2013 (5) TMI 675 - SC - Central Excise

Supreme Court Upholds Procedural Compliance for Tax Exemptions

The Supreme Court dismissed both appeals, emphasizing the mandatory procedural compliance for availing exemptions under the relevant notifications. The ... Exemption notification - Concessional rate of duty - actual user condition - Chapter X procedure - Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 - time gap between expiry of earlier certificate and beginning of new certificate - held that:- The language of Rule 192 of Chapter X of the Rules is clear that for availing concession from excise duty on excisable goods used in a specified industrial process, a person must obtain a registration certificate from the Collector and that “the concession shall, unless renewed by the Collector, cease on the expiry of the registration certificate”. Admittedly, the registration certificate of the appellant expired on 31-12-1995. Hence, the exemption granted under the notification ceased on 31-12-1995. The fresh registration certificate in favour of the Ahmedabad Electricity Company Ltd. was issued on 26-6-1996 and we find on a reading of the copy of the CT-2 certificate annexed as Annexure P5 that the registration certificate was not for any period prior to 26-6-1996. As the procedure laid down in Rule 192 of Chapter X of the Rules has not been complied with, the appellant is not entitled to avail the exemption of excise duty under the exemption notification during the period from 1-1-1996 to 25-6-1996. Procedure under 2001 rules - held that:- Rule 3(1) makes it amply clear that the manufacturer, who intends to use subject goods for specified use at concessional rate of duty, shall make an application in quadruplicate in the Form at Annexure-1 to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be. Admittedly, no such application was made by Indo Gulf Corporation Limited in the form at Annexure-1 to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise. As the procedure set out in the 2001 Rules has not been followed, the appellant was not entitled to exemption on the Naphtha cleared from its factory for supply to Indo Gulf Corporation Limited for manufacture of fertilizer. - decided against the assessee. Issues Involved:1. Entitlement to exemption from excise duty under Notification No. 75/84-C.E.2. Compliance with procedural requirements under Rule 192 of Chapter X of the Central Excise Rules, 1944.3. Entitlement to exemption from excise duty under Notification No. 3/2001-C.E.4. Compliance with procedural requirements under Rule 3(1) of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.Detailed Analysis:Issue 1: Entitlement to exemption from excise duty under Notification No. 75/84-C.E.The appellant, a producer of Reduced Crude Oil (RCO), claimed exemption from excise duty under Notification No. 75/84-C.E., provided the RCO was used as fuel for generating electrical energy by specified entities. The Ahmedabad Electricity Company Ltd. had a registration certificate in Form CT-2, which expired on 31-12-1995 and was renewed on 26-6-1996. The Assistant Commissioner demanded excise duty for the period 1-1-1996 to 25-6-1996, as the company did not have a valid registration certificate during this period. The Tribunal upheld this demand, stating the appellant did not meet the statutory requirements for exemption.Issue 2: Compliance with procedural requirements under Rule 192 of Chapter X of the Central Excise Rules, 1944The appellant argued that the RCO was used for the intended purpose, and thus, they should be entitled to the exemption. However, the respondent contended that the exemption was conditional on following the procedures in Chapter X of the Rules, including obtaining a registration certificate. The court emphasized that both conditions in the exemption notification must be met: proving the intended use and following the Chapter X procedures. Since the registration certificate expired and was not renewed until 26-6-1996, the exemption was not applicable for the disputed period.Issue 3: Entitlement to exemption from excise duty under Notification No. 3/2001-C.E.In a separate appeal, the appellant sought exemption for Naphtha supplied to Indo Gulf Corporation Limited for fertilizer production under Notification No. 3/2001-C.E. The exemption was conditional on following the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The Commissioner confirmed the demand for duty and imposed a penalty, which the Tribunal upheld, albeit reducing the penalty amount.Issue 4: Compliance with procedural requirements under Rule 3(1) of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001The appellant contended that the Naphtha was used for the intended purpose, and as a government company, they should not be denied exemption on technical grounds. The court, however, noted that the exemption notification required compliance with the 2001 Rules, specifically Rule 3(1), which mandates an application in quadruplicate to the jurisdictional Assistant Commissioner or Deputy Commissioner. Since Indo Gulf Corporation Limited did not submit the required application, the procedural requirements were not met, and thus, the exemption was not applicable.Conclusion:The Supreme Court dismissed both appeals, affirming that procedural compliance is mandatory for availing exemptions under the respective notifications. The court emphasized the necessity of strict adherence to the conditions specified in exemption notifications to prevent misuse and ensure proper utilization of excisable goods.