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2023 (8) TMI 315
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.... by M/s Dharampal Satyapal Ltd., against the Orderin- Original No. 01/2016 dated 28.01.2016 passed by Commissioner of Central Excise, Shillong, wherein the demand of Rs.101,83,69,342 raise in the Notice dated 07.09.2009 was confirmed along with interest and equal amount of duty as penalty. Excise Appeal No. 76157 of 2018 This appeal is filed by M/s Satyapal Shiv Kumar, against the Order-in- Original No. 03/2016 dated 28.01.2016 passed by Commissioner of Central Excise, Shillong, wherein the demand of Rs.2,58,54,193 raised in the Notice dated 13.01.2009, was confirmed along with interest and penalty. 2. Briefly stated facts of the case are that all the three Appellants mentioned above are manufacturers of Chewing Tobacco and availed exemption from Central Excise duty under Notification No. 8/2004 CEDated 21.01.2004.The exemption under this notification was available to the Appellants subject to satisfaction of certain conditions. The main condition to avail the benefit of the said Notification is that the the beneficiary manufacturers were required to utilize an amount equal to the duty payable but for the exemption in the above said Notification only for investment in plant and....
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....ter to the adjudicating authority to decide the issue afresh. The observations made by the Tribunal while remanding the cases, are reproduced below; "7.1. We find that issue involved in all the appeals are identical and therefore, they are disposed by this common order. 7.2. During the relevant period, the appellants manufactured compound and clared them without payment of duty for captive consumption in their own factory for manufacture of chewing tobacco which is wholly exempt under Notification No. 8/2004-CE dated 21.01.2004. the said compound classifiable under Chapter Heading 2404.41 of CETA, 1985 and under 24039930 after 28.02.2005, is specified in the Notification No. 8/2004 and there is no dispute about this. 7.3. The issue involved is whether the appellants are eligible for exemption on compound under Notification No. 52/2002, as their finished products i.e. chewing tobacco are wholly exempt under Notification No. 8/2004. This notification exempts all goods falling under tariff item 21069020 and chapter 24 of the first schedule to the CETA, 1985 manufactured in a factory and used within the said factory for manufacture of final products. The benefit of this notific....
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.... fresh order after considering all the issues raised by both parties. We, however, direct that the adjudicating authority should pass the order preferably as far as practicable within three months of the date of communication of this order. It is needless to mention that a reasonable opportunity of hearing to the appellants should be provided before deciding the case. 11. In the result, appeals are allowed by way of remand." 6. The Ld. commissioner decided the case under denovo adjudication vide Order-in-Original dated 28.01.2016, wherein the demands of duty along with interest and penalty equal to the duty was confirmed against all the three Appellants. The present appeals were filed by all the three Appellants against the impugned order dated 28.01.2016. 7. In their grounds of Appeal, the Appellant made the following submissions: (i) Notification No. 8/2004-CE is special scheme of benevolent nature to encourage investment for development in the North East. It is required to be interpreted liberally keeping in view the purpose of the scheme behind it. If the view taken by the Department is accepted, it would defeat the very purpose of the scheme. If Department's interpreta....
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....re the case laws in respect of 67/95- CE apply to interpretation of proviso to 52/2002-CE. In Pitambar Coated Paper Ltd vs Commissioner of Central Excise, Jaipur- 2003 (157) ELT 297 (Tri.-Del.), the argument of demanding duty on the intermediate under captive consumption exemption notification No. 67/95-CE was rejected by the Tribunal, observing that "If the interpretation sought to be given by the Revenue is accepted, it would defeat the very objective." The above judgment was approved by the Hon'ble Supreme Court, vide Commissioner of Central Excise, Jaipur vs Pitambar Coated Paper Ltd-- 2015 (319) ELT 357 (SC). (vii) Interpretation of the word 'exempted' in Notification 8/2004 need to be considered in the relevant context of facts and not literally. Having regard to the essential purpose of the scheme of exemption in notification No. 8/2004-CE and notification No. 52/2002-CE, it would be illogical to interpret that the proviso to this notification is attracted to demand duty on intermediate compound. Notification No. 8/2004-CE mandates that an amount equal to the duties, otherwise payable, on chewing tobacco is deposited and invested. (viii) Compound is also covered by exe....
