Whether non filing of declaration under Notification No. 36/2001-CE (NT) dated 02.06.2001 be reason to deny the SSI exemption?

PJ/Case Study/2012-13/38

CASE STUDY

Prepared By: CA Neetu Sukhwani &

Kavita Thanvi

Introduction:-

The Show Cause Notice was issued to the assessee on the allegation that the assessee has willfully suppressed and not disclosed the material facts and have manufactured and cleared excisable goods with intent to evade payment of duty as the assessee had desired to claim benefit of different exemption notifications but subsequently has made payment of duty in respect of goods sought to be governed by various exemption notifications. The assessee had firstly claimed exemption under Notification No. 108/95-CE dated 28.08.95, then under 06/2006-CE dated 01.03.2006 and thereafter under 128/94-CUS dated 10.06.1994 but was subsequently held to be ineligible for claiming exemption under all of the above notifications. The assessee was also availing SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 but the same was also proposed to be denied on account of non filing of declaration under Notification No. 36/2001-CE (NT) dated 02.06.2001. The adjudicating authority confirmed the denial of SSI exemption and confirmed the demand of Rs. 32,96,317/- along with interest and penalty. Hence, the assessee filed appeal to the Commissioner Appeals.

M/s Qualitech Metal Industries
[Order-In-Original no. 33-34/CE/JP-II/2011 dated: 23.03.2011]

Relevant Legal Provisions:-

Notification No. 8/2003-CE dated 01.03.2003:-Regarding Small Scale Industries Exemption

Notification No. 36/2001-CE(NT) dated 02.06.2001:-Regarding Filing of Declaration on crossing the limit of Rs. 90 Lacs.

Issue: - Following issue was made before the Commissioner Appeals:-

Whether non filing of declaration under Notification No. 36/2001-CE (NT) dated 02.06.2001 be reason to deny the SSI exemption?

Brief Facts:-

M/s Qualitech Metals Industries, Jodhpur, the appellants, are engaged in the manufacture and clearance of M.S. pipes, M.S. Flanges and M.S. Special Joint, falling under sub heading no. 730519210, 73079190 and 7307990 of the Central Excise Tariff Act, 1985. They are availing the benefit of SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 during the financial year 2008-09. The appellant had also cleared said goods to Bisalpur Jaipur Water Supply Project, Jaipur without payment of duty under Notification no. 108/95-CE dated 28.08.95 or 06-2006-CE dated 01.03.2006. In the SCN, it was alleged that the benefit of Notification No. 1085/95 was not available as the project was funded by Japan Bank of International Co-operation which is not an International Organization notified under Section 3 of the United Nation Privileges and Immunities Act, 1947. The appellant later on claimed that Bisalpur Jaipur Water Supply Project was under International Competitive Bidding and therefore covered under exemption Notification No. 06/2006-CE dated 01.03.2006. This exemption was denied by the adjudicating authority on the ground that it did not satisfy the condition no. 19 to the Notification No. 06/2006-CE dated 01.03.2006 which provides that goods should be exempted from the duties of Customs leviable under Customs Tariff Act, 1975 and Additional duty leviable under Section 3 of the Customs Tariff Act, 1975 when imported into India.
The appellant had however also withdrawn their claim as the project was not registered under Customs and paid duty of Rs. 923090/- along with interest on 23.12.09 on goods of value of Rs. 8840710/- cleared without payment of duty on 19.1.2008, 16.12.08 and 28.01.09.
Even though the appellant had paid duty, but availed Cenvat credit on the inputs received from 05.11.08 to 01.12.08. It was held by the adjudicating authority that the Cenvat credit taken and utilized amounting to Rs. 501217/- was irregular as the appellant were not registered with the department at the time when inputs were received in the factory and were availing SSI exemption. The adjudicating authority also denied the SSI exemption on the ground that the appellant neither filed the declaration required under Notification No. 36/2001-CE (NT) dated 02.06.2001 nor had followed the conditions of Notification No. 8/2003-CE dated 01.03.2003 by subsequently availing Cenvat credit of Rs. 501217/-. It was also held that the value of bought out items cannot be deducted as they were integral part of the final product and no evidence of these bought out items has been provided by the appellant. As such the demand of Rs. 3296321/- was confirmed for the clearance of Rs. 22859372/- made upto 05.02.09 without payment of duty to be recovered along with interest chargeable under Section 11AB of Central Excise Act, 1944. Penalty of Rs. 3296321/- under Section 11AC was also imposed. Thus, the appellant is under this appeal.

