2004 (97) ECC 675 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonah Bench : Chennai

Shri P.G. Chacko, Member (J) and Shri Jeet Ram Kait, Member (T)

Sisir Enterprises and M/s. Jalan Indl. Co.

Versus

Commissioner of Central Excise, Pondicherry

Appeals No. E/526-528/2003

[Arising out of Order-in-Appeal Nos. 157, 159 & 160 (Pondicherry) dated 14.5.2003 passed by Commissioner of CE (Appeals), Chennai]

Final Order No. 471 to 473/2004, dt. 25.5.2004, Certified on 16.6.2004

Demand (C. Excise)

SSI Exemption Notification Nos. 9/99, 9/2002-CE dt. 1.3.200 -- Effective date -- Under these Notifications it was necessary for the assessee to exercise their option for availing the benefit of SSI exemption -- Excisable goods under Chapter 39 of CETA -- The declaration filed on 28.2.1999 by assessee under Rule 173B ceased to have effect on 31.3.1999 and was no substitute for exercise of option in terms of Para 2 of Notification No. 9/99-CE for a period commencing from 1.4.1999. In the result, the demand of duty for the periods prior to the actual dates of exercise of option under the relevant notifications has to be sustained -- Hence, demands upheld -- Penalty set aside -- Sec. 11A of CEA.

PRESENT :

Shri V. Raveendran, Cons. for the appellants.

Shri C. Mani, JDR for the respondent.

Case Cited :

Simcon Engineers v. Commissioner of Central Excise, Calcutta, 2002 (144) ELT 446 (Tri.-Kol) [Para 5]

Per : P.G. Chacko (Oral)

In two of these appeals, the appellants are aggrieved by the denial, by the authorities below, of the benefit of exemption under Notification No. 9/99-CE dated 28.2.1999 for the short period 1.4.1999 to 6.4.1999. In the remaining appeal, the grievance is against similar denial of exemption under Notification No. 9/2000-CE dated 1.3.2000 for three days 1.4.2000 to 3.4.2000.

2. The appellants are engaged in the manufacture of excisable goods of Chapter 39 of the CETA Schedule, which are goods specified for SSI exemption under Notification No. 9/2003-CE. During the period of dispute (1.4.1999 to 6.4.1999), the relevant notification granting SSI exemption in respect of the said goods was Notification No. 9/99-CE ibid. That notification came into effect on 1.4.1999 consequent to budgetary changes, replacing Notification No. 9/98-CE. The essential conditions of Notification Nos. 9/98-CE and 9/99-CE were similar, and so was the position under Notification No. 9/2000-CE relevant to the period of dispute (1st to 3rd April, 2000) in the remaining appeal. Under these notifications, it was necessary for the assessee to exercise their option for availing the benefit of SSI exemption. Para 2 of the notification prescribed the manner of exercise of this option. Para 2 of Notification No. 9/99-CE ibid reads as under:

"The exemption contained in this notification shall apply only subject to the following conditions, namely:

(i) a manufacturer who intents to avail the exemption under this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances of specified goods and such option shall be effective from the date of exercise of the option which shall not be withdrawn during the remaining part of the financial year.

(ii) while exercising the option under condition (I), the manufacturer shall inform in writing to the jurisdictional Assistant Commissioner of Central Excise giving the following particulars, namely:

(a) name and address of the manufacturer;

(b) location/locations of factory/factories;

(c) description of specified goods produced;

(d) Date from which option under this notification has been exercised;

(e) Aggregate value of clearances of specified goods (excluding the value of clearances referred to in para 3 of this notification) till the date of exercising the option.

(iii) where a manufacturer opts for availing the exemption under this notification in terms of condition (i) above, the clearances of specified goods already made during the financial year, prior to the exercise of such option, shall be taken into account for computing the aggregate value of clearances, as specified in the said Table".

3. The appellants, admittedly, had not exercised their option strictly in terms of the above provision under the notification. They exercised such option in the prescribed manner only in the course of the month of April 1999. The date of such exercise of option by the appellants in Appeal Nos. E/527/2003 and E/528/2003 was 7.4.1999. The authorities below have confirmed demands of duty against these 2 appellants for the period 1.4.1999 to 6.4.1999 on the ground that they had not exercised option for the said period in terms of Para 2 of the notification. In Appeal No. E/526/2003, the period for which demand of duty has been confirmed is 1.4.2000 to 3.4.2000. In this case also, the demand is on the similar ground that the option for availment of exemption under Notification No. 9/2000-CE was not exercised in terms of Para 2 of the notification.

