of evidence contradicting the certificates.
Conclusions: The court concluded that the appellants were eligible for the exemption, as the goods were used for research purposes and certified by competent authorities.

Issue 2: Justification for Denial of Exemption

Relevant legal framework and precedents: The denial was based on the interpretation of the notification's scope. The court referred to clarifications issued by the Central Board of Excise and Customs.
Court's interpretation and reasoning: The court found that the Department's denial was based on assumptions without evidence. The notification's scope was clarified to include engineering goods, supporting the appellant's case.
Key evidence and findings: Clarifications from the Central Board of Excise and Customs and certificates from research institutions supported the appellant's position.
Application of law to facts: The court applied the notification's provisions and the Board's clarifications to determine that the goods fell within the scope of the exemption.
Treatment of competing arguments: The court dismissed the Department's arguments due to the absence of contrary evidence and the presence of supporting certificates.
Conclusions: The court concluded that the denial of exemption was unjustified and set aside the orders denying the exemption.

Issue 3: Sustainability of Penalties

Relevant legal framework and precedents: Rule 25 of CER, 2002 and Section 11AC of CEA, 1944 were considered regarding the imposition of penalties.
Court's interpretation and reasoning: Penalties under Rule 25 can only be imposed when the conditions of Section 11AC are met, which require suppression of facts with intent to evade duty.
Key evidence and findings: The court found no evidence of suppression of facts or intent to evade duty, as the notice was a second show cause notice without new evidence.
Application of law to facts: The court applied the legal standards for imposing penalties and found them unmet in this case.
Treatment of competing arguments: The Department's basis for penalties was found lacking due to the absence of evidence of suppression or intent.
Conclusions: The court concluded that the penalties were unsustainable and set them aside.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Department has evidently erred in sitting in judgement over such certification without any proof or evidence to the contrary."
Core principles established: The court emphasized the importance of adhering to certifications provided by competent authorities and the need for evidence when disputing such certifications.
Final determinations on each issue: The court determined that the appellants were eligible for the exemption, the denial of exemption was unjustified, and the penalties were unsustainable.

The judgment underscores the importance of respecting certifications from recognized institutions and the necessity for evidence when challenging such certifications. The court's decision to set aside the denial of exemption and penalties aligns with the principles of fair adjudication and due process.

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