2024 (8) TMI 1146 - AT - Central Excise

100% EOU - Non-compliance with the conditions of the Notification No.31/2007--CE (NT) dt. 2.8.2007 for supply of the items to the DTA unit - non-submission of CT--1 certificate as required under Notification No.31/2007 dt. 2.8.2007 - time limitation - penalty on Managing Director - HELD THAT - From the conditions and procedure of the notification explained above it can be seen that the condition is to make sure that the finished goods which are manufactured by the duty free inputs are used for export only. In the present case the appellant has cleared the hangers to the DTA customers who have exported the goods along with garments. The Department has not made any allegation that the goods manufactured by the appellants have not been exported. The only allegation is that they have not complied with the procedure of removal of goods on the basis of CT--1 certificates. The appellant has explained the difficulty of procuring the CT1 certificate during the disputed period - the appellant has furnished Form--H which is sufficient to prove that the goods cleared from the factory have been sold to the DTA customers only for the purpose of export. The document in the nature of Form--H establishes that sale of the goods is in the course of transaction of export of goods. The very same issue in respect of clearances of hangers to the domestic exporters and non--production of CT--1 certificates was examined by the Tribunal in the case of RAMANI PLASTICS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE CHENNAI-I 2015 (1) TMI 988 - CESTAT CHENNAI where it was held that The Commissioner (Appeals) observed that there is procedural lapse in so far as the goods were not directly exported but through merchant exporter. The Board has clearly clarified that this facility is not available to the supplies made to any other domestic manufacturer who may or may not export its finished products. In the present case it is observed from the record that the merchant exporter exported the goods which was not disputed at any point of time. Time Limitation - HELD THAT - The entire allegation is with regard to non--compliance of the procedure. There were audits conducted who have not objected to the clearances made to DTA exporters. The appellant has been making repeated representations to higher authorities informing inability to furnish CT1 certificates. Later the notification No.20/2015(NT) dt.24.09.2015 was issued wherein the requirement of CT--1 certificate was omitted. All these would go to show that there no ingredients for invoking the extended period. The show cause notices are time--barred. The issue on limitation is also answered in favour of the appellant. Penalty on Managing Director - HELD THAT - The penalty imposed on Shri Atul Bhayani Managing Director is set aside. The impugned orders are set aside - Appeal allowed.

Summary

Issues Involved:
1. Compliance with Notification No. 31/2007-CE (NT) regarding CT-1 certificates.
2. Demand of duty, interest, and penalties for non-compliance.
3. Procedural irregularities and their impact on duty exemption.
4. Invocation of the extended period of limitation.
5. Penalty on the Managing Director.

Issue-wise Detailed Analysis:

1. Compliance with Notification No. 31/2007-CE (NT) regarding CT-1 certificates:
The appellant, a 100% Export Oriented Unit (EOU), cleared goods to Domestic Tariff Area (DTA) customers as 'deemed exports' without obtaining CT-1 certificates from the buyers (exporters). The Department contended that the appellant did not comply with the conditions of Notification No. 31/2007-CE (NT) dated 2.8.2007, which mandates the use of CT-1 certificates for duty-free clearances to DTA units.

2. Demand of duty, interest, and penalties for non-compliance:
The original authority confirmed the duty demand for the disputed periods along with interest and imposed equal penalties, including a separate penalty of Rs. 10 lakhs on the Managing Director. The appellant argued that they maintained proper records and filed returns regularly and that the issue of CT-1 certificates was a procedural requirement that was difficult to fulfill due to the non-registration of their customers with the Central Excise Department.

3. Procedural irregularities and their impact on duty exemption:
The appellant furnished Form-H certificates to establish that the goods were exported. The Tribunal noted that the Department did not dispute the actual export of goods but only the non-compliance with the CT-1 certificate procedure. The Tribunal referred to previous decisions, including Annai Chemicals and Associators Vs Commissioner of GST & Central Excise, which held that Form-H certificates were sufficient to prove export and that procedural lapses should not result in the denial of duty exemption.

4. Invocation of the extended period of limitation:
The appellant argued that the show cause notices were time-barred as there was no suppression of facts with intent to evade duty. The Tribunal observed that audits conducted earlier did not raise objections regarding the clearances, and the appellant had made representations to higher authorities about the difficulties in obtaining CT-1 certificates. The Tribunal concluded that there were no grounds for invoking the extended period, and the show cause notices were indeed time-barred.

5. Penalty on the Managing Director:
Given the procedural nature of the irregularities and the lack of intent to evade duty, the Tribunal set aside the penalty imposed on the Managing Director, Shri Atul Bhayani.

Conclusion:
The Tribunal set aside the impugned orders, including the demand of duty, interest, and penalties, and allowed the appeals with consequential relief. The procedural irregularities did not justify the denial of duty exemption, and the show cause notices were time-barred.

Order Pronounced:
(Order pronounced in the open court on 23.08.2024)