2007 (10) TMI 119 - AT - Central Excise

Tribunal overturns duty demand and penalties, finding products exempt under specific notifications

The Tribunal overturned the duty demand of Rs.8,91,58,843 imposed on products cleared clandestinely without duty payment, as they were found to be exempt ... Payment of duty on the products which are exempted under Not. 56/95 and 46/94, amounts to reversal of credit – Once the product in dispute were not required to discharge duty liability, the demand confirmed on account of clandestine removal in the impugned order can’t be sustained . Issues:Duty demand on poly tubes, micro tubes, and HDPE pipes cleared clandestinely without payment of duty; imposition of penalties on the manufacturers and company; imposition of personal penalties on various officers of the company.Analysis:The Commissioner of Central Excise confirmed a duty demand of Rs.8,91,58,843 on certain products cleared clandestinely without duty payment by the company during a specific period. Penalties were imposed on the manufacturers and the company, along with personal penalties on several officers of the company. The issue revolved around the duty demand and penalties imposed, including personal penalties on the officers.The products in question were found to fall under chapter heading 84.24 of the Schedule to the Central Excise Tariff Act and were eligible for exemption from duty payment under specific notifications. The Commissioner acknowledged the classification and exemption eligibility in the impugned order. However, it was noted that the question of classification and exemption was deemed extraneous to the issue of clandestine removal. As the products were exempt from duty liability, the demand confirmed in the order could not be upheld. The argument by the Revenue's Representative regarding the availed modvat credit of duty paid on the products was dismissed, as the duty payment on exempt products leads to credit reversal. The Tribunal's focus was on upholding the duty confirmed by the Commissioner, not on credit recovery issues.Given the setting aside of the duty demand, the associated penalties were also deemed unsustainable and subsequently set aside. Consequently, the impugned order was overturned, and the appeals were allowed. The judgment highlighted the importance of considering exemption eligibility in duty demands and the inapplicability of penalties when duty demands are invalidated.