TaxTMI 
TaxTMI 
2023 (9) TMI 1134
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....of Notification No. 1/2011 which enabled them to pay duty at the rate of 1% on coir products as against the standard rate of duty of 5% / 6% subject to the condition that no CENVAT credit was availed on the inputs and input services. The benefit of this Notification was availed by the appellant in all their units across the country. The officers of internal audit on scrutiny of records found that the appellant had availed CENVAT credit on the inputs and input services used for manufacture of rubberised coir mattress and products and accordingly, notice was issued to deny the benefit of Notification No.1/2011 dated 1.3.2011. The Commissioner vide impugned order dated 5.12.2014 held that non-availment of CENVAT credit was a precondition to avail the benefit of Notification No. 1/2011 dated 1.3.2011 and therefore, clearance of the final goods at the concessional rate of duty was incorrect in as much as they had availed credit on the inputs and input services. Accordingly, the Commissioner confirmed demand of duty for the period 1.3.2011 to 31.3.2013 and imposed penalty on the Managing Director and Vice President of the company for having violated the conditions of the Notification kno....
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....s availed and therefore, credit cannot be availed as per the exemption Notification No. 1/2011 dated 1.3.2011. The appellant admits the fact that they are aware of the fact that on rubberised coir mattresses, they are not supposed to avail CENVAT credit on inputs and inputs services in as much as they were claiming concessional rate of duty. Their only defense is that it was an inadvertent human error on their part but since they have reversed immediately along with interest when pointed out, they cannot be penalised with the standard rate of duty of 5% / 6% denying the benefit of the Notification. The appellant also admits that policy decision was taken to pay 1% duty on rubberised coir products without availing CENVAT credit, from all their units across the country. This clearly proves the fact that they were well aware that to avail the concessional rate of duty of 1% as against the standard rate of duty of 5%/6%, they were willing to forego the CENVAT credit on the inputs and input services availed in the manufacture of rubberised coir products. Moreover, as rightly observed by the adjudicating authority when all other units were strictly following the conditions of the exempti....
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....ty Even assuming that the respondents were eligible for exemption from duty, the respondents could not be absolved from the legal obligation to comply with the statutory requirements for the manufacture of excisable goods at the supplier end. 19. The purpose and object of the notification dated 11-8- 1994 was to exempt those specified intermediate goods, which were otherwise excisable to duty, and not to exempt or absolve the respondents from following the statutory requirements for the manufacture of intermediate excisable goods. The notification under Chapter X was designed in such a manner to ensure an inseparable link between the supplier and recipient of excisable goods for the manufacture of specified final products. Rule 192 of Chapter X states that a manufacturer intending to receive duty free goods under remission is required to make an application in Form R-1 for obtaining excisable goods to be used for special industrial purpose giving details of the estimated quantity of each class or variety of goods and the value of such goods likely to be used during the year, commodities to be manufactured and estimated output and clearance of each commodity during the year, manne....
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....s given strict meaning where for the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature. 24. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it mean....
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....in establishing the plea of "intended use" or "the substantial compliance" of the procedure set out in Chapter X so as to claim the benefit of the exemption notification dated 11-8-1994. ....... 34. We find it difficult to sustain the reasoning of the Tribunal that the procedure laid down in Chapter X, is meant only to establish the receipt of goods by the recipient unit and their utilization. The Tribunal completely overlooked the object and purpose of the procedure laid down in Chapter X. The goods manufactured at the supplier end were excisable goods and if a party wants remission of duty, he has to follow certain pre-requisities, the object of which is to see that the goods be not diverted or utilized for some other purpose, on the guise of the exemption notification. Detailed procedures have been laid down in Chapter X so as to curb the diversion and misutilization of goods which are otherwise excisable. The plea of "substantial compliance" and "intended use" is, therefore, rejected for the reasons already stated". 6.4 The Hon'ble Supreme Court of India in the case of Commissioner of Cus. (Import), Mumbai vs. Dilip Kumar & Company in Civil Appeal No. 3327 Of 2007, decided....
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.... The Commissioner at para 29 of the impugned order also notes that "on one hand, the noticee claim that they have taken a policy decision to clear the goods on payment of 1% duty and on the other, they claim that there was confusion in their minds regarding CENVAT credit to be availed. It cannot be accepted that the contravention has not come to the notice of the noticee either at the time of their internal audit, statutory audit or during the preparation of the financial statement of the company." In view of the above, it is very clear that the appellant had consciously taken CENVAT credit which was irregular. Hence, having suppressed the facts, the Commissioner was right in invoking the Proviso to Section 11A. The Hon'ble Delhi High Court in identical circumstances in the case of Lally Automobiles Pvt. Ltd. vs. Commissioner (Adjudication), C. Ex: 2018(17) GSTL 433 (Del.) responding to the arguments of similar nature i.e., invocation of extended period of limitation, observed as follows:- "18. As regards the method of calculation and invocation of extended period of penalty, the assessee's contentions again, to the Court's mind, are groundless. The assessee concededly did not ma....
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....om that business, in its returns) meant that the assessee was aware of what it was doing. It cannot now take shelter under the plea that non- trading activity was expressly exempt from claiming credit, in 2011. That amendment made no difference, given that trading was never taxable under the Finance Act, 1994. In these circumstances, the Revenue was justified in invoking the extended period of limitation in this case." The said judgment has later been upheld by the Hon'ble Supreme Court reported in 2019(24) GSTL J115(SC). 9. In view of the above, invoking of proviso to Section 11A is upheld. The Commissioner has imposed penalty of Rs.22,12,12,586/- on the appellant under Rule 25 read with Section 11AC of Central Excise Act, 1944, which is equivalent to the duty demanded. However, it is noticed that Rs.5,90,57,107/- has already been paid at the rate of 1% during the relevant period; therefore, the penalty also accordingly needs to be re- determined for the differential payment of duty. 10. With regard to penalties on Shri Kushroo, Engineer, Head of Finance; Shri M. S. Kamath, Vice President and Shri T. Sudhakar Pai, Chairman and Managing Director, the only allegation in the show-....