TMI Blog2023 (8) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... w Account deposit and withdrawal. Other conditions are purely procedural. It is not in dispute that the Appellants used the compound only for captive consumption and nothing was cleared from the factory as such. Once the condition of deposit of an amount equal to the duty payable, but for exemption under notification No. 8/2004-CE stands satisfied for chewing tobacco, the same condition gets automatically satisfied for compound captively consumed as well. This is for the reason that the amount of duty payable on compound, but for the exemption contained in notification No. 8/2004-CE, is nothing but ZERO. It is calculated that the amount to be deposited/invested for compound keeping this in mind, the amount comes to be ZERO because in a tax regime in which 8/2004-CE is nonexistent, the intermediate compound having been used captively in dutiable chewing tobacco gets the benefit of duty exemption under notification No. 52/2002-CE and thus no amount of duty is payable on compound. Thus, the exemption to chewing tobacco under notification No. 8/2004-CE automatically accompanies with it the exemption to captively used compound under the same very notification. In other words, exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Orderin- Original No. 01/2016 dated 28.01.2016 passed by Commissioner of Central Excise, Shillong, wherein the demand of Rs.101,83,69,342 raise in the Notice dated 07.09.2009 was confirmed along with interest and equal amount of duty as penalty. Excise Appeal No. 76157 of 2018 This appeal is filed by M/s Satyapal Shiv Kumar, against the Order-in- Original No. 03/2016 dated 28.01.2016 passed by Commissioner of Central Excise, Shillong, wherein the demand of Rs.2,58,54,193 raised in the Notice dated 13.01.2009, was confirmed along with interest and penalty. 2. Briefly stated facts of the case are that all the three Appellants mentioned above are manufacturers of Chewing Tobacco and availed exemption from Central Excise duty under Notification No. 8/2004 CEDated 21.01.2004.The exemption under this notification was available to the Appellants subject to satisfaction of certain conditions. The main condition to avail the benefit of the said Notification is that the the beneficiary manufacturers were required to utilize an amount equal to the duty payable but for the exemption in the above said Notification only for investment in plant and machinery in their manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01,83,69,342/- Do 5. Aggrieved against the said order, all the three Appellants filed appeals before the Tribunal, Kolkata, which were disposed off by the Tribunal vide a common Order No. FO/A/75415-75417/2015, dated 30.07.2015, remanding the matter to the adjudicating authority to decide the issue afresh. The observations made by the Tribunal while remanding the cases, are reproduced below; 7.1. We find that issue involved in all the appeals are identical and therefore, they are disposed by this common order. 7.2. During the relevant period, the appellants manufactured compound and clared them without payment of duty for captive consumption in their own factory for manufacture of chewing tobacco which is wholly exempt under Notification No. 8/2004-CE dated 21.01.2004. the said compound classifiable under Chapter Heading 2404.41 of CETA, 1985 and under 24039930 after 28.02.2005, is specified in the Notification No. 8/2004 and there is no dispute about this. 7.3. The issue involved is whether the appellants are eligible for exemption on compound under Notification No. 52/2002, as their finished products i.e. chewing tobacco are who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions, the said final products cannot be said to be wholly exempt. 10. In view of above facts both the sides agree that the matter requires a fresh look by the adjudicating authority. Accordingly, we set aside the impugned order with the direction to the adjudicating authority for passing a fresh order after considering all the issues raised by both parties. We, however, direct that the adjudicating authority should pass the order preferably as far as practicable within three months of the date of communication of this order. It is needless to mention that a reasonable opportunity of hearing to the appellants should be provided before deciding the case. 11. In the result, appeals are allowed by way of remand. 6. The Ld. commissioner decided the case under denovo adjudication vide Order-in-Original dated 28.01.2016, wherein the demands of duty along with interest and penalty equal to the duty was confirmed against all the three Appellants. The present appeals were filed by all the three Appellants against the impugned order dated 28.01.2016. 7. In their grounds of Appeal, the Appellant made the following submissions: (i) Notification No. 8/2004-CE is spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be the objective of scheme of incentivising investment in the North East through notification No. 8/2004-CE. As such the bar under proviso to 52/2002-CE is not attracted. The law is well settled in this regard. (vi) Proviso to Notification No. 52/2002 is similar to proviso to notification No. 67/95-CE. Therefore the case laws in respect of 67/95- CE apply to interpretation of proviso to 52/2002-CE. In Pitambar Coated Paper Ltd vs Commissioner of Central Excise, Jaipur 2003 (157) ELT 297 (Tri.-Del.), the argument of demanding duty on the intermediate under captive consumption exemption notification No. 67/95-CE was rejected by the Tribunal, observing that If the interpretation sought to be given by the Revenue is accepted, it would defeat the very objective. The above judgment was approved by the Hon ble Supreme Court, vide Commissioner of Central Excise, Jaipur vs Pitambar Coated Paper Ltd-- 2015 (319) ELT 357 (SC). (vii) Interpretation of the word exempted in Notification 8/2004 need to be considered in the relevant context of facts and not literally. Having regard to the essential purpose of the scheme of exemption in notification No. 8/2004-CE and notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion gets automatically satisfied for compound captively consumed as well. This is for the reason that the amount of duty payable on compound, but for the exemption contained in notification No. 8/2004-CE, is nothing but ZERO. When we calculate the amount to be invested for availing of exemption under notification No. 