By TIOL News Service

NEW DELHI, FEB 26, 2015: THE appellant is located in the State of Himachal Pradesh and were availing the benefit of exemption under Notification No.50/03-CE from 18/06/09.

According to the Department, for availing the exemption a declaration in the prescribed format mentioning date from which the exemption is to be availed is required to be filed and the exemption would be available only from that date. However, the appellant filed this declaration only on 22/03/10.

Inasmuch as it is the view of the department that the appellant would not be eligible for duty exemption under Notification No. 50/03-CE for the period from 18/06/09 to 21/3/10.Resultantly, a demand notice was issued seeking recovery of CE duty of Rs.70.54 lakhs.

The CCE, Chandigarh confirmed a duty demand of Rs.48,06,021/- after allowing the adjustment of CENVAT credit of Rs.22,48,960/- and also imposed penalty and interest.

Before the CESTAT the appellant submitted that while commencing clearances from 18/06/09, they had filed the declaration on the same day to the Jurisdictional Assistant Commissioner and had sent the same through post under certificate of posting; that they had also enclosed a copy of the postal authority's receipt regarding despatch of the declaration UCP, that they had also filed the quarterly returns for the quarter ending 30th June, 2009, 30th September 2009, 31st December, 2009 and 31st March 2010 in terms of Rule 12 of the CER, 2002; that even if the Department did not receive the declaration dated 18/06/09 sent by them, the Department cannot deny the receipt of the quarterly returns and, therefore the duty exemption under Notification No. 50/03-CE cannot be denied. Moreover, in March 2010 when the appellant were informed that the declaration sent by them under certificate of posting in June 2009 was not received, they filed a fresh declaration on 22/03/10.

It is also submitted that another SCN dated 22/07/10 was issued asking them to show cause as to why the duty exemption under Notification No. 50/03-CE should not be denied for the period from 20th June 2009 to 21st March 2010; that this SCN was adjudicated by the Jurisdictional DC, CEX by which the exemption was denied and the appeal filed was rejected by Commissioner(A) on 13/08/2012 and, therefore, they filed an appeal before the CESTAT which is still pending. And in this background, the SCNdt.05.07.2011 demanding CE duty of Rs.70.54 lakhs for the same period is time barred.

The AR submitted that the alleged declaration was never received by the Asstt. Commissioner; that the appellant have not endorsed a copy of this declaration to the Jurisdictional Range office;that the quarterly returns alleged filed were never received; that filing of declaration in terms of Notification No. 50/03-CE is not an empty procedural formality but is a substantive requirement and failure to comply with this requirement would result in denial of exemption.

The Bench after considering the submissions and perusing the records observed –

++ The SCDN would survive only if the extended limitation period under proviso to Section 11A (1) can be invoked, as the entire duty demand is beyond the normal period of limitation of one year from the relevant date.

++ Even if the appellant's plea that they had filed the required declaration on 18/06/09 to the Assistant Commissioner and had sent the same under the certificate of posting is ignored, even as per the Department, the required declaration had been filed on 22/03/10.

++ It is on this basis that the Jurisdictional Deputy Commissioner issued a show cause notice dated 22/07/10 for denial of the exemption Notification No. 50/03-CE to the appellant for the period from 18/06/09 to 21/3/10 and subsequently the Deputy Commissioner vide order-in-original dated 08/02/11 ordered the denial of the exemption under Notification No. 50/03-CE to the appellant for the period from 18/06/09 to 21/3/10.

++ Thus, the Department, at least from 22/03/10 was aware of the manufacturing activities of the appellant company and the fact of availment of exemption Notification No. 50/03-CE and at least from July 2010 was of the view that the appellant would not eligible for exemption under this notification for the period from 18/06/09 to 21/3/10.

++ There is no explanation as to why at that stage, the show cause notice for demand of duty for this period i.e. for period from 18/06/09 to 21/3/10 was not issued and the show cause notice was confined only to the question of denial of exemption.

++ The show cause notice for demand of duty was issued only on 08/07/11 and as such this show cause notice has been issued beyond the normal limitation period of one year from the relevant date. In these circumstances, the Department's allegation that the appellant had suppressed the relevant facts from the Department with intent to evade the payment of duty is difficult to accept.

++ Moreover, when the appellant's unit was located in the area specified in the Notification No. 50/03-CE and the goods being manufactured by them was not in the negative list of the exemption notification, the appellant had nothing to gain by clearing the goods clandestinely without reporting to the Department.

++ Besides this, when the appellant's stand from the very beginning is that they had filed required declaration on 18/06/09 under certificate of posting and had enclosed a certificate of the postal authorities in this regard, the Department should have at least made inquiries with the postal authorities, but no such inquiries had been made.

++ Similarly, there is no explanation as to why no inquiries were made with the appellant when they were filing quarterly returns in respect of the value of the goods being cleared by them by availing duty exemption under Notification No. 50/03-CE for the quarters ending 30th June, 2009, 30th September 2009, 31st December, 2009. At least one quarterly return for the quarter ending 30th September 2009 bears the seal of the Central Excise Commissioner, Chandigarh.

Taking a prima facie view that the SCDN dated 08/07/11 is time barred and in such a circumstance the appellant have a strong prima facie case on limitation, pre-deposit of the adjudged dues was waived and the recovery was stayed.

The stay application was allowed.

(See 2015-TIOL-410-CESTAT-DEL)