Penalty not Demandable when Assessee has Not Crossed the Threshold limit on Exemption: CESTAT sets aside Demand relying on Form H [Read Order]

The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty is not demandable when the assessee has not crossed the threshold limit on the exemption and set aside demand relying on Form H.

M/s.Annai Chemicals and Associators, the appellant is engaged in the manufacture of Magnesium Sulphate. During the verification of records by the department officers, it was found that the appellant had crossed the exemption limit of Rs.1 Crore during 2006-07 to 2007-08.  The appellant had not discharged applicable duty even after crossing the threshold limit prescribed under Notification No.8/2003-CE dated 01.03.2003. Show cause notice dated 14.09.2011 was issued proposing to demand the duty along with interest and for imposing penalties.  After due process of law, the original authority confirmed the duty liability with interest and imposed a penalty.  On appeal, the Commissioner (Appeals) upheld the same.  

Ms Mane Vera Niveditha appeared and argued the matter. It was contended that the appellant has not crossed the threshold limit during the disputed period. Department has failed to consider the export clearances made by the appellant through the merchant exporter.  The value of such export clearances made through merchant exporters against Form-H was included by the department to allege that the appellant has exceeded the threshold limit of the notification. 

Counsel adverted to Circular No.648/30/2002 dated 25.07.2002 and submitted that the Board has clarified that when exports are made through merchant exporters against  Form-H, the same has to be taken into consideration for the benefit of SSI exemption.

The adjudicating authority held that the subject goods have not been directly exported from the SSI unit and hence this cannot be considered as export clearances made by the appellant. On a plain reading of the Board’s circular, it was found that the dispute relates to the acceptance of sales tax documents as proof of export by the exempted SSI units. The Board has clarified that the documents prescribed by the Sales Tax Department viz. H-Form or ST-XXII Form or any other equivalent Sales Tax Form will be accepted as proof of export.

The Commissioner (Appeals) observed that there is a procedural lapse in so far as the goods were not directly exported but through merchant exporters. The Board has clarified that this facility is not available to the supplies made to any other domestic manufacturer who may or may not export its finished products

The two-member bench comprising Ms Sulekha Beevi C.S., Member (Judicial) and Shri M. Ajit Kumar, Member (Technical)  held that “it is observed from the record that the merchant exporter exported the goods which were not disputed at any point of time.”

While allowing the appeal, the Bench set aside the impugned order.

To Read the full text of the Order CLICK HERE

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