8/2004-CE, the amount is to be calculated as if compound and chewing tobacco are both taxable in a regime where notification No. 8/2004-CE is not in existence. This follows quite clearly from the use of the words, but for the exemption in this notification used in notification No. 8/2004-CE. Thus, when we calculate the amount to be deposited/invested for compound keeping this in mind, the amount comes to be ZERO because in a tax regime in which 8/2004-CE is nonexistent, the intermediate compound having been used captively in dutiable chewing tobacco gets the benefit of duty exemption under notification No. 52/2002-CE and thus no amount of duty is payable on compound. Thus, the exemption to chewing tobacco under notification No. 8/2004-CE automatically accompanies with it the exemption to captively used compound under the same very notification. In other words, exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted only after the Investment Appraisal Committee (IAC) gives the investment certificate. That is why the notification says that if certificate is not given, duty becomes recoverable. Now, if any demand on finished chewing tobacco is confirmed for the reason that conditions of exemption on finished chewing tobacco are not fulfilled, then, no duty is payable on the intermediate product Compound used in manufacture of the relevant clearances of chewing tobacco by virtue of notification No. 124/94-CE itself in as much as compound was used in dutiable clearances of chewing tobacco. This renders the action taken to raise the demand of duty on compound without waiting for confirmation of exemption claim on chewing tobacco via the mechanism of investment certificate by the IAC completely premature, infructuous and legally untenable. From this, it follows that even if the Department contends that duty is payable on intermediate goods captively used, the demand, if at all, can be raised only after the fate of exemption claimed on finished chewing tobacco is known after the appraisal by the IAC. In other words, the impugned show cause issued is a nullity and consequently the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d product 'Chewing Tobaco' is exempted by Notification 8/2004-CE dated 25.01.2004, duty is payable on the intermediate product 'Compound'. Accordingly, he prayed for upholding the impugned order. 9. Heard both sides and perused the appeal records. 10. We observe that the impugned order has been passed by the Ld. Commissioner as per the directions given by the Tribunal in the Final order dated 30.07.2015, the relevant portion of which is reproduced in Para 5 supra. From the findings of the Tribunal, we observe that the Ld. Commissioner while adjudicating the case earlier has not given any finding on some of the points raised by the Appellant in their submissions. One of the main contention of the Appellant is that the Notification 52/2002-CE is not applicable to intermediate products, when the final products are wholly exempt from duty. In their case, the final products are exempt subject to certain conditions and hence it cannot be said that the said final products are wholly exempt from duty. We observe that this is the most vital point to be decided in this case to arrive at a decision whether the Notification 52/2002-CE is applicable in this case or not. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a manufacturing unit which it located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura, or (ii) Infrastructure or civil works or social projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram Nagaland or Tripura. 7.3.3 It thus transpires that the specified duties were payable but for the exemption in the notification. This denotes that the goods were exempted notwithstanding the conditions attached to the notification the duty payment was to be made at the factory gate read with Rule 8 of the Central Excise Rules. The notice has opted for the exemption and thus the goods were exempted. In that situation the calculation of the duty on intermediate product at zero rates was irrelevant. The Notification has not specified anything that the goods so cleared under the provision of the Notification were not exempted even when the investments are not certified. The goods were exempt at the time of clearance as well as on or after payment of the amount equal to the sum, as specified in the Notification, Notwithstanding the exemption, the duties were levied, and the goods were cleared for home consumption and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the manufacturer alongwith interest without prejudice to any action that may be taken under the provisions of the Central Excise At, by forfeiture of amount in the said escrow account. 7.3.5 The above time-bound stringent conditions of the Notification No. 8/2004-CE makes it patently clear that it is no longer open to the noticee to retrospectively claim the benefit of the said notification after nearly a decade in respect of the impugned Intermediate product. 7.3.6 AS for deemed exemption of the impugned Kimam under Notification No. 52/2002-CE, on the basis of the Demand issued by Revenue for denial of the benefit of Notification No. 8/2004-CE, it is the case of Revenue that neither the Demand Notices per se, nor the decision of the investment Appraisal Committee comprising the Chief Commissioner of Central Excise and the principle Secretary/ Secretary of the State concerned to recover proportionate duty in pursuance of the order of the apex court dated 24.01.2014, negates the fact that the noticee availed of exemption from the whole of the duty of excuse leviable on their final product, viz, performed chewing tobacco or scented Jarda, under Notification No. 8/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest the duty saved in the North East area, then the duty payable on the finished goods can be recovered from them. Thus, we observe that the Ld. Commissioner has erred in arriving at the conclusion that the exemption provided under Notification 8/2004-CE is an absolute exemption. Once the exemption provided under the Notification 8/2004-CE is considered as a conditional exemption, then the bar under proviso to 52/2002-CE is not attracted. The law is well settled in this regard. 