1999 (9) TMI 187 - AT - Central Excise

Tribunal rules in favor of appellants for Chulhas exemption, penalties set aside.

UP. STATE AGRO IND. CORPN. LTD. Versus COMMISSIONER OF C. EX., MEERUT

UP. STATE AGRO IND. CORPN. LTD. Versus COMMISSIONER OF C. EX., MEERUT - 1999 (114) E.L.T. 955 (Tribunal) Issues Involved:1. Eligibility of 'Improved Chulhas' for exemption under Notifications No. 181/88-C.E. and 41/94-C.E.2. Justification for invoking the extended period under Section 11A(1) of the Central Excises & Salt Act, 1944.3. Liability for penal action under Rule 173Q for contravention of Section 6 of the Central Excises & Salt Act read with Rules 174, 9(1), and 173G of the Central Excise Rules.Issue-wise Detailed Analysis:Issue I: Eligibility for Exemption under Notifications No. 181/88-C.E. and 41/94-C.E.The appellants, authorized to manufacture 'improved Chulhas' under the National Programme on Improved Chulhas, claimed exemption from Central Excise duty under Notifications No. 181/88-C.E. and 41/94-C.E. These notifications provided for exemption for wood-burning stoves of iron or steel. The primary question was whether the improved Chulhas manufactured by the appellants fell within this category. The adjudicating authority had initially ruled against the appellants, stating that the presence of an aluminum sheet in the Chulhas disqualified them from being considered wood-burning stoves of iron or steel. However, upon review, it was found that the Chulhas predominantly consisted of iron and steel, with the aluminum sheet constituting only a minor part (2.2% by weight). The tribunal concluded that the products were indeed wood-burning stoves of iron or steel, thus eligible for the exemption under the cited notifications.Issue II: Justification for Invoking the Extended Period under Section 11A(1)The appellants contended that the extended period of limitation under Section 11A(1) of the Central Excises & Salt Act, 1944, was not applicable as there was no suppression of facts with intent to evade duty. They argued that they had a bona fide belief that their products were exempt and had promptly responded to all departmental queries. The tribunal agreed, noting that the appellants, being a state government undertaking, had no reason to suppress information. The tribunal referenced past decisions where bona fide belief negated the invocation of the extended period, thereby ruling that the extended period was not justifiable in this case.Issue III: Liability for Penal Action under Rule 173QGiven the findings on Issues I and II, the tribunal concluded that the appellants were not liable for penal action under Rule 173Q. The penalties imposed by the adjudicating authority were based on the assumption of duty evasion and suppression of facts, which were not substantiated. Consequently, the tribunal set aside the penalties.Conclusion:The tribunal set aside the impugned order, ruling in favor of the appellants on all issues. The improved Chulhas were deemed eligible for exemption under the cited notifications, the extended period for duty demand was deemed inapplicable, and the appellants were not liable for penal action. The appeal was allowed with consequential reliefs to the appellants.