4. In Appeal No. E/526/2003, the appellants have also challenged the penalty of Rs. 10,524 imposed on them under Rule 173Q of the Central Excise Rules, 1944.

5. Heard both sides. Ld. Counsel for the appellants submits that, although any option for availment of the benefit of SSI exemption under the relevant Notification (9/99-CE or 9/2000-CE, as the case may be) was not exercised at the commencement of the financial year strictly in terms of Para 2 thereof, the appellants had been duly availing the similar benefit of the predecessor-Notification and had continued to do so in a bona fide manner and that they had duly filed Rule 173B declaration in the wake of budgetary changes. The argument is that the declaration filed under Rule 173B by M/s Sisir Enterprises on 29.2.1999 with effect from 1.3.1999 substantially amounted to exercise of option in terms of Para 2 of Notification No. 9/99-CE ibid. A similar argument has been advanced in relation to Notification No. 9/2000-CE ibid: also Ld. Counsel further seeks to draw support from the Tribunal's decision in Simcon Engineers v. Commissioner of Central Excise, Calcutta, 2002 (144) ELT 446 (Tri.-Kol), wherein a declaration filed by the assessee under Rule 173B on 6.4.1999 was accepted as substitute for exercise of option under Para 2 of Notification No. 9/99-CE; for the period 1.4.1999 to 30.6.1999.

6. Ld. DR has contested the above arguments and endeavoured to distinguish the cited case. He submits that the Rule 173B declaration filed with effect from 1.3.1999 did not serve any purpose beyond that financial year and that an option in terms of Para 2 of Notification No. 9/99-CE ibid should have been exercised in the manner prescribed in the said para for the period 1999-2000. This was not done by the appellants. According to Ld. DR, the condition stipulated in Para 2 of the notification was a substantive requirement, rather than procedural, for the purpose of SSI exemption under the notification. The DR submits that, in the case of Simcon Engineers, the Rule 173B declaration and the demand of duty related to the same financial year unlike in the instant case where the declarations filed by the assessees were for the previous financial year, which, according to Ld. DR, could not be any substitute for exercise of option under the relevant notification.

7. After giving careful consideration to the rival arguments, we are inclined to endorse the position taken by the DR. As rightly pointed out by him, in Simcon Engineers (supra), the declaration under Rule 173B was for the year 1999-2000 and the demand of duty confirmed against the said assessee by the departmental authorities by denial of exemption under Notification No. 9/99-CE also related to the same year. In the instant case, the factual position is different. Admittedly, the appellants had not filed Rule 173B declarations for the periods for which demands of duty have been confirmed by the authorities below. They had filed declarations only for the previous financial year. Such declarations did not have any effect beyond 31st March of the financial year. The demands of duty confirmed against the appellants are for the periods commencing from 1.4.1999 or 1.4.2000, as the case may be. The declarations which were filed by the assessees under Rule 173B for the previous financial years and had no effect beyond the last dates of such financial years cannot be, for any reason, adopted as substitute for exercise of option, under the relevant notifications, for the respective succeeding financial years. For instance, the declaration filed on 28.2.1999 by M/s Sisir Enterprises under Rule 173B ceased to have effect on 31.3.1999 and was no substitute for exercise of option in terms of Para 2 of Notification No. 9/99-CE for a period commencing from 1.4.1999. In the result, the demand of duty for the periods prior to the actual dates of exercise of option under the relevant notifications have to be sustained. We, therefore, affirm the demands.

8. The penalty imposed on M/s Sisir Enterprises in Appeal No. 526, however, cannot be sustained inasmuch as no malafide intention has been brought out in the order impugned in that appeal. It appears from the facts and circumstances of the case that the belated exercise of option by M/s Sisir Enterprises was occasioned by a bona fide mistake. We do not see any reasonable ground for penalty on the party in such circumstances. It is also pertinent to note that M/s Sisir Enterprises and M/s Jalan Industrial Company have not been penalised despite the fact that they were similarly placed in the other 2 appeals. The penalty on M/s Sisir Enterprises in Appeal No. 526 is vacated.

9. Appeal No. E/526/2003 is disposed of in the above terms and Appeal Nos. E/527 & 528/2003 are dismissed.

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