2026-VIL-1846-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Exemption to waste and scrap arising in manufacture of railway coaches cleared at concessional rate - Meaning of exempted goods in Sl.No.17 of Notification No.62/95-CE - Appellant, a factory belonging to the Central Government under the Ministry of Railways, cleared coaches at 1% under Notification No.1/2011-CE and cleared waste and scrap without payment of duty, treating it as covered by Notification No.27/2011-CE, and on audit objection paid duty on the scrap and claimed refund - Whether waste and scrap arising in the manufacture of coaches cleared at 1% under Notification No.1/2011-CE is exempt under Sl.No.17 of Notification No.62/95-CE - HELD - Sl.No.17 exempts waste and scrap arising in the course of manufacture of exempted goods in a factory belonging to the Indian Railways. Section 5A(1) empowers the Central Government to exempt goods from the whole or any part of the duty, and Notification No.1/2011-CE itself exempts the coaches from so much of the duty as is in excess of 1%, so that they are exempted goods though not exempted from the whole of the duty. Sl.No.17 does not qualify the expression, whereas an earlier notification expressly defined exempted goods as goods chargeable to nil rate or exempted from the whole of the duty, and the restriction cannot be supplied by interpretation. Strict construction means fidelity to the words used and does not permit addition of words. The amendment to Rule 2(d) of the CENVAT Credit Rules, 2004 shows that the Central Government itself treated goods under Notification No.1/2011-CE as exempted goods. Citation of an inapplicable notification at the time of clearance cannot extinguish an exemption conferred by law - Waste and scrap was exempt under Sl.No.17, the rejection of refund cannot stand, and the demand fails on merits - Extended period of limitation under Section 11A(4) of the Central Excise Act, 1944 - Show cause notice issued after the Department had itself unearthed and collected the duty on audit - Appellant paid the duty on audit objection and claimed refund, which was adjudicated by the Assistant Commissioner, whereafter SCN was issued alleging suppression of facts - Whether the extended period under Section 11A(4) could be invoked against the Appellant - HELD - Section 11A(4) is attracted only where duty is not paid by reason of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of duty, and mere failure to declare is not wilful suppression. The facts alleged to be suppressed were ascertained by the Department's own audit, collected, and made the subject of the refund claim adjudicated earlier, and facts known to the authorities cannot be treated as suppressed in a later notice. The SCN merely echoed the statutory words without particulars of any positive act. The Appellant, a factory of the Union of India, whose liability was ascertained and paid at the instance of the Department in a dispute of pure construction, cannot be attributed with intent to evade - The extended period was not invokable, and the demand is barred by limitation in its entirety - Interest under Section 11AA and penalty under Section 11AC of the Central Excise Act, 1944 - Consequential to demand of duty on waste and scrap - Whether interest and penalty are tenable when the demand fails on merits and on limitation - HELD - Interest under Section 11AA is consequential and cannot survive when the demand fails. Penalty under Section 11AC presupposes fraud, suppression or intent to evade, which were found to be absent - Interest and penalty are set aside, both appeals are allowed, the refund of the duty paid on waste and scrap is held admissible with interest as admissible in law, the amount appropriated shall be refunded only once, and the original authority shall process the refund after verification within ninety days from the date of receipt of the order.
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