Assessee’s Contentions:-

Assessee made following submissions before the Commissioner (Appeals):

1) The appellant submit that the Order-In-Original passed by the learned Deputy Commissioner is not correct and thus is liable to be set aside. He submit that on the basis of project authority’s certificate issued by the Principal Secretary, Government of Rajasthan, where it was clearly mentioned that the project was exempted, under International Competitive Bidding, and the material was cleared under exemption only on the basis of this certificate received and there was no intention of evading any duty. Further he submit that the impugned order in original is categorically discussing the provisions of notification no. 108/95-CE dated 28.08.1995, Notification no. 6/2006- C.E. dated 10.03.2006 and Notification no. 128/94-Cus dated 10.06.1994. After discussing these notifications, the impugned order has simply denied the benefit of these notifications. But while denying the benefit of these notifications, impugned order has not discussed the submissions made by the appellant in this regard.
2) It is further submitted that the entire duty of Rs. 923090/- was paid on 23.12.2009. The said duty is paid as Rs. 421873/- through cash and Rs. 501217/- from Cenvat Credit. The impugned order is raising the objection on payment of Duty from Cenvat Credit. It is alleged that they have availed and utilized credit on inputs received from 5.11.2008 to 1.12.08 when they were availing the SSI exemption benefit. As such, the benefit of Cenvat Credit was not available to them. In this regard, it is submitted that when the goods were cleared, the appellant they under belief that these goods are exempted. They had relied upon certain exemption notifications. But when the benefit of these notifications was denied to them; they paid the duty. It is a set rule that when the duty liability arises, subsequent benefits should also accrues to the assessee. Reliance is placed on following decisions:-

Ø M/s Shah Yarn Tex (P) Ltd. Vikash J Shah v/s Commissioner of Central Excise, Coimbatore [2008-TIOL-1975-CESTAT-MAD.]

Ø S.R. SPRINGS PVT. LTD. Versus COMMISSIONER OF C. EX. & CUS., BBSR-II [2002 (150) E.L.T. 757 (Tri. - Kolkata)]

Ø SUPER STEEL MFG. CO. (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE [2003 (152) E.L.T. 166 (Tri. - Del.)]