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....unt is to be calculated as if compound and chewing tobacco are both taxable in a regime where notification No. 8/2004-CE is not in existence. This follows quite clearly from the use of the words, "but for the exemption in this notification" used in notification No. 8/2004-CE. Thus, when we calculate the amount to be deposited/invested for compound keeping this in mind, the amount comes to be ZERO because in a tax regime in which 8/2004-CE is nonexistent, the intermediate compound having been used captively in dutiable chewing tobacco gets the benefit of duty exemption under notification No. 52/2002-CE and thus no amount of duty is payable on compound. Thus, the exemption to chewing tobacco under notification No. 8/2004-CE automatically accompanies with it the exemption to captively used compound under the same very notification. In other words, exemption to compound travels along with exemption on chewing tobacco. (xi) All duties were not exempt under 8/2004-CE dated 25.01.2004. AED under Finance Act 2005 was paid on chewing tobacco. The word 'exempted' used in the proviso to 52/2002-CE has to be interpreted in the relevant context and not literally. In the first place, there wa....
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....y is payable on the intermediate product 'Compound' used in manufacture of the relevant clearances of chewing tobacco by virtue of notification No. 124/94-CE itself in as much as compound was used in dutiable clearances of chewing tobacco. This renders the action taken to raise the demand of duty on compound without waiting for confirmation of exemption claim on chewing tobacco via the mechanism of investment certificate by the IAC completely premature, infructuous and legally untenable. From this, it follows that even if the Department contends that duty is payable on intermediate goods captively used, the demand, if at all, can be raised only after the fate of exemption claimed on finished chewing tobacco is known after the appraisal by the IAC. In other words, the impugned show cause issued is a nullity and consequently the impugned order confirming the demand is also a nullity. (xv) The demands are barred by limitation. No evidence of suppression of facts with intention to evade duty has been either alleged in the SCN or discussed in the findings of the impugned order, except stating that suppression of facts involved in this case. The Process of manufacture was declared to ....
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....Tribunal in the Final order dated 30.07.2015, the relevant portion of which is reproduced in Para 5 supra. From the findings of the Tribunal, we observe that the Ld. Commissioner while adjudicating the case earlier has not given any finding on some of the points raised by the Appellant in their submissions. One of the main contention of the Appellant is that the Notification 52/2002-CE is not applicable to intermediate products, when the final products are wholly exempt from duty. In their case, the final products are exempt subject to certain conditions and hence it cannot be said that the said final products are wholly exempt from duty. We observe that this is the most vital point to be decided in this case to arrive at a decision whether the Notification 52/2002-CE is applicable in this case or not. Another notable omission pointed out in the Tribunal order is that the Ld. Commissioner in his order dated 31.05.2012, has discussed how the benefit of Notification 8/2004 is not applicable to the compound but, he has not recorded any findings in regard to the submission of the Appellants that while calculating the duty, but for the exemption, the duty payable on 'Compound' i....
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....is denotes that the goods were exempted notwithstanding the conditions attached to the notification the duty payment was to be made at the factory gate read with Rule 8 of the Central Excise Rules. The notice has opted for the exemption and thus the goods were exempted. In that situation the calculation of the duty on intermediate product at zero rates was irrelevant. The Notification has not specified anything that the goods so cleared under the provision of the Notification were not exempted even when the investments are not certified. The goods were exempt at the time of clearance as well as on or after payment of the amount equal to the sum, as specified in the Notification, Notwithstanding the exemption, the duties were levied, and the goods were cleared for home consumption and the prie included the element of duty also. Thus, the duty' stands as collected from the buyer/market. One o the pleas taken by the noticee is that the impugned 'Kimam' falling under sub-head 2404.41 up to 28.02.2005 and thereafter under sub-head 2403 9930, was covered by Notification No. 8/2004-CE dated 21.01.2004, as amended; therefore, it was open to the noticee to avail of the benefit of said exemp....
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....ter nearly a decade in respect of the impugned Intermediate product. 7.3.6 AS for deemed exemption of the impugned 'Kimam' under Notification No. 52/2002-CE, on the basis of the Demand issued by Revenue for denial of the benefit of Notification No. 8/2004-CE, it is the case of Revenue that neither the Demand Notices per se, nor the decision of the investment Appraisal Committee comprising the Chief Commissioner of Central Excise and the principle Secretary/ Secretary of the State concerned to recover proportionate duty in pursuance of the order of the apex court dated 24.01.2014, negates the fact that the noticee availed of exemption from the whole of the duty of excuse leviable on their final product, viz, performed chewing tobacco or scented Jarda, under Notification No. 8/2004-CE, and therefore, their intermediate product 'Kimam' was not eligible for exemption under Notification No. 52/2002-CE. 7.3.7. Secondly, as has been pointed out above, the benefit of a conditional exemption notification cannot be retrospectively claimed in regard to offending goods in respect of which duty had been evaded. In support of the above contention the following case laws are relied upon by ....
