2001 (4) TMI 425 - AT - Central Excise

Court Allows Appeal Due to Flawed Duty Recovery Logic

The appeal was allowed, and consequential relief was granted as the court found that the duty recovery demand and penalty imposition were based on flawed ... Demand and Penalty Issues:Manufacture and clearance of excisable goods without payment of duty, validity of CT 2 certificates, imposition of penalty, interpretation of Central Excise Rules.Manufacture and Clearance of Goods:The assessees manufactured excisable goods and cleared them without duty payment to another entity under a specific notification allowing duty-free clearance for further export-manufactured goods. The movement of goods was to be governed by Chapter X of the Central Excise Rules, requiring the recipient manufacturer to possess specific certificates. The certificates held by the recipient assessee had expired when the goods were supplied, leading to a show cause notice for duty recovery. The Deputy Commissioner confirmed the duty and imposed a penalty, which was upheld by the Commissioner based on the expiry of the certificates as per the notification.Validity of CT 2 Certificates:The certificates possessed by the recipient assessee had expired before the goods were supplied, leading to the duty recovery demand. The Commissioner's decision was based on the belief that the clearance of goods on expired certificates without payment of duty was not in accordance with the prescribed procedure under the notification. However, it was argued that the continuity of the registration held by the recipient manufacturer was the qualification for receiving goods, not the validity period of the certificates.Imposition of Penalty:The appeal was made against the imposition of duty, penalty, and interest by the Deputy Commissioner, which was upheld by the Commissioner. The Commissioner's decision was based on the belief that the appellants had cleared goods on invalid certificates without payment of duty and without following the prescribed procedure, rejecting the argument that it was a technical error. However, the appellant argued that the receipt and utilization of goods in the manufacture of further products were not in doubt.Interpretation of Central Excise Rules:The judgment highlighted an error made by the Commissioner in attributing the demand for duty to the expiry of the certificates. It was argued that the life of the certificate did not determine the life of the registration, and the proceedings were initiated based on flawed logic not supported by relevant law. Consequently, the appeal was allowed with consequential relief upon finding that the proceedings were not backed by the law.