2017 (1) TMI 370 - AT - Central Excise

Government Undertaking Exempt from Bond Execution for Duty Liability Dispute

The Tribunal ruled in favor of the appellant, a Central Government Public Sector Undertaking, in a dispute over bond execution for provisional assessment ... Price escalation clause - provisional assessment in terms of Rule 7 of the Central Excise Rules, 2002 - whether, the appellant is to be considered as an “undertaking owned and managed directly by the Ministry” for the purpose of getting the benefit of non-execution of the bond and Bank Guarantee before the jurisdictional Central Excise Authorities for clearance of excisable goods on provisional basis? - Held that: - since the appellant is owned and managed by the Government of India through the Ministry of Heavy Industries and Public Enterprises, the case squarely falls under paragraph 6.1 contained in Chapter 14 of the CBEC Manual. Thus, the exemption provided therein for non-execution of Bond and payment of Bank Guarantee for clearance of goods on provisional basis should be available to the appellant - appeal allowed - decided in favor of appellant. Issues:1. Appellant's grievance regarding the execution of bond for provisional assessment of duty liability.2. Interpretation of whether the appellant qualifies as an 'undertaking owned and managed directly by the Ministry' for exemption from bond execution.3. Dispute over the applicability of CBEC Manual guidelines concerning bond execution and Bank Guarantee.Analysis:1. The appellant, a Central Government Public Sector Undertaking (CPSU), appealed against an order enhancing the value of bond and Bank Guarantee for provisional assessment by the Central Excise Authorities. The appellant contended that being a CPSU directly managed by the Ministry of Heavy Industries and Public Enterprises, it was exempt from bond execution as per CBEC Manual guidelines.2. The appellant argued that various aspects, such as share capital ownership by the President of India, appointment of directors by the Government, and determination of employee benefits by the Ministry, demonstrated direct management by the Government. The respondent, however, contended that the appellant did not qualify as a company directly managed by the Central Government under CBEC Manual paragraph 6.1.3. The Tribunal analyzed the appellant's status as a Government Company under the Companies Act, noting that 63.06% of its share capital was held by the President of India. Additionally, documents showed the Ministry's involvement in director appointments and company affairs, indicating direct ownership and management by the Government. Consequently, the Tribunal held that the appellant fell under the exemption in CBEC Manual Chapter 14, paragraph 6.1, and was not required to execute the bond or furnish Bank Guarantee for provisional clearance of goods.4. The Tribunal rejected the respondent's argument that the appellant did not meet the criteria for exemption, emphasizing the substantial government shareholding and control over the company's operations. As the appellant was owned and managed by the Government through the Ministry, the Tribunal ruled in favor of the appellant, stating that the Department's insistence on bond execution was contrary to the CBEC Manual guidelines.5. In conclusion, the Tribunal allowed the appeal, finding that the appellant met the criteria as an undertaking directly owned and managed by the Ministry, exempting it from the requirement of executing a bond and providing Bank Guarantee for provisional clearance of goods. The judgment highlighted the importance of adherence to CBEC Manual guidelines in determining exemption eligibility based on ownership and management structure.