2024 (1) TMI 81 - AT - Central Excise

Ducting systems for air-conditioning qualify as parts under Notification 22/2003-CE, demand unsustainable /2003

CESTAT Bangalore held that ducting systems supplied by appellant to 100% EOU under CT-3 certificates were eligible for Notification No. 22/2003-CE ... Eligibility for benefit of Notification No. 22/2003-CE - CT-3 certificate removals - part of an air-conditioning system - customised ducting as component of central air-conditioning - re-warehousing certificate and jurisdiction of user industry officer - extended limitation invoked post-audit and absence of suppressionEligibility for benefit of Notification No. 22/2003-CE - CT-3 certificate removals - part of an air-conditioning system - customised ducting as component of central air-conditioning - Items supplied by the appellant under CT-3 certificates are eligible for the benefit of Notification No. 22/2003-CE (entry relating to central air-conditioning equipment and parts) as they constitute part of an air-conditioning system. - HELD THAT: - The Tribunal examined the CT-3 certificates which described the items as accessories/parts of air-conditioning equipment and considered the chartered engineer's certificate and process details produced by the appellant. It accepted the factual and technical finding that the goods supplied are customised ducting and associated components used in central air-conditioning systems (supply and return ducts integral to system operation). The Revenue's contention that the items are only GI hollow profiles classified under tariff headings and not parts of air-conditioning system was rejected because the goods were made to user specifications for use in air-conditioning installations and serve an essential functional role in the system. Consequently the clearances under the impugned CT-3 certificates fall within entry No.3 of Notification No. 22/2003-CE dated 31.03.2003 and the demand based on denial of that benefit is unsustainable. [Paras 9, 12, 14, 16]Goods cleared under the CT-3 certificates are part of an air-conditioning system and are eligible for the Notification No. 22/2003-CE benefit.Re-warehousing certificate and jurisdiction of user industry officer - CT-3 certificate removals - Where clearances are effected against valid CT-3 certificates and re-warehousing certificates are obtained from the user industry, any action for violation of notification conditions lies with the jurisdictional officer of the user industry and not with the supplier's jurisdictional officer. - HELD THAT: - The Tribunal accepted the appellant's submission and authorities cited that once removals are made under bona fide CT-3 certificates issued by the user industry's jurisdictional officer and the supplier obtains the requisite re-warehousing certificate, responsibility for any non-compliance rests with the user industry and its officer. The appellant had furnished the ARE/re-warehousing documentation as required and there was no suppression on its part; hence the Department's attempt to fasten liability on the appellant was not tenable. [Paras 15, 16]Liability, if any, for breaches of Notification conditions is for the user industry/jurisdictional officer of the user industry; the appellant having complied with re-warehousing formalities cannot be held liable.Extended limitation invoked post-audit and absence of suppression - interest and penalty - The demand, interest and penalty cannot be sustained where there is no suppression or misstatement and where clearances were made against valid CT-3 certificates; accordingly extended limitation and penalty/interest do not survive. - HELD THAT: - The Tribunal recorded that the case was made out post-audit and there was no allegation or finding of suppression or misstatement by the appellant; the transactions were reflected in records and clearances were under CT-3 certificates. Given the finding that the clearances were eligible under the Notification and the absence of suppression, the extended period invocation and the consequential demand for duty, interest and imposition of penalty were found unsustainable and liable to be set aside. [Paras 12, 16]Demand, interest and penalty set aside; extended period invocation not sustained in the facts of this case.Final Conclusion: The appeals are allowed: the Tribunal held the goods cleared under the CT-3 certificates to be parts of central air-conditioning systems eligible for Notification No. 22/2003-CE; findings record compliance by the appellant with re-warehousing formalities and absence of suppression, and therefore the departmental demand, interest and penalties are set aside with consequential relief as per law. Issues involved:The issues involved in this case are whether the items supplied by the appellant to the user industry against CT-3 certificates are eligible for the benefit of Notification No. 22/2003-CE dated 31.03.2003 under entry No. 3, and whether the larger time limit invoked based on audit observations is justified.Issue 1: Benefit of Notification No. 22/2003-CE:The appellant, engaged in the manufacture of Galvanized Iron (G.I) hollow profiles and Aluminum Hollow Profiles, supplied goods to 100% EOU based on CT-3 certificates. The Department contended that the goods cleared were not eligible for the benefit of Notification No. 22/2003-CE. The appellant argued that the goods supplied were part of an air-conditioning system, as certified by a chartered engineer, and were custom-made for such systems. The Tribunal found that the items supplied were indeed part of the air-conditioning system and eligible for the benefit under the said Notification. The demand, interest, and penalty imposed were deemed unsustainable.Issue 2: Larger Time Limit based on Audit Observations:The appellant argued that the larger time limit invoked based on audit observations was not justified. They cited various case laws to support their contention that the larger time limit cannot be invoked solely based on audit observations. The Tribunal agreed with the appellant, stating that they had not suppressed any information or resorted to misstatement in their clearances against valid CT-3 certificates. Therefore, the larger time limit invoked by the Department was not sustainable.Conclusion:In conclusion, the Tribunal allowed the appeals, finding in favor of the appellant on both issues. The goods supplied were deemed eligible for the benefit of Notification No. 22/2003-CE as they were integral parts of an air-conditioning system. The demand, interest, and penalty imposed were held to be unsustainable. The larger time limit invoked based on audit observations was also deemed unjustified.