2026-VIL-1780-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Applicability of Sl. No. 3 of Notification No. 23/2003-C.E. to DTA clearances of Instant Tea by a 100% EOU manufactured wholly from indigenous raw materials - Appellant, a 100% EOU, cleared into the DTA Instant Tea manufactured exclusively from indigenous raw materials and availed Sl. No. 4 of the Notification - Department held that Sl. No. 4 was not available as like goods manufactured by a non-EOU were not wholly exempt or chargeable to nil rate of duty, assessed the clearances under Sl. No. 2 and confirmed differential duty with interest and penalty under Section 11AC(1)(c) of Central Excise Act, 1944 - Appellant contended that Sl. No. 3 applied and that a wrong claim of serial number cannot deny the exemption otherwise available - Whether the clearances necessarily fall under Sl. No. 2 once Sl. No. 4 is held unavailable or are governed by Sl. No. 3 - HELD - Even if Sl. No. 4 may not be applicable, the applicability of Sl. No. 2 cannot be presumed merely by elimination without examining the nature of the goods cleared, the origin of the raw materials and the conditions stipulated under the other entries. All three conditions of Sl. No. 3 are satisfied. The goods were manufactured wholly from indigenous raw materials, as verified by the Department in earlier proceedings where separate accounts were found maintained and the demand was dropped. The goods were cleared into the DTA in accordance with the Foreign Trade Policy as acknowledged by the adjudicating authority itself. Like goods manufactured by a non-EOU were neither wholly exempt nor chargeable to nil rate of duty. A procedural lapse or an initial incorrect claim cannot deny a substantive exemption. An applicant who fails to claim the correct exemption at the initial stage is not debarred or estopped from claiming it later - The Appellant is entitled to Sl. No. 3, the duty is restricted to that leviable on like goods manufactured by a non-EOU, the demand in excess is set aside, and the Appellant is liable to pay duty with interest as computable under Sl. No. 3 only within the normal period of limitation – The appeal is disposed of - Invocation of extended period of limitation under Section 11A(4) of Central Excise Act, 1944 where the Department had prior knowledge of the facts - Four SCNs were issued for DTA clearances of Instant Tea by a 100% EOU, the last being styled as a supplementary notice overlapping the earlier periods, and the extended period was invoked on the allegation of suppression of facts with intent to evade duty - Appellant contended that the facts were known to the Department through earlier proceedings, audits and the earlier SCNs - Whether the extended period of limitation is invokable - HELD - In the earlier proceedings the Department had examined the very issue of use of imported tea vis-à-vis indigenous raw materials after physical verification of the factory and records, and the demand was dropped. The subsequent SCNs were issued on the same notification and the same duty computation, and the later notice revised the quantification of the earlier notices. As held by the Hon'ble Supreme Court, where the relevant facts were already within the knowledge of the Department when an earlier SCN was issued, the same facts cannot be relied upon later to allege suppression and invoke the extended period afresh by merely reiterating the allegation. The SCNs were issued before the amendment of Section 11A by the Finance Act, 2016 which enhanced the normal period from one year to two years - The extended period of limitation is not available to Revenue and the demands raised by invoking the extended period are set aside - Imposition of penalty under Section 11AC(1)(c) of Central Excise Act, 1944 where the dispute arises from adoption of an incorrect serial number of exemption notification - Penalty equal to the duty confirmed was imposed on the Appellant, a 100% EOU, on the allegation of suppression with intent to evade payment of duty on DTA clearances - Whether the ingredients for penalty under Section 11AC(1)(c) are made out - HELD - The Department failed to bring on record any tangible evidence of fraud, collusion, wilful mis-statement or suppression of facts with intent to evade payment of duty. The dispute emanates from the adoption of an incorrect serial number of Notification No. 23/2003-C.E. while determining duty on clearances into the DTA, which is a lapse of incorrectly applying the relevant entry and not an established act of deliberate evasion. The material circumstances concerning the manufacturing operations and the use of indigenous raw materials had previously been examined by the Department. In the absence of cogent evidence of deliberate concealment, the mere adoption of an incorrect serial number cannot be elevated to wilful suppression with intent to evade duty - The requisite statutory ingredients for penalty under Section 11AC are not made out and the penalty is set aside.
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