Manufacturer's Steel Doors Exemption Dispute: Compliance Key for Tax Benefits

M/s Shakti Met-Dor Limited Versus Commissioner of Central Excise, Customs & Service Tax, Hyderabad - II

M/s Shakti Met-Dor Limited Versus Commissioner of Central Excise, Customs & Service Tax, Hyderabad - II - TMI Issues:
- Entitlement to benefit of Notification No. 10/1997 for goods sold
- Imposition of interest on duty
- Possibility of imposing penalty

Entitlement to benefit of Notification No. 10/1997 for goods sold:
The case involved the appellant, a manufacturer of steel doors with frames, who sold such doors to a research institute under the Department of Animal Husbandry, Government of Andhra Pradesh, claiming exemption under Notification No. 10/1997-CE. The dispute arose when a Show Cause Notice was issued, alleging that the appellant did not qualify for the exemption as their goods did not fall under the specified categories in the notification. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the current appeal. The critical issue was whether the appellant was entitled to the benefit of the notification for the goods cleared by them. The notification exempted specified goods supplied to specific institutions subject to certain conditions, including registration with the Department of Scientific and Industrial Research (DSIR) of the Government of India. The appellant argued that the doors were required for animal vaccine research, making them eligible for the exemption. However, the Revenue contended that the goods did not match the description in the notification and that the buyer was not registered with DSIR at the time of clearance, thus challenging the appellant's entitlement.

Imposition of interest on duty:
Apart from the entitlement issue, the imposition of interest on the duty was also contested. The Adjudicating Authority had demanded interest on the duty along with penalties. The appellant argued that they were under a bona fide belief that they were eligible for the exemption, warranting the setting aside of the penalty. However, the Tribunal found that the demand was sustainable, and interest was payable due to the failure to meet the conditions specified in the notification. Despite this, the penalty was set aside based on the appellant's genuine belief in their eligibility for the exemption.

Possibility of imposing penalty:
The Tribunal's decision partly allowed the appeal by setting aside the penalty while confirming the demand and interest. The judgment highlighted precedents where exemptions were granted for specific goods supplied to research institutions for research purposes. However, in this case, the Tribunal found that the steel doors in question did not meet the criteria specified in the notification and that the buyer's registration with DSIR was not established. Consequently, the demand for duty and interest was upheld, but the penalty was waived due to the appellant's genuine belief in their eligibility for the exemption. The appeal was disposed of with this decision, emphasizing the importance of meeting the specific conditions outlined in exemption notifications to qualify for the benefits.