The Ahmedabad bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that excise duty exemption cannot be denied in the absence of wilful suppression of fact to evade tax. As there is no case of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade and the larger period of limitation is inapplicable in the present case.
The Appellant, Polymer Technologies International, were functioning as 100% EOU and was manufacturing an “Intraocular Lens” falling under Chapter 90 of the Central Excise Tariff. The Appellant, Shri Hasmukh I. Patel, was an employee and authorized signatory of the 100% EOU. In respect of the goods cleared into DTA, the Appellant was availing exemption under Notification No. 23/2003-CE dated 31-3-2003.
In June 2012, the Appellant was granted permission to exit from the EOU scheme and the Assistant Commissioner of Central Excise, Vadodara issued a “No Dues Certificate” and thereafter Final Exit Order dated 24-7-2012 was passed. Almost three years after the Appellant exited from EOU, a Show Cause Notice was issued to the Appellant wherein it was contended that during the period 2009-2010 to June 2012, the Appellant had wrongly availed exemption under Notification No.23/2003-CE dated 313-2003 from Excise duty equal to Special Additional duty (SAD) of 4% leviable under Section 3(5) of the Customs Tariff Act, 1975, in respect of Intraocular Lens cleared into DTA.
It was contended in the show cause notice that under Sr. No.1 of Notification No. 23/2003-CE, Excise duty on goods cleared into DTA, which is equal to the SAD leviable under Section 3(5) of the Customs Tariff Act 1975, was exempted subject to Condition 1 which stipulated that the goods should not be exempted by the State Government from payment of sales tax or Value added Tax (VAT); that Intraocular Lens were exempted from VAT under Sr. No.3 (18) of Schedule I read with Section 5(1) of the Gujarat Value Added Tax Act. The show cause notice accordingly demanded Central Excise duty equal to SAD amounting to Rs.89.51 lakhs under Section 11A (1)/A(5) of the Central Excise Act 1944 read with B-17 Bond executed by the Appellant at the time of taking EOU license.
The Appellant replied to the said show cause and submitted that the goods were otherwise exempted from SAD if imported into India and consequently under the Proviso to Section 3 (1) of the Central Excise Act 1944, the excise duty payable equal to SAD will be NIL.
After considering the reply and giving a personal hearing in the matter, the Principal Commissioner of Central Excise, Vadodara vide Order-inOriginal confirmed the demand for duty of Rs.89.51 Lakhs with interest and further imposed penalties on the Appellant against which the present appeals of the appellant have been preferred.
Shri J.C.Patel, counsel for Appellant, submitted that since the goods in question, if imported, are exempted from SAD, excise duty equal to SAD payable under Proviso to Section 3(1) of the Central Excise Act 1944, is NIL, consequently, exemption from Excise duty equal to SAD under Notification No.23/2003-CE is not required; even otherwise, the Notice issued under section 11A(5), which stood omitted with effect from 14-5-2015, is not maintainable having been issued under non-existing provision and further that notice is barred by limitation of one year; that Appellant has duly disclosed in the ER-2 Returns that they were availing the benefit of Notification No.23/2003-CE and that Appellant have been subjected to audit from time to time; the Audit report records that the Appellant was availing Notification No.23/2003. Shri AR Kanani, Superintendent for the revenue relied upon the finding given in the impugned order.
A two-member bench comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that exemption from Excise duty equal to SAD under Notification No.23/2003-CE is not required since the said goods if imported are exempt from SAD and therefore Excise duty equal to SAD payable under the Proviso to Section 3 (1) of the Central Excise Act 1944, will be NIL.
In any event, the said Section 11A (5) read with Section 11A (4) applies in cases of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade, none of which is present in this case.
In the ER-2 Returns it is duly disclosed that the Appellant was availing Notification No.23/2003-CE. The Appellant has been subjected to audit from time to time. The Audit report records that the Appellant was availing Notification No.23/2003. The department was therefore fully aware that the Appellant was availing the benefit of Notification no.23/2003. Moreover, a No Dues certificate was also issued by the department at the time of exit from EOU. Accordingly, it is not a case of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade and the larger period of limitation is inapplicable in the present case.
The Tribunal observed that in the case of John Deere (I) P Ltd v CCE, it was held that where the benefit of Notification No.23/2003-CE was not available for excise duty equal to SAD on the ground that VAT was exempt, it was held that the larger period of limitation cannot apply when the department was aware that the EOU was availing Notification No .23/2003-CE.
The CESTAT set aside the impugned order and allowed the appeal.
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