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....CE is not attracted. The law is well settled in this regard. 11.4. The Appellants stated that all duties were not exempt under 8/2004-CE dated 25.01.2004. AED under Finance Act 2005 was paid on chewing tobacco. The word 'exempted' used in the proviso to 52/2002-CE has to be interpreted in the relevant context and not literally. In the first place, there was no upfront exemption on chewing tobacco from basic duty, NCCD etc. An amount equal to theses duties, payable at the normal rate, was deposited in the Escrow Account. Secondly, chewing tobacco was chargeable to an Additional Duty of 6% under the Finance Act 2005. Notification No. 8/2004-CE did not exempt this duty. Since the amount of duty payable on compound, but for the exemption in notification No. 8/2004-CE is ZERO, the substantive as well as procedural conditions get automatically satisfied along with that for chewing tobacco. We observe that the intermediate product, 'Compound' will be chargeable to duty only when the finished goods Chewing tobacco is wholly exempt from payment of all duties. In the present case firstly, the finished goods Chewing Tobacco is not exempted from all duties of excise, as Additional Dut....
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....from 28/2/2005, the benefit of exemption Notification 8/2004-CE is applicable to it. The exemption under 8/2004-CE is applicable to compound as well. However, compound is not removed or cleared as such. Its identity gets merged with chewing tobacco. Thus compound gets cleared along with chewing tobacco. The fact that compound is classifiable as chewing tobacco and falls in the category of products specified under notification No. 8/2004-CE, we hold that the goods 'Compound' is eligible for the benefit of the Notification 8/2004-CE. 11.8. We observe that the Appellants manufactured two products-one, compound and the other, chewing tobacco in the same factory and compound was used entirely captively. According to the Department while chewing tobacco is exempt under notification No. 8/2004-CE, compound is not, even though both are products specified under notification No. 8/2004-CE. The substantive condition for exemption under notification No. 8/2004-CE is that an amount equal to the duty payable on the specified product should be invested in the North East for any of the notified purposes through the mechanism of Escrow Account deposit and withdrawal. Other conditions are purely pr....
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....exempted goods' refer only to a situation where the goods are exempted from all kinds of excise duties in so far as Rule 6(1) of the Cenvat Credit Rules, 2004 is concerned. If the Cenvat credit is denied in respect of inputs and capital goods merely on the interpretation that basic excise duty on the finished goods is exempted, then it would lead to an anomalous situation. 11.10. The Tribunal's Order has been affirmed by the Tripura High Court in Union of India vs Dharampal Satyapal Ltd.-2021 (377) ELT 523 (Tripura). In this decision, the word 'exempted goods' has been interpreted to mean a situation where all duties are exempted. If some duties are still payable, then, it cannot be considered as 'wholly exempted'. 11.11. In the present case also, the Appellants were liable to pay Additional Duty as per Finance Act, 2005. The word "exempted" used in the proviso to notification No. 52/2002-CE has to be interpreted keeping in view the context and purpose of exemption to chewing tobacco under 8/2004-CE, otherwise it would defeat the very purpose of exemption and cause anomaly. 11.12. The relevant portion of the said decision of the Hon'ble High Court of Tiripura is reproduced belo....
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....xcise duty, additional excise duty and National Calamity Contingent duty, payable, but for the exemption in this notification, shall be utilised by the manufacturer only for investment in, - (i) plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya , Mizoram, Nagaland or Tripura; or (ii) infrastructure or civil works or social projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; (C) the investment in terms of condition (B) shall be made before the expiry of six months from the end of each quarter; (D) the manufacturer shall provide all details relating to the investment made in terms of condition (B), within one month after the expiry of the period of six months referred to in condition (C), to a Committee consisting of, the Chief Commissioner of Central Excise, Shillong, the Principal Secretary of the Department of Industry of the State concerned, in which the unit is located and the Principal Secretary of the Department of Industry of the State in which the investment is made, and shall have to prove to the satisfaction of the said Committee that the inv....
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.... the said Notification would not be allowed to be withdrawn before expiry of ten years from the date on which the investment is made. If such condition is breached, the duty which is forgone will be recovered from the manufacturer. 14. In plain terms, this Notification cannot be seen as an unconditional exemption Notification in the nature of the Government of India forgoing certain duties. The Notification appears to have a dual purpose in the mind of the authority. First was to encourage investment in manufacturing units of specified products in the North-Eastern States. The second purpose also is equally important namely, that the element of duty waived by the Government of India is also ploughed back into the region by augmenting the manufacturing capability of a unit in the said region or for other purposes such as development of infrastructure or civil works or social projects in the region. The amount of duties saved by the manufacturer thus under this Notification, was to be utilized in a specified manner. The additional condition was that any such investment so made as required under the Notification, would not be withdrawn before completion of a period of 10 years and ....