By TIOL News Service

NEW DELHI, MAR 15, 2017: ON 19.03.2007 a search was conducted at the manufacturing premises of the assessee. It was found that seven machines were in operation for manufacturing of CD/VCD/Audio-CD, CD-ROM. The Director stated that they are manufacturing/replicating VCD/CD of educational nature and the same,since being exempted under Notification No. 6/2006-CE dated 01.03.2006, they are not paying duty.

The relevant entry reads –

Revenue alleged that the CD ROM manufactured/replicated were not of Educational nature and, therefore, they are not eligible for the benefit of notification. The appellant volunteered to make the duty payment of Rs.3,25,000/-.

SCN was issued and the demand of duty was confirmed along with interest and penalty on both, the assessee and the Director.

The Commissioner (Appeals) reduced the penalty on the assessee to 25% of the duty. Aggrieved by this reduction of penalty, Revenue is in appeal. The assessee is also in appeal against the confirmation of duty and penalty imposition.

The appellant submitted that no samples of the impugned goods (CD-ROMs) in question were drawn; that as submitted by the Director, VCD, CD-ROMs with contents of educational/entertainment/games etc. are covered under journal, periodicals (magazines) or newspaper and entitled for the benefit of exemption Notification No. 6/2006-CE. Furthermore, since they had paid duty, interest and 25% of the penalty,the Revenue appeal should be dismissed.

The AR, while fairly agreeing that no samples were drawn by the department during investigation, submitted that it is an admitted position that appellants were manufacturing/ replicating VCD, CD-ROMs containing books of educational nature as well as non-educational nature which is in the form of Video Games and, therefore, the appellant is not entitled for the benefit of Notification No. 6/2006-CE dated 01.03.2006.

The Bench observed –

"5. ..., we find that this is an admitted position that no samples were drawn to find out the contents of the VCD, CD-ROMs in question. The assessee has admitted that they are manufacturing/replicating VCD, CD-ROMs of educational material. They are of educational nature as well as non-educational nature. The Revenue has presumed that non-educational nature means ‘Video Games' and consequently held that they are not covered by the Notification No. 06/2006-CE dated 01.03.2006. We have seen that in the notification, the assessee is entitled for exemption on CD-ROMs containing books of education nature, journal, periodicals (magazines) or news paper but the Revenue has presumed that CD-ROMs which are of not educational nature are of ‘Video Games' and not covered by the said notification. In the absence of any evidence on record that non-educational CD-ROMs containing journal, periodicals (magazines) or newspaper are CD-ROMs of ‘Video Games', the benefit of doubt goes to the assessee…."

Concluding that there is no merit in the impugned order, the same was set aside.

The appeal filed by the assessee and the Director was allowed and that by the Revenue was dismissed.

(See 2017-TIOL-815-CESTAT-DEL)