The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed excise duty demand on goods exported on Free of Charge (FOC) basis, thereby granting relief to M/s Hero Motocorp Limited, the appellant.
The appellant is a public limited company and is engaged in the manufacture and clearance of two wheelers falling under chapter no. 87 of the First Schedule to the Central Excise Tariff Act, 1985. A show cause notice was issued to the appellant demanding duty of Rs. 5,12,692/- in respect of goods exported on FOC basis where no sale proceeds were received during the period from 13.04.2015 to 23.03.2017.
The Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the appellant has exported the goods in compliance with the provisions and the procedures under Rule 19 of the Central Excise Rules, 2002 read with Notification No. 42/2002-CE(N.T.) dated 26.06.2001.
It was further submitted that appellant has exported the goods on FOC basis in compliance with the provisions of Rule, 19 read with Notification No. 42/2002 and the appellant had bona-fide belief that he is eligible to avail Cenvat credit and the same cannot be recovered from the appellant under Rule 14 of the CC Rules and that there was no willful suppression or deliberately wrong doing by appellant. Hence, the penalty cannot be imposed.
On the other hand, the Departmental Representative reiterated the findings of the impugned order and submitted that the appellant has exported the goods in violation of the procedures and master circular issued by the RBI. She further submitted that the appellant has not submitted any supporting documents or evidence to lower adjudicating authority to prove that the goods were sent as samples or for testing/repairing purpose.
The Tribunal of SS Garg, Judicial Member observed that “I find that at the time of export no objection was raised by the department neither at the time of export nor at the time of submission of document with Central Excise department that receipt of sale proceedings in foreign currency is required for FOC exports.”
The Bench further observed that “I find that the impugned order relying upon the RBI Master Circular No. 14/2012-13 dated. 02.07.2012 is not justified because there is no allegation regarding the same in the show cause notice which is the foundation upon which the department has to build its case. Therefore, in my view, the entire demand is bad in law.”
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