2016 (10) TMI 869 - AT - Central Excise

Tribunal Denies Bus Exemption, Overturns Penalties for Lack of Fraudulent Intent

The Tribunal ruled that buses supplied to DMRC by the main appellant did not qualify as 'equipment' under Notification no.6/2006-CE, denying the ... Eligibility for exemption under N/N. 6/2006-CE dated 1.3.2006 (Sl.No.19) - manufacture of bus bodies - buses cleared to M/s. Delhi Metro Railway Corporation (DMRC) - Held that: - The wordings of Entry No.90 in the Notification is specific and the appellant’s claim that bus is an equipment cannot be accepted even by plain reading. The Original Authority also relied on the Board’s letter dated 14.09.2004 addressed to the DMRC enclosing two lists of items, for which exemption was sought by the DMRC. The Original Authority referred to the proceedings of the Empowered Committed on Delhi MRTS Project. The Original Authority, after examining in detail, the background of DMRC’s claim with the Department of Revenue recorded that bus cannot be even by implication considered as “equipment” It was also recorded that if the intention is to include the bus for exemption, the same could have found place in the original list of items submitted by the DMRC for consideration before the issue of the exemption notification - buses for passengers cannot be considered as an “equipment” within the scope of Entry No.90 of the above said notification. The appellant’s claim for such exemption is not tenable. Imposition of penalty - Held that: - the penalties imposed on the main appellant as well as the Director of the DMRC cannot be sustained. We find no justification for imposing equal amount of penalty on the main appellant in terms of Section 11 AC. The main appellant produced a certificate given by DMRC and claimed the exemption. DMRC gave such certificate based on their understanding of the claim for exemption. No fraudulent intent could be brought out in these transactions. DMRC is a Government Promoted Utility Organization and considering the facts and circumstances of the case, we find no justification in the imposition of equal penalty on the appellant and personal penalty on the Director of DMRC. Accordingly, we set aside the penalties imposed on them. Appeal disposed off - decided partly in favor of appellant. Issues:1. Eligibility for exemption under Notification no.6/2006-CE for buses supplied to DMRC.2. Interpretation of the term 'equipment' in the context of the exemption notification.3. Imposition of penalties on the main appellant and Director of DMRC.Analysis:1. The main issue in this case revolves around the eligibility of the buses supplied by the main appellant to DMRC for exemption under Notification no.6/2006-CE. The appellant claimed full exemption from excise duty for buses supplied to DMRC under Sl.No.19 of the notification. The Revenue objected to this claim, leading to proceedings to deny the exemption and recover the duty amounting to &8377; 1,60,09,717. The dispute centered on whether buses can be considered as 'equipment' eligible for exemption.2. The interpretation of the term 'equipment' under the notification was crucial. The appellant argued that buses should be classified as equipment and, therefore, qualify for the exemption. They relied on various dictionary meanings of 'equipment' to support their claim. On the other hand, the Revenue contended that buses, particularly those for transporting passengers, do not fall under the category of equipment as specified in the notification. The common understanding of 'equipment' in the context of central excise provisions was emphasized.3. Upon examination, the Tribunal found that buses supplied by the main appellant to DMRC did not qualify as 'equipment' as per the specific wording of the notification. The Tribunal considered the original list of items submitted by DMRC for exemption, the purpose for which the buses were procured, and the ownership and usage arrangements. It was established that buses for passenger transport did not meet the criteria set out in the notification for exemption as equipment. Therefore, the appellant's claim for exemption was deemed untenable.4. Regarding the penalties imposed on the main appellant and the Director of DMRC, the Tribunal ruled in favor of setting aside the penalties. It was noted that the main appellant had produced a certificate from DMRC in good faith to support their claim for exemption. No fraudulent intent was found in the transactions, especially considering DMRC's status as a Government Promoted Utility Organization. Consequently, the equal penalties imposed on the main appellant and the personal penalty on the Director of DMRC were deemed unjustified and were overturned.5. In conclusion, the Tribunal partly rejected the main appellant's appeal concerning the exemption claim but partly allowed it concerning the penalties. The appeal by the Director of DMRC was fully allowed, and the penalties imposed on both parties were set aside.