The analysis of these decisions makes it clear that in the cases where demand is confirmed the related benefit of Cenvat Credit should be allowed. In the present case, at the time of clearing the goods they were not aware that the duty is to be paid on them. As such, they neither paid duty, nor took Cenvat Credit even though separate stock register was maintained for this sale. But when they paid the duty finally, the credit was allowable to them in the light of above referred decisions. Thus, the benefit of these decisions should be extended to them and the impugned order should be quashed.
3)    It is further submitted that the impugned order is alleging that since they registered with the Department on 5.2.2009 and surrendered the registration certificate on 31.3.2009 and as on date of paying the duty i.e. on 23.12.2009) they were not registered. It is alleged that due to this reason, they were not supposed to take the Cenvat Credit. In this regard, it is submitted that registration certificate was surrendered on 31.3.2009 thinking that most of the sale are for water supply projects which are exempt from excise duty. After this issue arose, they again got registered on 1.11.2009 before crossing the exemption limit. This proves the bona fides of the appellant that they were acting within the boundaries of excise law. Further, it is reiterated that the cases referred earlier allows the credit even in the case of clandestine removal of goods. In certain cases of clandestine removal, at the time of clearing the goods, the manufacturer is not registered with the department (particularly in case of new levy or due to unawareness of manufacturer). But even then when the duty demand is confirmed, the credit is allowed to them. So, in the instant case also, this analogy is equally applicable and as such, this allegation is baseless since the credit is taken only as a consequence of duty payment, not otherwise. As such, contention of the impugned order for denial of Cenvat Credit is not viable and is liable to be set aside.
4)    The impugned order is denying the benefit of SSI exemption under Notification no. 8/2003-CE dated 1.3.2003 on the grounds that since they has taken and utilized the input Cenvat Credit amounting to Rs. 501217/-, they have violated the conditions of notification no. 8/2003; as such, the SSI exemption is not available to them. In this regard, it is submitted that there was no such allegation in the show cause notice no. V (73) Adj-II/JPR-II/513/09/5351 DT 13.11.2009 for which this order is passed. This show cause notice proposed to deny the benefit of Notification no. 8/2003-CE dated 1.3.2003 only on the grounds that they had not disclosed the value of clearances category wise and has not filed the declaration in terms of notification no. 36/2001-CE (NT) dated 26.06.2001. Both of these allegations were the only allegations raised for denial of benefit under Notification no. 8/2003-CE dated 1.3.2003 in the show cause notice. Both of these allegations were duly replied in the reply to show cause notice and in the written submissions. In fact, a series of judgments were cited by them wherein it was held that the benefit of notification cannot be denied on account of non-filing of declaration. The no. of decisions cited by them proved that it is the set law that mere non filing of declaration cannot be taken as basis to deny the substantial benefit of the exemption notification. Since these judgments have bent the case in favour of the appellant, the adjudicating authority had turned the case to another side by raising other allegations. The impugned order is denying the benefit of SSI exemption entirely on the new ground that the Cenvat credit is taken. But denying the benefit of notification on entirely new grounds at the stage of passing the order is not sustainable when no such allegations were raised in the show cause notice.Thus, the order has travelled beyond the show cause notice. Such an order going beyond the show cause notice is not sustainable and liable to be set aside. This decision has been given in the case of JAY AR ENTERPRISES V/s COMMISSIONER OF CUSTOMS (SEA), CHENNAI [2007 (210) E.L.T. 459 (Tri. - Chennai)]. The analysis of the decision makes it clear that where the order is passed on the grounds other than what are proposed in the show cause notice, it is not legally viable. Similar decision was given in the following case:-
·         BHAGWATI SILK MILLS Versus COMMISSIONER OF CENTRAL EXCISE, SURAT [2006 (205) E.L.T. 182 (Tri. - Mumbai)]

·         M/s Oswal Paper & Allied Industries Vs CCE, Jalandhar [2010-TIOL-678-CESTAT-DEL]
·         Caliber Point Business Solutions Ltd Vs CST, Mumbai [2010-TIOL-554-CESTAT-MUM.]
In the above referred cases, it was held that the order should align with the allegations of the show cause notice. If the order is not passed in accordance with the grounds specified in the show cause notice, it is not tenable in the eyes of the law. In the present case also, the impugned show cause notice proposed to deny the benefit under Notification no. 8/2003-CE dated 1.3.2003 on the grounds that they had manipulated the figures of clearances (as they had wrongly claimed the benefit under several notifications) and has not filed the declaration in terms of notification no. 36/2001-CE (NT) dated 26.06.2001. But the impugned order is denying this benefit on the ground that credit is taken and since this allegation was not a part of show cause notice, the impugned order has travelled beyond the provisions of show cause notice. Such an order is not tenable in the light of above referred decisions and hence liable to be quashed.

5)    The appellant further submit that the impugned order is alleging that the exemption notifications should be construed literally and the conditions specified therein should be fulfilled for claiming its benefit. Certain case laws have also been cited in support of this contention. In this regard, it is submitted that the notifications which have been introduced for the purpose of promoting certain activities should be liberally interpreted. It has been held by Hon’ble Supreme Court in the case of Commissioner of Customs (Preventive), Mumbai, Vs M/s M Ambalal & Co. (2010-TIOL-111-SC-CUS). It is clear from the said case law that the notification which contains the beneficial exemptions and which is issued for the purpose of encouragement or promotion of certain activities should be interpreted liberally. SSI exemption under Notification no. 8/2003-CE dated 1.3.2003 has been introduced to promote the small entrepreneurs. By allowing this exemption, government has taken a step to promote the small scale industries which ultimately strengthens the economy of India. Since this notification aims to promote the specific activities of the small scale industries, it is required to be interpreted liberally in the light above referred decision of Hon’ble Supreme Court. As such, the ratio of above decision should be extended to them and the impugned order should be set aside.

