2006 (12) TMI 297 - AT - Central Excise

Tribunal overturns Commissioner's decision due to no suppression of facts or intent to evade duty

The Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals) as there was no suppression of facts or intention to evade duty. ... Demand - Cenvat/Modvat Issues Involved: Interpretation of Notification No. 43/88 dated 1-3-88, entitlement to duty credit for exported goods and goods cleared for domestic consumption, imposition of penalty and interest under Section 11AB.Interpretation of Notification No. 43/88:The appellants, engaged in manufacturing pesticides and intermediate products, availed the benefit of Notification No. 43/88 which exempts goods for use in the manufacture of pesticides falling under Chapter Heading 3808.10. The revenue contended that duty should be imposed as part of the inputs were not used in the manufacture of pesticides, leading to a demand of Rs. 8,05,765. On appeal, the penalty and interest under Section 11AB were set aside, but the demand was upheld.Entitlement to Duty Credit:The appellants argued that they were entitled to duty credit for both exported goods and goods cleared for domestic consumption. They claimed that under Rule 13, they could receive material duty-free for export, and for goods cleared domestically, they were entitled to Modvat credit. They maintained that the exercise would be revenue neutral as they were eligible for credit equivalent to the duty payable on the inputs used.Imposition of Penalty and Interest:The appellants contended that they had not suppressed any facts and had no intention to evade duty. They argued that the extended period should not be invoked as they were entitled to credit for duty paid on inputs. The Commissioner (Appeals) did not give a finding on this plea. The appellants claimed that demanding duty would result in unnecessary paperwork as the situation was revenue neutral. The Tribunal found that the appellants were indeed entitled to duty credit for both exports and domestic clearances, and that no duty should be charged as it would serve no purpose and was a matter of interpretation of the notification.Decision:The Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals) as there was no suppression of facts or intention to evade duty. The Tribunal held that the situation was revenue neutral, and demanding duty would lead to useless paperwork. The Commissioner (Appeals) had already set aside the demand for interest and penalty, which was not challenged by the Revenue.