2003 (6) TMI 157 - AT - Central Excise

Tribunal Upholds Duty Payment for State Entity's Non-Compliance

The Tribunal upheld the duty payment by the Irrigation Department, State of Maharashtra, for non-payment of duty on items manufactured and cleared between ... Exemption - Demand - Limitation Issues:1. Duty payment by Irrigation Department, State of Maharashtra2. Applicability of exemption notification No. 74/933. Interpretation of goods intended for use by a department of the Government4. Liability for penalty and confiscationIssue 1: Duty payment by Irrigation Department, State of MaharashtraThe appeals were filed against an Order-in-Original confirming duty payment by the Irrigation Department, State of Maharashtra, for non-payment of duty on various items manufactured and cleared between April 1996 to June 2000. The Commissioner found the duty payable and imposed a penalty of Rs. 50 lacs. The appellant contended that goods supplied to statutory corporations created by the State Government should be exempt under Notification No. 74/93. The Commissioner did not accept this contention but refrained from ordering confiscation due to the department's status as a State Government entity.Issue 2: Applicability of exemption notification No. 74/93The appellant argued that goods supplied to statutory corporations like Maharashtra Krishna Valley Corporation, Tapi Valley Corporation, etc., should be exempt under Notification No. 74/93 as these corporations were extensions of the Government of Maharashtra and fully controlled by the State. The contention was that goods sold to these corporations should be considered as used by the department of the Government of Maharashtra, making them eligible for the exemption. However, the Tribunal held that statutory corporations are separate legal entities created by Acts of the Legislature of Maharashtra and cannot be equated with the State Government for the purpose of the exemption notification.Issue 3: Interpretation of goods intended for use by a department of the GovernmentThe Tribunal analyzed the wording of Notification No. 74/93, which exempts goods intended for use by any department of the State Government. It was observed that the goods in question were sold to statutory corporations created by specific Acts, which are distinct legal entities with separate property rights. The Tribunal concluded that the intention of the notification was not to extend the exemption to goods supplied to such statutory corporations, as they are separate from the State Government departments.Issue 4: Liability for penalty and confiscationThe Tribunal considered the argument that the payment of a substantial amount of duty by the Irrigation Department prior to the order contradicted the claim of intent to evade duty. It was noted that the Department had paid a significant portion of the demanded sum both before and after the order. The Tribunal held that under the circumstances, the larger period of limitation under Section 11A of the Central Excise Act was not applicable, leading to the dismissal of the department's appeal and allowing the appeal filed by the Irrigation Department of the State of Maharashtra.In conclusion, the Tribunal allowed the appeal filed by the Irrigation Department, State of Maharashtra, with consequential benefits according to law, while dismissing the appeal filed by the department for enhancement of penalty.