2007 (11) TMI 495 - AT - Central Excise

Recipient not Liable for Duty: Tribunal Upholds Commissioner's Order

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner's order. It ruled that duty cannot be recovered from the recipient when parts are ... Duty liability - Exemption to seller, denial of Issues:1. Interpretation of exemption Notification No. 3/2001-C.E. dated 1-3-2001 for agricultural waste conversion device producing energy.2. Liability for duty payment on parts procured for erection of a power plant under the exemption Notification.3. Dispute over duty liability on parts supplied by manufacturers and their entitlement to exemption benefit.4. Applicability of duty payment on manufacturers supplying parts not entitled to exemption benefit.5. Recovery of duty from the manufacturer versus the recipient of the parts.Detailed Analysis:1. The judgment involved the interpretation of exemption Notification No. 3/2001-C.E. dated 1-3-2001 concerning the entitlement to exemption benefits for an agricultural waste conversion device producing energy. The Respondent intended to avail this exemption for a power project involving the use of agricultural waste as fuel. They followed the required procedure under the Central Excise Rules and obtained CT-2 certificates. However, a dispute arose regarding the parts procured for the power plant's erection and their eligibility for exemption under the Notification.2. The primary issue revolved around the liability for duty payment on the parts procured for the power plant under the exemption Notification. The Department contended that the parts were not entitled to exemption when cleared to another unit, placing the duty liability on the Respondent who received them. The Adjudicating Authority initially dropped the proceedings against the Respondents, leading to the Revenue's appeal before the Tribunal seeking relief.3. The dispute further delved into the duty liability on the parts supplied by manufacturers and their entitlement to the exemption benefit. The Revenue argued that the parts were not eligible for exemption under the Notification, emphasizing that the duty liability falls on the recipient who knowingly received them without entitlement to the exemption benefit. The Tribunal was urged to set aside the Commissioner's order based on the interpretation of the Notification.4. Another aspect of the case involved the applicability of duty payment on manufacturers supplying parts not entitled to the exemption benefit. The Respondent's position was that duty liability should rest with the manufacturers who supplied the parts, as per the Central Excise rules. They argued that the duty payment obligation arises when the goods are not used for the intended purpose, rather than on the recipient when the exemption benefit is unavailable for the procured parts.5. The final issue addressed the recovery of duty from the manufacturer versus the recipient of the parts. The Tribunal, after careful consideration, concluded that the parts supplied by manufacturers were not entitled to the exemption benefit. However, the duty liability was deemed to be on the manufacturers, following the basic principle in Central Excise that manufacturers are liable to pay duty unless exempted. The Tribunal emphasized that duty recovery should be pursued from the suppliers and not the Respondent, especially since the Revenue had already taken action against the manufacturers and recovered dues from them.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner's order and emphasizing that duty cannot be recovered from the recipient when the parts are not entitled to exemption, reiterating that duty liability lies with the manufacturers and cannot be imposed twice on the same goods.