2004 (9) TMI 102 - SC - Central Excise

Failure to submit declaration under Notification 11/88 (Rule 174A) disqualifies manufacturer from exemption; mandatory compliance required

EAGLE FLASK INDUSTRIES LIMITED Versus COMMISSIONER OF C. EX., PUNE

The SC dismissed the appeal, holding that failure to submit the declaration and undertaking required by Notification 11/88 (issued under Rule 174A) ... Duty demand - failure to obtain the required L-4 license and non-compliance with excise regulations - Whether mere lapse of non-submitting a declaration in terms of Notification 11/88 does not dis­entitle the assessee from the benefits otherwise available under the Notification? - Held that:- Notification 11/88 deals with exemption from operation of Rule 174 to exempted goods. The Notification has been issued in exercise of powers conferred by Rule 174A of the Rules. Inter alia it is stated therein that, where the goods are chargeable to nil rate of duty or exempted from the whole of duty of excise leviable thereon, the goods are exempted from the operation of Rule 174 of the Rules. The goods are specified in the Schedule to the Central Excise Tariff Act, 1985 (in short 'the Tariff Act'). The proviso makes it clear that where goods are chargeable to nil rate of duty or where the exemption from the whole of the duty of excise leviable is granted on any of the six categories enumerated, the manufacturer is required to make a declaration and give an undertaking, as specified in the Form annexed while claiming exemption for the first time under this Notification and thereafter before the 15th day of April of each financial year. As found by the forums below, including CEGAT, factually, the declaration and the undertaking were not submitted by the appellants. This is not an empty formality. It is the foundation for availing the benefits under the Notification. It cannot be said that they are mere procedural requirements, with no consequences attached for non-observance. The consequences are denial of benefits under the Notification. For availing benefits under an exemption Notification, the conditions have to be strictly complied with. Therefore, CEGAT endorsed the view that the exemption from operation of Rule 174, was not available to the appellants. On the facts found, the view is on terra firma. We find no merit in this appeal, thus dismissed. Issues:Challenge to order passed by Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) - Duty demand and penalty imposition.Analysis:The appellants contested a duty demand of Rs. 14,95,893/- and a penalty of Rs. 5,000/- imposed by the Adjudicating Authority and upheld by the Collector, Central Excise and Customs (Appeals). The appellants claimed exemption from Central Excise Licensing Control under Rule 174A of the Central Excise Rules, 1944 for goods manufactured at their main factory during the disputed period. However, the Central Excise authorities issued a show cause notice alleging failure to obtain the required L-4 license and non-compliance with excise regulations. The Adjudicating Officer and Collector (Appeals) found the appellants liable for duty and penalty. The CEGAT dismissed the appeal, upholding the departmental orders.The appellants argued before the CEGAT that exemption notification 53/88 dated 1-3-1988 exempted the casseroles manufactured by them. They contended that the failure to file a declaration under Notification 11/88 was a procedural lapse and should not lead to substantial tax liability. However, the CEGAT affirmed the departmental orders, stating that the appellants failed to comply with the declaration requirement under Notification 11/88, thereby confirming the duty demand and penalty imposition.The Supreme Court analyzed Notification 11/88, which provides exemption from Rule 174 for goods chargeable to nil duty or fully exempted. The Notification mandates a declaration and undertaking for claiming exemption, which the appellants failed to submit. The Court emphasized that strict compliance with conditions is necessary to avail benefits under an exemption Notification. Since the appellants did not fulfill the declaration requirement, they were not entitled to the exemption from Rule 174. Consequently, the Court upheld the CEGAT's decision, dismissing the appeal.In conclusion, the Supreme Court affirmed the CEGAT's decision, emphasizing the importance of complying with exemption Notification requirements for availing benefits. The failure to submit the necessary declaration under Notification 11/88 led to the denial of exemption from Rule 174, resulting in the confirmation of duty demand and penalty imposition against the appellants.