CESTAT sets aside order denying benefits to non-importer for goods supplied against International Competitive Bidding

CESTAT Ahmedabad allowed the appeal, setting aside the impugned order. The tribunal held that invoking Customs N/N. 21/2002 provisions at adjudication stage without citing them in the show cause notice exceeded SCN scope. The appellant, being a non-importer, was entitled to benefits under Sr. No. 91 of N/N. 6/2006-CE and Sr. No. 336 of N/N. 12/2012-CE for goods supplied against International Competitive Bidding. Non-submission of CEO undertaking and requisite certificate to Deputy Commissioner were deemed procedural lapses, not grounds for denying substantial benefits where there was substantial compliance with notification provisions.

---

---

Issues Involved:
1. Demand of Central Excise duty due to non-compliance with conditions of various notifications.
2. Imposition of penalties on the appellant and their authorized signatories.

Summary:

Issue 1: Demand of Central Excise Duty
The appellant, engaged in the manufacture of electric wires and cables, was issued a show cause notice (SCN) proposing a demand of Central Excise duty amounting to Rs. 4,42,30,084/- for allegedly availing exemptions under various notifications without furnishing the required undertakings/certificates to the competent authority. The Principal Commissioner confirmed the demand of Rs. 4,38,73,549/- under Sr. No. 91 & 91A of Notification No. 6/2006-CE as amended, Sr. No. 336 of Notification No. 12/2012-CE, Notification No. 15/2010-CE, and Notification No. 33/2005-CE, but dropped the demand related to Sr. No. 338 of Notification No. 12/2012-CE.

The appellant argued that they had substantially fulfilled the conditions prescribed under the relevant notifications and that the demand was not sustainable. They contended that the Commissioner's order was beyond the scope of the SCN, as it introduced additional grounds not mentioned in the SCN. The Tribunal agreed with the appellant, stating that invoking provisions of Customs Notification No. 21/2002 at the adjudication stage was beyond the SCN's scope and that the provisions of the Customs notification could not be applied to the appellant, who was not the importer of the goods. Therefore, the benefit of Sr. No. 91 of Notification No. 6/2006-CE and Sr. No. 336 of Notification No. 12/2012-CE could not be denied.

Regarding the non-observance of the condition with respect to furnishing an undertaking by the Chief Executive Officer, the Tribunal found that the appellant had substantially complied with the provisions of the relevant notification, and the mere non-submission of the undertaking was a procedural infringement. The substantial benefit could not be denied for a bona fide procedural lapse.

Issue 2: Imposition of Penalties
The Principal Commissioner imposed penalties u/s 11AC of the Central Excise Act, 1944, and personal penalties of Rs. 5,00,000/- each on the authorized signatories under Rule 26 of the Central Excise Rules, 2002. The Tribunal, however, found that the appellant had substantially complied with the conditions of the exemption notifications and that the non-submission of certain documents was merely procedural. Therefore, the substantial benefit could not be denied, and the penalties were not justified.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, holding that no demand was sustainable against the appellant under Sr. No. 91 of Notification No. 6/2006-CE, Sr. No. 91A of Notification No. 6/2006-CE as amended by Notification No. 46/2008, and Notification No. 12/2012-CE. The substantial compliance with the provisions of the exemption notifications was sufficient, and procedural lapses did not warrant the denial of benefits or imposition of penalties.

---