2014 (5) TMI 382 - HC - Central Excise

Court upholds Commissioner's decision in favor of assessee in Central Excise Appeals on exemption notifications

The High Court of Andhra Pradesh upheld the Commissioner's decision in favor of the respondent-assessee in Central Excise Appeals regarding exemption ... Duty demand - Penalty - Bar of limitation - manufacturing without aid of power - Benefit of the exemption notification under Serial No.13 of Notification No.9/96-CE, dated 23.07.1996 as amended and also exemption notification No.40/95-CE, dated 16.03.1995 - the process of calendaring, stentering, padding, etc. are carried on with the aid of power and bleaching, dying and printing and process not mentioned in the Notification No.40/95 - Held that:- aspect of ineligibility of the benefit of Notification No.40/95 would get attracted only when the respondents' usage of power in the process of bleaching, dyeing and painting and not with respect to usage of power in carrying out any of the processes mentioned in paragraph No.2 of the Notification. Likewise, under Notification No.9/96 which was a subsequent notification, there were 12 processes which were specified and the disability is mentioned in Condition No.1 which is only in respect of the manufacture of denim fabrics. In relation to the respondents, it is nobody's case that they are manufacturers of denim fabrics or other fabrics mentioned in the prohibited category. Order of the Commissioner itself records that the respondents by letter dated 23.03.1998 had explained in detail the process of manufacturing since 1992 and periodical checks were being done by the Department, and as a matter of fact, a show cause notice was issued earlier and an order in original was passed in O.I.O. No.2/98 - ASR, dated 19.02.1998 (mentioned as 1988) which goes to show the knowledge of the departmental officials, and in that view of the matter, there is no justification for invoking the extended period of limitation under Section 11-A of the Act, and there is no contra material before us to take a contra view. Even on the ground of limitation, the appeal of the Department would fail - Decided against Revenue. Issues involved: Interpretation of exemption notifications under Central Excise Act, 1944; Eligibility for exemption under specific notifications; Usage of power in manufacturing processes; Invocation of extended period of limitation under Section 11-A.Analysis:The judgment by the High Court of Andhra Pradesh involved three Central Excise Appeals filed by the Commissioner of Central Excise against the Final Order passed by the CESTAT, Bangalore. The respondent-assessee, engaged in processing cotton fabrics, was issued a Show Cause Notice demanding duty payment under Central Excise Rules. The respondent raised objections related to limitation, exemption notifications, and usage of power in manufacturing processes. The Commissioner found the assessee eligible for exemption under relevant notifications and dropped the proceedings. The Revenue challenged the order before the CESTAT on various grounds, including the availability of specific notifications and the usage of power in manufacturing processes.The Tribunal confirmed the Commissioner's order after considering relevant case law. The High Court analyzed the interpretation of exemption notifications, specifically Notification No.40/95 and No.9/96. It was established that the assessee was not using power in processes like dyeing and printing, making them eligible for exemption. The Tribunal's decision was based on findings that the processes were done manually, aligning with the requirements of the notifications. The usage of power in specific processes did not disqualify the assessee from exemption benefits under the notifications.The Court further examined the aspect of extended period of limitation under Section 11-A and found no justification for its invocation based on the department's knowledge and actions. The eligibility of the assessee under Notification No.9/96 was also addressed, with no challenge made on this ground. As the facts and grounds of challenge were identical across all three appeals, they were dismissed. The judgment emphasized the importance of fulfilling conditions of exemption notifications and proper interpretation of the restrictions related to power usage in manufacturing processes. The appeals were dismissed with no order as to costs, and pending miscellaneous petitions were disposed of as infructuous.