Exemption under Notification No. 108/95 denied for non-listed financer, while Rule 25 penalty was set aside.

Goods supplied to a project financed by Japan Bank of International Corporation were held ineligible for exemption under Notification No. 108/95 because the notification applies only where the project is financed by an international organisation specifically listed in its Annexure and the prescribed certificate conditions are met. As Japan Bank of International Corporation was not named in the Annexure, the duty demand was upheld. Penalty under Rule 25 of the Central Excise Rules, 2001 was not sustained because the appellants had produced the required certificate issued by the empowered officer and endorsed by the State Government, and the facts did not justify penal action. The liability to duty remained, but the penalty was deleted.

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Issues: (i) Whether the goods supplied to a project financed by Japan Bank of International Corporation were eligible for exemption under Notification No. 108/95. (ii) Whether penalty under Rule 25 of the Central Excise Rules, 2001 was sustainable.

Issue (i): Eligibility for the exemption turned on whether the project was financed by an international organisation listed in the Annexure to the notification and whether the certificate contemplated by the notification was satisfied. The notification granted exemption only to goods supplied to projects approved by the Government of India and financed by a specified international organisation. Japan Bank of International Corporation was not one of the organisations named in the Annexure.

Conclusion: The benefit of Notification No. 108/95 was rightly denied, and the demand was upheld.

Issue (ii): Penalty under Rule 25 was examined in light of the certificate produced by the appellants, which was issued by the empowered officer and endorsed by the State Government. On those facts, the Tribunal found that the case did not warrant penal action.

Conclusion: The penalty under Rule 25 was not sustainable and was set aside.

Final Conclusion: The liability to duty remained undisturbed, but the penal component was deleted, resulting in a partial relief to the assessee.

Ratio Decidendi: Exemption under Notification No. 108/95 is available only when the project is financed by an international organisation specifically listed in the Annexure, while penalty cannot be sustained where the prescribed certificate is produced and the circumstances do not justify penal action.

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