The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the denial of excise duty exemption on clearance of flock fabric on the ground of genuineness of the Indian Institute of Technology (IIT) Roorkee Report.
The Rishabh Velveleen Ltd, the appellant assessee engaged in the manufacture of flock fabrics and submitted the declaration to the Deputy Commissioner, Central Excise, Division Dehradun with a copy to Jurisdictional Superintendent, Central Excise, intimating that after undertaking substantial expansion for their installed capacity by more than 25% they started availing the benefit of exemption Notification No. 50/2003- CE on the clearances of their products.
The assessee appealed against the order passed by the adjudicating authority for confirming the demand of excise duty of Rs.4,40,72,632/- for the period from 10.09.2003 to 08.07.2004 along with proportionate interest and appropriate penalties.
Jitin Singhal, the counsel for the assessee contended that the manufacture of flock fabric is an integrated process involving nine stages in line. Hence all such operations are to be performed in a continuous process. If the capacity of any of these operations is not increased, the installed capacity of the plant cannot be increased by such percentage as is required by Notification No. 50/2003.
O.P. Bisht, the counsel for the department contended that the assessee had attempted to evade the payment of excise duty by mis-declaring the facts about substantial expansion of their units to wrongly fit in the requirement of the exemption notification.
The Bench observed that the denial and the demand of duty were not as per the law the demand was presumptive and baseless and the IIT report had established that the installed capacity of the assessee’s unit was enhanced by more than 25% after 07.01.2003.
The two-member bench comprising Rachna Gupta (Judicial) and Subba Rao (Technical) quashed the excise duty demand against the assessee.
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