2018 (4) TMI 1312 - AT - Central Excise

Tribunal emphasizes distinction between technical and substantive conditions for Central Excise duties refund adjustment

The Tribunal set aside the order confirming demand for Central Excise duties and penalties, emphasizing the distinction between technical and substantive ... Export of goods to Falta Special Economic Zone (SEZ) without furnishing a General Bond or Letter of Undertaking to the jurisdictional Assistant Commissioner of Central Excise - contravention of provisions of Rule 19 of the Central Excise Rules, 2002 read with N/N. 42/2001-CE(NT) dated 26.06.2001 as amended - Held that: - Hon’ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner [1991 (8) TMI 83 - SUPREME COURT OF INDIA] has held that Appellant did not have prior permission because it was withheld by the Revenue without any justification. The High Court took the view that after the period to which the adjustment related had expired no permission could at all be granted. A permission of this nature was a technical requirement and could be issued making it operative from the time it was applied for - appeal allowed - decided in favor of appellant. Issues:1. Alleged contravention of Rule 19 of Central Excise Rules, 2002.2. Failure to furnish General Bond or Letter of Undertaking for export to SEZ.3. Confirmation of demand for Central Excise duties and penalty imposition.4. Claim of ignorance of law and procedural non-compliance.5. Interpretation of substantive vs. procedural conditions for exemption.6. Applicability of prior permission requirement for adjustment of refunds.Issue 1: Alleged contravention of Rule 19 of Central Excise Rules, 2002The appellant, engaged in industrial fan manufacturing, faced a Show Cause Notice for contravening Rule 19 by exporting goods to SEZ without furnishing a General Bond or Letter of Undertaking. The Adjudicating Authority confirmed the demand for Central Excise duties and imposed penalties, leading to the present appeal.Issue 2: Failure to furnish General Bond or Letter of Undertaking for export to SEZThe appellant exported goods to Falta SEZ without complying with the procedural requirement of furnishing a General Bond or Letter of Undertaking. Despite submitting copies of ARE-1 to the department, the appellant did not respond to the show cause notice or appear for a hearing, resulting in the demand confirmation and penalty imposition.Issue 3: Confirmation of demand for Central Excise duties and penalty impositionThe Commissioner (Appeals) upheld the order confirming the demand for Central Excise duties and penalties imposed by the Adjudicating Authority. The appellant, a small SSI unit, argued that they paid the duty at the insistence of their customers and that their turnover was below the threshold. The Tribunal considered the submissions in light of relevant legal precedents.Issue 4: Claim of ignorance of law and procedural non-complianceThe appellant contended that being a small-scale undertaking, they were not fully aware of the procedural requirements for export to SEZ. They argued that despite procedural lapses, the goods were duly received in SEZ, and compliance failure should not disqualify them from availing substantive benefits. Legal precedents were cited to support this argument.Issue 5: Interpretation of substantive vs. procedural conditions for exemptionThe Tribunal analyzed the distinction between substantive and procedural conditions for exemption, citing the Hon'ble Supreme Court's observations in previous cases. The judgment emphasized the need to differentiate between conditions of substance embodying policy considerations and those of a procedural or technical nature, especially concerning exemptions and permissions.Issue 6: Applicability of prior permission requirement for adjustment of refundsThe Tribunal, aligning with the Supreme Court's decision, set aside the impugned order by emphasizing the importance of distinguishing between technical requirements and substantive conditions. It directed the grant of permission for adjustment of refunds, highlighting that the refusal of permission without justification was a technicality that should not disentitle the appellant from availing benefits.