CESTAT allows Duty Exemption on PCC Poles Stored Outside Factory and Broken Poles Failing Quality Tests [Read Order]

The Kolkata Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) allowed duty exemption on PCC poles that were either stored outside the factory due to failed quality tests.

Rohini Udyog,appellant-assessee,manufactured PCC Poles and supplied them only to West Bengal State Electricity Distribution Company Limited (WBSEDCL). These poles were made by mixing sand, cement, and stone chips with MS rods as binding. During the audit, 650 poles made in September 2013 were found outside the factory due to lack of space.

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The show cause notice said these poles were not recorded in the daily stock account for September 2013, and no invoices were issued for their removal, so duty was not paid at that time. The assessee told the department that these poles were for a specific WBSEDCL project and would be removed after about a month.

The department charged the assessee for removing goods without paying duty, not recording the removal in stock accounts, and not issuing invoices as required. The assessee later paid the duty.

The notice also raised an issue of shortage in stock records from 2009-10 to 2012-13. It noted that one pole out of every 100 was tested for strength as per standards, which was part of quality control. If the test passed, no further work was needed on the rest.

The poles were marked “WBSEDCL,” which the appellant said only showed ownership and not a brand. The department alleged this meant WBSEDCL owned the goods and that the appellant undervalued them by not using prices supplied by WBSEDCL for assessment.

The Tribunal heard the advocates and reviewed the records.It noted that pre-inspection was required by law to accept the goods. Broken poles were unusable and had no market value, so the appellant did not record them in the stock account.

About the 650 poles found outside the factory, the Tribunal accepted that they were kept outside due to space issues and that duty was paid on them. It disagreed with the claim for duty on 933 broken poles, as these had no market value and were not considered finished until passing the stress test. The assessee admitted not applying for duty remission on damaged poles. The  tribunal found no revenue loss or bad intent.

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Regarding denial of SSI exemption, the appellate tribunal said the “WBSEDCL” mark was not a brand but showed ownership only. Since WBSEDCL did not trade these poles, the exemption could not be denied.

The tribunal also found that the demand related to mismatched returns was barred by limitation because the appellant filed returns regularly and there was no suppression.

Following similar cases and Supreme Court rulings, the bench held that no duty was payable on goods lost during testing.

The CESTAT set aside the lower authority’s order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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