6)    The appellant also submits that the impugned order has confirmed the penalty under section 11AC of the Central Excise Act, 1944 only on the grounds that there was suppression of facts and intention to evade payment of duty. In this regard, it is submitted that the mechanically imposing the penalty by saying that there was willful suppression or intention to evade payment of duty is not sufficient. The willful suppression is required to be proved which is not proved in the impugned order. It was held in the case of Rainbow Industries v/s. CCE [1994 (74) ELT 3 (SC)] that for invoking the extended period, two ingredients are essential–
(i)            Willful suppression, mis-declaration, etc. and
(ii)           Intention to evade payment of duty.

In absence of both of these extended period cannot be invoked. This is also held in the case of Chemphar Drug & Limits reported in (2002-TIOL-266-SC- CX) - [1989 (40) E.L.T. 276 (S.C.)] that extended period of limitation can only be invoked in case of fraud, collusion, suppression or willful misstatement. In absence of these essential ingredients, extended period cannot be invoked. Thus extended period cannot be invoked blindly in every case. Where the assessee has been acting in the boundaries of law, the extended period cannot be invoked. Similar decision is given in the following cases:-

Ø Pushpam Pharmaceuticals Company Vs. CCE, Mumbai reported in ( 2002-TIOL-235-SC- CX )-
Ø M/s Idea Cellular Ltd Vs CCE, Rohtak [2009-TIOL-387-CESTAT-DEL]-

In the above cases, it was held that mere inaction would not be a valid ground for invoking the extended period of limitation. In this case, all the factum was in due knowledge of the department. This is ample clear from the hierarchy of the facts that they took the matter from range office to division office and even to the office of Commissioner. Thus, everything was in the knowledge of the department as they had tried to sort out the matter by consulting with the department itself. But their honesty has been rewarded by confirming such a demand a part of which is time barred. Hence in the light of above decisions, the allegation of suppression of facts is not tenable and as such the impugned order is liable to be set aside.

7)    It is further submitted that they had given a no. of submissions in their reply to show cause notice and in written submissions but many of these have not even been discussed in the impugned order. These submissions were as follows:-
Ø They had cited following decisions wherein it was held that the non filing of declaration would not deny the benefit of SSI exemption:-

                                     I.        Lokhandwala Construction Industries Ltd vs CCE [1997(92) ELT 703]
                                    II.        Tufail Ahmed Vs Collector of Central Excise [1992(62) ELT 745 (Tri.)]

