2025 (3) TMI 495 - AT - Central Excise

Clandestine removal - manufacture and clearance of ready-made garments under the brand-name of foreign companies without payment of CE duty for export and such clearance were not made under cover of invoices under Rule 11 of the CE Rules 2002 - ims-declaration of goods - entitlement to SSI exemption under N/N. 8/2003 CE dated 01.03.2003 - HELD THAT - The allegations are not supported by any iota of evidence to show that the appellant has cleared goods manufactured in their factory in domestic market and procured goods for export from other sources. Neither any enquiry was made to that effect from the domestic market where the goods have been allegedly sold and from where the goods have been procured for export. 16. Moreover if manufactured goods were sold by the appellant they are entitled for drawback claim at the rate of 7% to 8% and if goods are procured from outside market they are entitled for draw back claim of 3-4%. As appellant is a manufacturer of goods there is no sense that the manufactured goods will be cleared in domestic market and from the domestic market appellant will procure goods for export. The allegation made against the appellant by the authorities is without any supportive evidence. In that circumstances the allegation against the appellant is not sustainable. Moreover as appellant was not required to take CE Registration and the appellant was exempted for taking Registration vide letter dated 12th July 2011 therefore the appellant was not required to issue invoices under Rule 11 of the CE Rules 2002. In that circumstances the whole of the demand confirmed against the appellant are not sustainable. Consequently no penalty is imposable on the appellants. Conclusion - i) The allegation made against the appellant by the authorities is without any supportive evidence. In that circumstances the allegation against the appellant is not sustainable. ii) Moreover as appellant was not required to take CE Registration and the appellant was exempted for taking Registration vide letter dated 12th July 2011 therefore the appellant was not required to issue invoices under Rule 11 of the CE Rules 2002. The impugned order is set aside - appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appellant was required to register under the Central Excise Act and follow the procedures for excise duty payment given their turnover and export activities.
Whether the appellant's actions constituted a violation of the Central Excise Rules, specifically regarding the clearance of goods under commercial invoices without the issuance of invoices under Rule 11.
Whether the demand for excise duty and penalties imposed on the appellant were justified based on the alleged diversion of goods meant for export to the domestic market.

ISSUE-WISE DETAILED ANALYSIS

1. Requirement for Registration and Compliance with Excise Procedures

Relevant Legal Framework and Precedents: The case revolves around the interpretation of Notification No. 8/2003 CE, which provides Small Scale Industry (SSI) exemptions, and the requirements under Rule 11 of the Central Excise Rules, 2002.
Court's Interpretation and Reasoning: The Tribunal found that the appellant's domestic turnover was below Rs. 50,00,000/- and thus eligible for SSI exemption. The appellant had received a letter dated 12th July 2011, exempting them from registration under the Central Excise Act.
Key Evidence and Findings: The Tribunal noted that the appellant's domestic sales were below the threshold for mandatory registration, and the exemption letter supported their claim.
Application of Law to Facts: The Tribunal applied the SSI exemption notification to conclude that the appellant was not required to register or issue invoices under Rule 11 for the period in question.
Treatment of Competing Arguments: The appellant argued that their exemption from registration negated the need to follow excise procedures, while the respondent maintained that the procedures were mandatory. The Tribunal sided with the appellant, noting the lack of evidence supporting the respondent's claims.
Conclusions: The Tribunal concluded that the appellant was not required to register or comply with excise procedures due to their eligibility for SSI exemption.

2. Alleged Violation of Central Excise Rules

Relevant Legal Framework and Precedents: The allegations focused on the appellant's failure to issue invoices under Rule 11 of the Central Excise Rules, 2002.
Court's Interpretation and Reasoning: The Tribunal found no evidence that the appellant diverted goods meant for export to the domestic market or that they procured goods from outside sources for export.
Key Evidence and Findings: The Tribunal noted the absence of any inquiry or evidence showing that the appellant sold manufactured goods domestically or procured goods from the market for export.
Application of Law to Facts: The Tribunal applied the facts to the legal framework, concluding that the lack of evidence undermined the allegations against the appellant.
Treatment of Competing Arguments: The appellant contended that the allegations were based on conjecture, while the respondent reiterated the findings of the impugned order. The Tribunal found in favor of the appellant due to insufficient evidence.
Conclusions: The Tribunal concluded that the allegations of violating the Central Excise Rules were unsustainable due to a lack of evidence.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The said allegations are not supported by any iota of evidence to show that the appellant has cleared goods manufactured in their factory in domestic market and procured goods for export from other sources."
Core Principles Established: The judgment reinforces the principle that allegations must be supported by concrete evidence and that exemptions granted by the authorities must be respected unless compelling evidence suggests otherwise.
Final Determinations on Each Issue: The Tribunal set aside the impugned order, concluding that the appellant was not required to register under the Central Excise Act or follow the excise procedures due to their eligibility for SSI exemption. Consequently, the demand for excise duty and penalties was deemed unsustainable.

The Tribunal allowed the appeals with consequential relief, if any, effectively nullifying the demand and penalties imposed on the appellant.

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