Revenue's demand for central excise duty on capital goods clearance fails as duty applies only to manufactured goods

CESTAT NEW DELHI allowed the appeal challenging central excise duty demand on capital goods clearance. The Revenue incorrectly presumed duty was leviable on amounts received rather than on manufactured goods removed. The tribunal held that excise duty under Central Excise Act applies only to goods manufactured or produced in India, becoming payable on removal regardless of payment receipt timing. The demand on capital goods sold by the appellant, which were not manufactured by it, exceeded the scope of charging section 3 and Union's legislative powers under Constitution's Seventh Schedule. The tribunal emphasized Revenue bears burden of proof under Evidence Act section 102 for establishing escaped duty assessment.

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Issues involved:
The issues involved in the judgment are the levy of Central Excise duty on goods cleared, misdeclaration of value, demand of duty on used capital goods, and imposition of penalty under section 11AC.

Levy of Central Excise duty on goods cleared:
The appellant, a manufacturer of printed material, entered into a contract with the Board of Secondary Education of Madhya Pradesh to supply answer sheets. The department alleged misdeclaration of value based on Form 26AS, demanding additional duty. However, the Tribunal clarified that duty is payable on removal of goods, not contingent on receipts, and cannot be demanded on amounts received unrelated to excisable goods.

Misdeclaration of value:
The department alleged that the appellant had misdeclared the value of goods cleared, leading to a demand for differential duty. The Tribunal emphasized that duty is to be levied only on excisable goods manufactured or produced, not on amounts received, and rejected the demand based on incorrect understanding of the law.

Demand of duty on used capital goods:
The department issued a Show Cause Notice demanding duty on used capital goods sold by the appellant. The Tribunal noted that excise duty cannot be charged unless goods are manufactured or produced by the appellant, and the demand on capital goods sold, which were not manufactured by the appellant, was beyond the scope of the law.

Imposition of penalty under section 11AC:
The department proposed to impose an equal amount as penalty under section 11AC. However, the Tribunal set aside the impugned order, stating that the demand and penalty cannot be sustained as they were based on an incorrect understanding of the law regarding the levy of Central Excise duty.

Conclusion:
The Tribunal allowed the appeal, set aside the impugned order, and provided consequential relief to the appellant, emphasizing that duty is chargeable only on excisable goods manufactured or produced in India, not on amounts received or on goods sold through commercial invoices that were not manufactured or produced by the appellant.

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