2025 (1) TMI 418 - AT - Central Excise

Appellant wins dumpers classification case, gets notification benefits under 6/2002-CE and 6/2006-CE, no penalty imposed

CESTAT Kolkata ruled in favor of appellant regarding classification of dumpers/trippers and entitlement to notification benefits. The appellant had ... Classification of Dumpers/Trippers - to be classified under tariff sub heading 87051090 as special type vehicles or as Dumpers/Trippers under sub-heading 87041010 and 87041090? - whether the appellant is entitled for the benefit of notification no. 6/2002-CE dated 01.03.2002 and notification no. 6/2006 CE dated 01.03.2006 or not? HELD THAT:- The claim of the appellant is that during the course of investigation, they have already paid an amount equal to 29 lakhs whereas the Cenvat Credit involved is Rs. 13,78,470/- - as the appellant has already reversed the Cenvat Credit attributable to the goods cleared without payment of duty taking the benefit of notifications, the condition of notification has been fulfilled by the appellant. The contention of the Revenue in this case is that if it is not detected, the appellant would not have reversed the Cenvat Credit, therefore, they are not entitled for benefit of notifications. The said contention is not sustainable, as appellant has reverse the Cenvat Credit during investigation itself before issuance of the Show Cause Notice. Conclusion - The Cenvat Credit is attributable to the goods cleared by the appellant without payment of duty claiming the benefit of notification no. 6/2002 CE dated 01.03.2002 and notification no. 6/2006 CE dated 01.03.2006 reversed Cenvat Credit attributable to the other goods used in manufacture of those goods along with interest. The appellant is entitled for the benefit of notification no. 6/2002 CE dated 01.03.2002 and notification no. 6/2006 CE dated 01.03.2006. No penalty is imposable on the appellants. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the manufacturer of vehicle bodies mounted on duty-paid chassis is entitled to exemption under the notifications providing nil duty for 'special purpose motor vehicles'/vehicles of heading 87.04, when classification by Revenue as vehicles under heading 87.04/8704(10)/(90) is disputed. 2. Whether the manufacturer loses entitlement to the exemption notifications if CENVAT credit attributable to the production of the exempted goods has been taken and subsequently reversed during investigation. 3. Whether the extended period of limitation is invokable in adjudication where the primary dispute concerns classification of the goods and entitlement to exemption notifications. 4. Whether penalty is imposable where exemption entitlement is contested but the assessee reverses CENVAT credit attributable to exempted clearances during investigation and partly concedes other exemption benefits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to exemption under notifications for vehicles (classification dispute) Legal framework: Exemption conditions in the notifications require, inter alia, that the goods be of specified tariff headings (special purpose motor vehicles/vehicles of heading 87.04) and, where manufactured out of duty-paid chassis falling under heading 87.06, that no CENVAT credit on such chassis and other inputs used in manufacture be taken under the CENVAT Credit Rules. Precedent treatment: No prior judicial or quasi-judicial precedents were invoked or relied upon in the decision; the Tribunal considered statutory notification entries and their explicit conditions. Interpretation and reasoning: The Tribunal examined whether, even if Revenue's preferred classification under heading 8704 is accepted, the conditional exemption remains available provided the specific condition regarding non-availment (or reversal) of CENVAT credit is satisfied. The Court focused on the conjunctive condition - classification plus compliance with the no-credit rule - and found that compliance (by reversal) was achieved. Ratio vs. Obiter: Ratio - A manufacturer is entitled to the exemption under the notifications when the statutory conditions are met (including non-availment/reversal of CENVAT credit attributable to the exempted clearances), even if the Revenue disputes classification but the goods fall within the notified ambit. Conclusion: The appellant is entitled to benefit of the exemption notifications insofar as the condition relating to CENVAT credit has been complied with by reversal; entitlement cannot be denied solely because Revenue initially disputed classification when the statutory condition has been fulfilled. Issue 2 - Effect of prior availment and subsequent reversal of CENVAT