2018 (7) TMI 410 - AT - Central Excise

Tribunal quashes duty demand on footwear parts, cites exemption history

The Tribunal allowed the appeal, quashed the demand of duty along with interest and penalty on parts of footwear for the disputed period, and set aside ... Benefit of N/N. 49/86-CE dated 10.02.1986 as amended by N/N. 128/86-CE dated 01.03.1986 - manufacture of Footwear - period 01.03.1987 to 23.04.1987 - Held that:- On close reading of the legislative history of the Exemption Notification of the parts of footwear used in the factory of production in the manufacture of footwear falling under sub-heading NO. 6401.11 is exempted from payment of Excise duty, except for the disputed period of 01.03.1987 to 23.04.1987 - In the present case, after considering the legislative history of the exemption Notifications on parts of footwear since 1967, which was continued except for the disputed period of four days. The N/N. 119/87-CE, would be treated as clarificatory in nature in the fine of Government Policy as the legislature had given the exemption to the final product on footwear even during the disputed period. The issue is covered by the decision in the case of WPIL. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT, UP. [2005 (2) TMI 137 - SUPREME COURT OF INDIA], where it was held that In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory promises, it could not be said that while issuing Notification No. 46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. Appeal allowed - decided in favor of appellant. Issues Involved:1. Demand of duty along with interest and penalty on parts of footwear for the period 01.03.1987 to 23.04.1987.2. Applicability of exemption notifications to parts of footwear during the disputed period.3. Validity of the show cause notice and the imposition of penalty.4. Interpretation of subsequent notifications as clarificatory or new exemptions.Detailed Analysis:1. Demand of Duty Along with Interest and Penalty:The appellant, engaged in the manufacture of footwear and parts of footwear classified under Chapter 64 of the Central Excise Tariff Act, 1985, faced a demand of Rs. 7,51,313.70 along with interest and penalty for the period from 01.03.1987 to 23.04.1987. The adjudicating authority confirmed this demand, which was upheld by the Commissioner (Appeals), leading to the present appeal before the Tribunal.2. Applicability of Exemption Notifications:The appellant availed the benefit of exemption from payment of excise duty under Notification No. 49/86-CE dated 10.02.1986, as amended by Notification No. 128/86-CE dated 01.03.1986, for parts used in the manufacture of footwear within the factory. However, Notification No. 89/87-CE dated 01.03.1987 omitted the relevant exemption, and it was reinstated by Notification No. 119/87-CE dated 24.04.1987. The Tribunal noted that the series of notifications indicated no exemption benefit was available for the period from 01.03.1987 to 23.04.1987. The appellant argued that the subsequent notification should be treated as clarificatory and effective retrospectively, based on the legislative history of continuous exemptions since 1967.3. Validity of the Show Cause Notice and Imposition of Penalty:The appellant contended that the show cause notice issued on 25.09.1991 was barred by limitation and that there was no fraud, collusion, misstatement, or suppression of facts to justify the imposition of penalty. They argued that the parts used in the manufacture of the closing stock of footwear were cleared prior to 28.02.1986, and thus, no duty was evaded. The Tribunal considered these arguments and the legislative history of the exemption notifications.4. Interpretation of Subsequent Notifications:The Tribunal referred to the decisions of the Hon’ble Supreme Court in WPIL Ltd. v. Commissioner of Central Excise, Meerut, U.P. [2005 (181) ELT 359 (SC)] and Ralson (India) Ltd. v. Commissioner of C.Ex., Chandigarh-I [2015 (319) ELT 234 (SC)], which held that subsequent notifications clarifying earlier exemptions should be treated as clarificatory and effective retrospectively. The Tribunal found force in the appellant's argument that Notification No. 119/87-CE dated 24.04.1987 should be treated as clarificatory, continuing the exemption policy, and not as a new exemption.Conclusion:The Tribunal concluded that the legislative history of exemption notifications since 1967, the continuous policy of granting exemptions, and the clarificatory nature of the subsequent notification supported the appellant's case. The Tribunal set aside the impugned orders, allowed the appeal, and quashed the demand raised against the appellant. The operative part of the order was pronounced in the open court.