11.4. The Appellants stated that all duties were not exempt under 8/2004-CE dated 25.01.2004. AED under Finance Act 2005 was paid on chewing tobacco. The word exempted used in the proviso to 52/2002-CE has to be interpreted in the relevant context and not literally. In the first place, there was no upfront exemption on chewing tobacco from basic duty, NCCD etc. An amount equal to theses duties, payable at the normal rate, was deposited in the Escrow Account. Secondly, chewing tobacco was chargeable to an Additional Duty of 6% under the Finance Act 2005. Notification No. 8/2004-CE did not exempt this duty. Since the amount of duty payable on compound, but for the exemption in notification No. 8/2004-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellants. Even if, for argument s sake, duty is demandable under 52/2002-CE, the amount payable is ZERO. Notification No. 8/2004-CE exempts all goods falling under sub-heading 2401.90, 2402.00, 2404.41, 2404.49, 2404.50 or 2404.99 of the Tariff from basic duty, additional duty and NCCD. Since 'Compound' falling under Heading No. 2404.41 during 2003-04 and 2004-05 (up to 28/2/2005) and under heading 24039990 with effect from 28/2/2005, the benefit of exemption Notification 8/2004-CE is applicable to it. The exemption under 8/2004-CE is applicable to compound as well. However, compound is not removed or cleared as such. Its identity gets merged with chewing tobacco. Thus compound gets cleared along with chewing tobacco. The fact that compound is classifiable as chewing tobacco and falls in the category of products specified under notification No. 8/2004-CE, we hold that the goods Compound is eligible for the benefit of the Notification 8/2004-CE. 11.8. We observe that the Appellants manufactured two products one, compound and the other, chewing tobacco in the same factory and compound was used entirely captively. According to the Department while chewing tobacco is exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rule 6(3) of the Cenvat Credit Rules, 2004, The Tribunal observed as under: It is our considered view that the words exempted goods appearing in Rule 6 of the Cenvat Credit Rules are to be read and interpreted in the relevant context. It is not the correct interpretation that when a product is chargeable to different kinds of excise duties, the words exempted goods refer only to exemption from basic excise duty. The words exempted goods refer only to a situation where the goods are exempted from all kinds of excise duties in so far as Rule 6(1) of the Cenvat Credit Rules, 2004 is concerned. If the Cenvat credit is denied in respect of inputs and capital goods merely on the interpretation that basic excise duty on the finished goods is exempted, then it would lead to an anomalous situation. 11.10. The Tribunal s Order has been affirmed by the Tripura High Court in Union of India vs Dharampal Satyapal Ltd. 2021 (377) ELT 523 (Tripura). In this decision, the word exempted goods has been interpreted to mean a situation where all duties are exempted. If some duties are still payable, then, it cannot be considered as wholly exempted . 11.11. In the present case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled of the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 32/99-Central Excise, dated the 8th July, 1999 [G.S.R. 508(E), dated the 8th July, 1999] or No. 33/99-Central Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated the 8th July, 1999]; and (iv) has continued its manufacturing activities after the 28th day of February, 2001; (B) an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty, payable, but for the exemption in this notification, shall be utilised by the manufacturer only for investment in, - (i) plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya , Mizoram, Nagaland or Tripura; or (ii) infrastructure or civil works or social projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; (C) the investment in terms of condition (B) shall be made before the expiry of six months from the end of each quarter; (D) the manufacturer shall provide all details relating to the investment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil works or social projects in such States. Such investment should also be made before expiry of six months from the end of each quarter. The manufacturer would provide all details relating to such investments. Only when the committees specially constituted for such purpose was satisfied that the investment as required have been made, it would issue a certificate to the manufacturer which the manufacturer would produce before the jurisdictional Central Excise Officer. The investment made under the said Notification would not be allowed to be withdrawn before expiry of ten years from the date on which the investment is made. If such condition is breached, the duty which is forgone will be recovered from the manufacturer. 14. In plain terms, this Notification cannot be seen as an unconditional exemption Notification in the nature of the Government of India forgoing certain duties. The Notification appears to have a dual purpose in the mind of the authority. First was to encourage investment in manufacturing units of specified products in the North-Eastern States. The second purpose also is equally important namely, that the element of duty waived by the Government of India is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not wholly exempted. Consequently, the benefit of Notification 52/2002-CE also cannot be denied to demand duty on the intermediate product Compound manufactured and captively consumed in the manufacture of Chewing Tobacco. 12. The Appellants contended that the demands confirmed in the impugned order are barred by limitation. They stated that no evidence of suppression of facts with intention to evade duty has been brought on record either in the SCN or discussed in the findings of the impugned order, except merely stating that suppression of facts involved in this case. 12.1. We observe that the Process of manufacture was declared to the department. The compound emerging as an intermediate product was in the knowledge of the Department. Records were maintained by the Appellants for the manufacture of Compound which were consumed captively.Further, the Appellants stated that Audit was conducted in 2001, 2003, 2004, 2005 and 2007 and the Audit groups have not raised any objection on this point. Accordingly, we observe that when the facts were in the knowledge of the Department, suppression cannot be alleged. Accordingly, we hold that extended period cannot be invoked to d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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