credit on entitlement Legal framework: The notifications disqualify benefit where CENVAT credit under specified rules has been taken on chassis/inputs used in manufacture of the relevant vehicles; compliance requires that no such credit be taken. Precedent treatment: No precedent was applied or distinguished; the Tribunal applied the plain terms of the notification and factual finding of reversal. Interpretation and reasoning: The Tribunal held that reversal of CENVAT credit attributable to goods cleared without payment under the notifications satisfies the condition. The fact that reversal occurred during investigation (and prior to issuance of the Show Cause Notice) was treated as adequate compliance. The Revenue's argument that reversal would not have occurred but for detection was rejected as irrelevant to statutory entitlement once reversal has been effected. Ratio vs. Obiter: Ratio - Actual reversal of CENVAT credit attributable to exempted clearances cures the disqualifying effect of earlier credit availment and restores entitlement to the exemption notifications, subject to interest where appropriate. Conclusion: Reversal of the attributable CENVAT credit (as established on the record) fulfilled the condition of the notifications; therefore benefit accrues despite prior inadvertent credit availment. Issue 3 - Invokability of extended period of limitation in classification disputes Legal framework: Extended period of limitation is ordinarily invokable where suppression or fraud is found or where specific statutory tests are met; its application depends on the nature of the demand and the facts established. Precedent treatment: The Tribunal did not undertake extended precedent analysis nor rest its decision on a detailed limitation jurisprudence; it observed the appellant's contention that extended limitation is not sustainable in a classification issue. Interpretation and reasoning: The Tribunal identified the core issue as entitlement to exemption and compliance with notification conditions rather than suppression/fraud necessitating extended limitation. Given acceptance of reversal and compliance, the extended period challenge became immaterial to the outcome; the decision does not explicitly hold on the general proposition but treats extended limitation contentions as not determinative when conditional compliance is established. Ratio vs. Obiter: Obiter - The observations regarding limitation are incidental; no binding ratio on the general applicability of extended limitation to classification disputes is laid down. Conclusion: The Tribunal did not sustain the Revenue's insistence on extended limitation as a determinative ground in the facts where compliance with exemption conditions by reversal was established; no definitive rule on extended limitation vis-à-vis classification disputes was pronounced. Issue 4 - Imposition of penalty where reversal and partial concession occur Legal framework: Penalty provisions under central excise discipline permit imposition where statutory violations are established, with consideration of mens rea, conduct, reversal, cooperation, and admitted liabilities. Precedent treatment: No penalties jurisprudence was invoked; the Tribunal exercised discretion based on facts. Interpretation and reasoning: The Tribunal noted that the appellant reversed CENVAT credit attributable to the exempted clearances during investigation, admitted and agreed to pay the amount relating to the conceded SSI exemption, and there was no finding of deliberate suppression or mala fide conduct warranting penalty. On this factual matrix, the Tribunal exercised discretion to refrain from imposing penalty. Ratio vs. Obiter: Ratio - Where the assessee rectifies the disqualifying credit (reversal), cooperates in investigation, and concedes other liabilities, imposition of penalty is not warranted on the facts; the Tribunal's decision is an exercise of discretion tailored to these facts. Conclusion: No penalty was imposable in the facts and circumstances because the attributable CENVAT credit had been reversed and other admitted liabilities were settled; the Tribunal declined to impose penalty. Cross-references Issues 1 and 2 are interconnected: entitlement to notification benefits (Issue 1) is conditional upon non-availment/reversal of CENVAT credit (Issue 2); satisfaction of Issue 2 leads directly to the conclusions on Issue 1. Issue 4 (penalty) is dependent on factual findings under Issues 1 and 2 regarding reversal, cooperation and absence of deliberate suppression. Issue 3 (limitation) was considered but rendered non-decisive by the Tribunal's acceptance of reversal and consequent entitlement.