The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand of duty on test production before starting commercial production is not tenable.
Sh. Jitin Singhal, Advocate appeared for the appellant and Sh. Mahesh Bhardwaj appeared for the respondent
M/s Tribhuvan Metal Industries, the appellant is engaged in the trading and manufacture of aluminium circles falling under Chapter 76 of the First Schedule to the Central Excise Tariff Act, 1985 and were registered with the Department.
During a search at the factory premises of the appellant, the department found finished goods and raw materials without any documentary evidence and the goods valued at Rs.8,27,980/- were seized. Statement of Sh. Jai Prakash Sharma was recorded on the spot, wherein he stated that the appellant has started manufacturing of Aluminium (Al) circle since November 2010. Similarly, sh. Balbir Prasad Gupta has also stated in his statement that their firm started manufacturing in November 2010.
Based on the investigation, two show cause notice was issued proposing duty demand along with the interest and penalty on the firm and the partners.
The Adjudicating Authority passed a common order-in-original wherein allegations mentioned in the show cause notices were confirmed. In the said order, duty demand has been confirmed along with the seizure of goods.
The appellant filed an appeal before the Commissioner (Appeals), who vide impugned order-in-appeal, dropped the seizure proceedings and confirmed the duty demand to the extent of Rs. 3,23,761/- for the period July 2010 to October 2010 along with interest and equal penalty by setting aside the remaining duty demand.
A Coram comprising of Mr Anil Choudhary, Member (Judicial)observed that the appellant has done only test production before 11.11.2010 and they have been doing mainly trading of finished goods as the factory was not fully set up at the testing stage. The Tribunal allowed the appeal by modifying the impugned order wherein it was stated that the quantum of finished goods liable to duty for the period 01.07.2010 to 31.10.2010 shall be NIL. Further, the penalty under Section 11AC read with Rule 25 was set aside.
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