Bona fide belief of Area based exemption from Central Excise Duty: CESTAT deletes Penalty [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) deleted the penalty on the ground that there was bona fide belief of Area based exemption from Central Excise duty.

The issue involved in these appeals was whether the appellant, M/s Parvatiya Plywood Private Limited is entitled to ‘Area based exemption’ under exemption Notification No. 49/2003-CE dated 10.06.2003 read with subsequent Notification No. 50/2003-CE (as amended).

In the miscellaneous order dated 19/05/2022, the Tribunal recorded the submission of the appellant, that the main issue of exemption has been decided against the appellant by the Supreme Court in the similar matter for the other period.

The Counsel for the appellant submitted that the appellant was under bona fide belief that they will be entitled to the Area based exemption, as other units and /or similar units in the same locality were enjoying the Area based exemption. Accordingly, this appellant had also claimed the exemption and did not charge excise duty from their customers at the time of clearing the goods.

As the appellant had to pay the excise duty out of their own pocket and they did not collect the excise duty, it is urged that the demand of duty may be directed to quantified by extending the benefit of ‘cum-duty value’ and also the benefit of Cenvat credit on inputs/ input service, as may be available to the appellant. The appellant relied on the amended provision of Section 4 of the Act (w.e.f.) 14.05.2003, wherein an explanation was added in Section 4(1) after Clause (b).

The explanation clarifies that where excise duty has not been collected separately by the manufacturer-seller, the price charged shall be treated as cum-duty, excluding sales tax and other taxes, if any, actually paid.

A Coram consisting of Anil Choudhary, Judicial Member, and P V Subba Rao, Technical Member observed that “We hold that the appellant is entitled to the benefit of recalculation of demand on cum duty basis in accordance with explanation to Section 4(1)(b) of the Central Excise Act.”

Setting aside the penalty the Tribunal noted that “So far, penalty under Section 11AC is concerned, we hold that there is no case of misrepresentation, misstatement, suppression or fraud on the part of the appellant. The appellant was under bona fide belief in claiming the Area based exemption from Central Excise duty, as several other manufacturers located in the same locality, were also extended the benefit of Area-based exemption”.

To Read the full text of the Order CLICK HERE

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