By TIOL News Service

MUMBAI, APR 01, 2014: THIS is a Revenue appeal filed ten years ago against the order of the Commissioner(A) allowing the appellant the benefit of Notification No.10/97-CE dated 1.3.97 in respect of optical fibres and optical cables.

The lower appellate authority held that the requisite certificate as per the condition of the notification was produced by the respondents, albeit subsequent to the clearance of the goods and this would not disentitle the assessee from claiming the exemption.

It is the contention of the Revenue that as per the condition to the notification necessary certificate issued by the officer not below the rank of Dy. Secretary to the Government of India should be produced at the time of clearance of the goods. Inasmuch as since the certificate was produced by the respondents after issuance of the SCN and the same was issued by the Project Director and not by the Dy. Secretary to the Government of India, the exemption benefit is not available. So also, on merits, the benefit of Notification is not available to the respondents as the optical fibre/cables which are running into 88 kms, cannot be considered as accessory or spare parts specified in the notification. Reliance is placed on the decision in Eagle Flask Industries Limited - 2004-TIOL-74-SC-CX.

The respondent assessee submitted that since the necessary certificate has been produced, though late, the benefit of the Notification cannot be denied; that the demand is time barred as the goods were cleared by specifically mentioning in the invoice the exemption notification claimed. The decision in Amara Raja Power Systems Pvt. Ltd. 2006-TIOL-1230-CESTAT-BANG is adverted to and wherein the Tribunal allowed the benefit of the same Notification in spite of the fact that the requisite certificate was not produced at the time of clearance of the goods by holding that the same is a procedural lapse.

The Bench distinguished the case law cited by the respondent by observing that the facts of the present case were not parallel.

On the question of limitation, the Bench held -

++ As per the Notification, the manufacturer has to produce necessary certificate issued by the office not below the rank of Dy. Secretary to the Government of India at the concerned department at the time of clearance of the goods. In the present case, necessary certificate was not produced at the time of clearance of the goods. In the invoice, the respondents specifically mentioned that the goods are cleared by availing the benefit of Notification NO. 10/97-CE. During investigation, when the Revenue found that the respondents are not having the necessary certificate the respondents applied for the certificate. Show-cause notice was issued in September, 2001 demanding duty by denying the benefit of Notification. Thereafter, the respondents produced the certificate issued by the Project Director, ISSA, DRDO, Ministry of Defence. The facts show that at the time of clearance of the goods even the respondents have not applied for the necessary certificate and claimed the benefit of Notification by suppressing the material fact. Therefore, we find no merits in the contention of the respondents that the demand is time barred.

The Bench also relied on the apex Court decision cited by the Revenue representative and concluded that the conditions of the notification are not merely procedural; that they are to be strictly complied with and the benefit of exemption can be denied for non-compliance of the condition of the Notification. Inasmuch as the condition of the Notification was to produce the necessary certificate from the competent authority at the time of clearance of the goods whereas the respondents applied for the certificate after start of investigation.

On merits also, the Bench found the respondent ineligible to claim exemption. The CESTAT observed -

"Further, we find that the applicants are manufacturers of optical fibre & optical fibre cables and they supplied the same in the running length of approximately 88 km. The Notification provides exemption to scientific and technical instruments, apparatus, equipment including computers and also to accessories and spare parts of the above mentioned goods. The optical fibres and cables in running length cannot be considered as accessories and spare parts of the goods specified in the Notification…."

To sum up, the order of the Commissioner(A) was set aside and the Revenue appeal was allowed.

In passing: Victory after a decade for the Revenue and it is time to rejoice! But for the assessee, the battle begins!

(See 2014-TIOL-484-CESTAT-MUM)