2010 (7) TMI 439 - AT - Central Excise

Tribunal Upholds Duty Demand & Penalty, Clarifies Scope of Exemption under Notification

BIRD MACHINES Versus COMMISSIONER OF C. EX., DELHI-IV

The Tribunal dismissed the appeal, affirming the duty demand and penalty imposed by the Adjudicating Authority and Commissioner (Appeals). It held that ... Demand of duty and Penalty - crane parts and fabrication work classifiable under sub-heading Nos. 84313100 and 84314990 - Exemption Notification No. 108/95-C.E. dated 28-8-95 – SCN issued denying the benefit of the said notification and for demanding central excise duty - holding that the exemption is to be allowed only on production of the requisite certificate.The Apex court in Commissioner of Income Tax, Kerala v. Tara Agencies reported in 2007 (214) E.L.T. 491 (S.C.) had ruled that, “the intention of the legislature has to be gathered from the language used in the statute, which means that attention should be paid to what has been said as also to what has not been said.” It is true that the notification nowhere uses the expression “exclusive” with reference to the identity of the institution to whom the goods are to be supplied nor with reference to the use of the goods. However, once it is settled law that the exemption notification is to be understood as per its plain language and without any addition thereto or subtraction therefrom, by applying the principle of ascertaining legislative intention not only by looking into the words used but also from the words omitted, the absence of the word “exclusive” cannot be construed to mean that the notification can be so read that it would defeat the very purpose behind the notification nor it is permissible to enlarge the scope of the benefit under the notification.Explanation is added to any statutory provision to avoid any ambiguity arising out of the main statutory provision. The explanation cannot have existence independent of the main statutory provision. Being so, based on explanation itself, one is not entitled to enlarge the scope of the main notification more so, when the explanation is added to clarify what is stated in the main part of the notification.Prohibition of withdrawal is from the project site. But arrival of goods at the site by availing benefit under the notification has to be on supply of such goods ‘to’ the project ‘for’ the use at the project site, from where such goods cannot be withdrawn by the contractor even after completion of the project work. In other words, he cannot claim any ownership right over such goods. Issues Involved:1. Compliance with Notification No. 108/95-C.E.2. Applicability of Tribunal decisions in similar cases.3. Interpretation of the term 'supplied to' in the context of the notification.4. Necessity of referring the matter to a Larger Bench.5. Clarification provided by Explanation II to the notification.6. Judicial discipline in following coordinate Bench decisions.7. Principle of per incuriam.Detailed Analysis:1. Compliance with Notification No. 108/95-C.E.The appellants, manufacturers of crane parts, cleared goods to contractors without paying central excise duty, claiming exemption under Notification No. 108/95-C.E. The Adjudicating Authority and Commissioner (Appeals) confirmed the duty demand and penalty, rejecting the appellants' claim of compliance with the notification conditions.2. Applicability of Tribunal Decisions in Similar CasesThe appellants relied on several Tribunal decisions, including Caterpillar India Pvt. Ltd. and IBM India Pvt. Ltd., to support their claim for exemption. They argued that these decisions justified their right to claim exemption under the notification. However, the Tribunal noted that these decisions were delivered before the introduction of Explanation II to the notification and did not address the specific issue at hand.3. Interpretation of the Term 'Supplied to' in the Context of the NotificationThe Tribunal emphasized that the exemption notification clearly identifies the institutions to which the goods must be supplied and the purpose for which they are intended. It stated, 'A plain reading of the above relevant portion of the notification discloses that exemption to the goods is available only in case of the goods, which are intended to be supplied 'to project' financed by the World Bank or Asian Development Bank or any International Development Bank.'4. Necessity of Referring the Matter to a Larger BenchThe Tribunal rejected the appellants' contention that the matter should be referred to a Larger Bench due to conflicting decisions. It clarified that the issue in the current case was not addressed in the previous decisions, which were based on undisputed facts rather than the interpretation of the notification. The Tribunal stated, 'None of such occasions have arisen in the matter in hand to justify for the reference to the Larger Bench.'5. Clarification Provided by Explanation II to the NotificationExplanation II, added to the notification in 2008, clarifies that the goods supplied to the project cannot be withdrawn by the supplier or contractor. The Tribunal noted that this explanation supports the interpretation that the goods must be supplied directly to the project and not to contractors or suppliers. It stated, 'The explanation in question merely makes the position more explicit as discussed above.'6. Judicial Discipline in Following Coordinate Bench DecisionsThe Tribunal addressed the appellants' argument regarding judicial discipline, citing the Bombay High Court's decision in Mercedes Benz India Pvt. Ltd., which emphasized the need to refer matters to a Larger Bench when there is disagreement with a coordinate Bench decision. However, the Tribunal found no such disagreement in this case, as the previous decisions did not address the specific issue under consideration.7. Principle of Per IncuriamThe Tribunal rejected the appellants' contention that the previous decisions were declared per incuriam. It clarified that the decisions in IBM and Caterpillar were not declared per incuriam because they followed the incorrect law but because they were delivered in ignorance of relevant provisions. The Tribunal stated, 'It is well settled law that in case any decision has been delivered either in ignorance of any provision of law or contrary to any of the provisions of the law, the same cannot have binding effect on the Tribunal or upon any court dealing with the same issue.'Conclusion:The Tribunal dismissed the appeal, upholding the duty demand and penalty imposed by the Adjudicating Authority and Commissioner (Appeals). It concluded that the exemption under Notification No. 108/95-C.E. is only available for goods supplied directly to the project and not to contractors or suppliers. The Tribunal emphasized the importance of interpreting the notification as a whole and rejected the appellants' contentions regarding judicial discipline and the principle of per incuriam.