2026 (2) TMI 329 - AT - Central Excise

Cashew Shell Liquid SSI exemption affirmed after corrigendum and TRU clarification; duty demand, interest and penalty quashed.

Cashew Shell Liquid (CNSL) classified under Chapter Heading 1302 19 20 was eligible for small scale industry (SSI) exemption under Notification No. ... SSI exemption - Cashew Shell Liquid (CNSL) - corrigendum as part of notification - interpretation aided by TRU clarification - rate notification cannot override exemption - interest and penalty consequential on duty demand - Whether Cashew Shell Liquid (CNSL) falling under Chapter Heading 1302 19 20 was eligible for SSI exemption under Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE during 2012-13? - HELD THAT:- On a plain and harmonious reading of Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE read with the Corrigendum dated 28.02.2006, CNSL clearly remains eligible for SSI exemption. The Department’s contention proceeds on a truncated and incomplete reading of the Annexure by ignoring the corrigendum, which is legally impermissible. Read conjointly, the principal notification, the corrigendum, and the TRU clarification unmistakably establish that there was no conscious policy decision to deny SSI exemption to Cashew Shell Liquid, and the Department’s reliance on an uncorrected or truncated version of the Annexure is therefore legally unsustainable. The ratio laid down in Shah Foods Ltd. [2012 (9) TMI 676 - CESTAT, AHMEDABAD], squarely applies to the present case, as the corrigendum relied upon herein is identical in nature and scope. We also note that the Appellant has cited its own case and other precedents during the course of hearing, wherein consistent views have been taken that once a corrigendum clarifies the scope of an exemption notification, the Department cannot selectively rely upon an uncorrected or truncated version of the Annexure to deny statutory benefits. It is well settled that a rate notification cannot nullify or negate an exemption notification unless such intention is explicitly stated. In the absence of any express provision withdrawing SSI exemption for CNSL, the benefit available under Notification No. 8/2003-CE continues to operate independently. Once it is held that the Appellant was legally entitled to SSI exemption during the relevant period, the very foundation of the demand collapses. Consequently, the demand of duty confirmed in the impugned order is unsustainable in law. It follows as a natural corollary that interest under Section 11AA of the Central Excise Act, 1944, being purely consequential and compensatory in nature, cannot survive when the principal demand itself fails. Similarly, the penalty imposed under Rule 25 of the Central Excise Rules, 2002 is also liable to be set aside, as penalty cannot be sustained in the absence of a legally valid duty demand. Thus, Cashew Shell Liquid (CNSL) falling under Chapter Heading 1302 19 20 is eligible for SSI exemption under Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE, read with Corrigendum dated 28.02.2006; The impugned Order-in-Appeal dated 30.01.2014 is hereby set aside. Accordingly, the appeal is allowed. Issues: (i) Whether Cashew Shell Liquid (CNSL) falling under Chapter Heading 1302 19 20 was eligible for SSI exemption under Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE during 2012-13? (ii) Whether the demand of duty, interest and penalty is sustainable?Issue (i): Whether CNSL classifiable under Chapter 13 was eligible for SSI exemption under Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE read with Corrigendum dated 28.02.2006.Analysis: Notification No. 8/2006-CE substituted the Annexure to Notification No. 8/2003-CE and a Corrigendum dated 28.02.2006 clarified the Annexure to read 'All goods falling under Chapter 9 to 20 (except heading 0902)'. CNSL is classifiable under Chapter 13 which falls within Chapters 9 to 20. The corrigendum issued prior to the effective date forms an integral part of the amending notification. The TRU clarification supports the corrected scope. Prior decisions holding that corrigenda to budget notifications are binding apply.Conclusion: CNSL falling under Chapter Heading 1302 19 20 is eligible for SSI exemption under Notification No. 8/2003-CE as amended by Notification No. 8/2006-CE read with Corrigendum dated 28.02.2006.Issue (ii): Whether the demand of duty, interest and penalty confirmed by the authorities is sustainable in law.Analysis: If SSI exemption applies for the relevant period, the foundational duty demand fails. Interest under Section 11AA is consequential on a valid duty demand. Penalty under Rule 25 of the Central Excise Rules, 2002 cannot be sustained in the absence of a legally valid duty demand. Rate notifications relied upon by the Department do not, in the absence of express language, withdraw or override an exemption notification.Conclusion: The demand of duty amounting to Rs.3,22,457/-, interest under Section 11AA of the Central Excise Act, 1944, and penalty under Rule 25 of the Central Excise Rules, 2002 are unsustainable and are set aside.Final Conclusion: The appeal is allowed and the impugned Order-in-Appeal is set aside, with consequential reliefs if any available under law.Ratio Decidendi: A corrigendum issued to an amending notification that corrects the Annexure is an integral part of that notification and must be read into the notification; consequently, goods falling within the chapters specified by the corrigendum remain eligible for the exemption such corrigendum clarifies.