Ø They submitted that demand of Rs. 3200312/- has been arrived at by disallowing the deduction of bought out items on the fact that no evidence was provided in this regard. Moreover, an amount of Rs. 6729910/- in respect of exemptions claimed under the various other notifications has not been allowed and included in the total value of clearances made without payment of excise duty on which duty is being demanded. It was submitted that the bought out items were directly used at the site and it is wrong to deny its deduction only on the ground that no evidence has been provided in this respect. The intimation of claiming this deduction has been provided through the letters being sent and further this cannot be simply denied through issuing show cause notice. Reliance is being placed on the decision given in the case of Kerala State Electronic Dev. Corp. Vs CCE [2008 (224) ELT 88 (Tri.-Bang.)]that as long as the fact that goods used are bought out items on which excise duty has already been paid is not disputed, value of such bought out items cannot be included in assessable value.
Ø They had cited a no. of decisions regarding non imposition of penalty. But none of these decisions have even been referred in discussions and findings. They relied upon the decision of Commissioner of C. Ex., Coimbatore V/s M.S. Samuel and Sons [2009 (238) E.L.T. 696 (Tri.- Chennai)] wherein it was held that no penalty is warranted when the assessee has acted on the basis of bonafide belief. It was decided that no penalty is imposable as the assessee was under the bonafide belief that there was no duty liability on his part. In the case of Abe Value Point Systems Pvt Ltd v/s Commissioner of Service Tax, Bangalore [2009 (013) STR 0288 (Tri-Bang)] also it was held that appellant was under bona fide belief that they need not discharge the service tax liability and therefore imposition of penalty appears very harsh. In the same way, they were also under bonafide belief that no excise duty is leviable on the clearances effected by them as clear from the above stated submissions.
Ø It was also submitted by them that no penalty is warranted where the issue is relating to the divergent interpretation of the exemption notifications. It has been held in the case of CCE, Goa v/s M/s Betts India Pvt Ltd [2008-TIOL-2057-CESTAT-MUM]that where the issue pertains to interpretation of any provision, penalty is not imposable. Similar decision has been given in the case of M/s Arani Agro Oil Industries Ltd v/s CCE, Visakhapatnam [2008-TIOL-1883-CESTAT-BANG] and Mahalakshmi Textiles v/s Commissioner of Central Excise, Coimbatore [2008 (232) ELT 0099 (Tri. - Chennai)]. The analysis of these three decisions makes it ample clear that the penalty is not imposable in their case as the issue is made up of the divergent interpretations of the exemption notifications.
All the above discussion was duly done in the reply to show cause notice and the written submissions. But it has not even formed the part of the impugned order in original. Even the above stated decisions that were cited in reply and written submissions have not been discussed and distinguished by the learned adjudicating authority. As such non speaking and non-reasoned order is passed which is not justified in the light of following decisions:-
·         Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)]
·         CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]
·         M/s Nisha Cements Vs. CCE, Calicut [2010-TIOL-1255-CESTAT- BANG]
Going through the analogy given in the above decisions the above order passed against the appellant is not tenable in law because the Learned adjudicating authority has not discussed the case laws submitted by the appellant.
All the above submissions were the part of the reply to show cause notice and were reiterated in the written submissions. But neither these decisions have been discussed nor any reason have been assigned; as to why the benefit of these decisions have not been extended to them. Such an order is not justified in the light of decision given by Hon’ble Apex Court in the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS]. The analysis of this decision crafts it clear that the order passed without giving reasons of decision is not justified in the eyes of law. In then present case also, no reasons has also been assigned why the case laws cited by them are not applicable. As such, the impugned order passed without assigning the reasons is not justified and is liable to be quashed. The appeal should therefore be allowed.

8)    The appellant submit that the benefit of SSI exemption has already been allowed to them by the adjudicating authority while deciding the Show cause notice no. V (73) Adj-II /JPR-II/77/10/5998 dated 19/03/2010. Under this show cause notice, it was proposed to deny the benefit under notification no. 8/2003-CE dated 01.03.2009 on the grounds of non filing of declaration. This show cause notice has been adjudicated vide order in original no. 33-34/CE/JP-II/2011 dated 24.3.2011. The learned adjudicating authority has dropped the proceedings initiated vide aforesaid show cause notice by stating that mere non filing of declaration is a procedural lapse for which substantial benefit of exemption notification cannot be denied. The same allegation was raised in the instant case wherein the show cause notice proposed to deny the benefit of notification no. 8/2003 on the grounds that the declaration is not filed. But while passing the impugned order, the case laws cited have not been considered and entirely new case is framed for denying the benefit under this notification. Thus, for the same allegations and reply thereof, benefit of notification no. 8/2003 has been allowed in respect of show cause notice no. 5998 dated 19.3.2010 while it is being denied in the instant case. Such an order is a discriminatory order which is not justified and is liable to be quashed.

9)    Without prejudice to above, it is submitted that though they do not agree that the benefit of SSI exemption is not allowable to them, yet if it is accepted for the sake of argument only; then too the denial of SSI exemption right from the beginning is not justified. Thus, even if the impugned order alleges that the benefit of SSI exemption is not available to them as they had taken the Cenvat Credit, then too, the benefit is to be denied as from the date of taking the Cenvat Credit; not from the beginning. As such, even if the allegation of the impugned order is accepted for the sake of argument only, then too the benefit of notification no. 8/2003 is to be denied as from the date of taking the Cenvat Credit, not from the beginning. Therefore, the impugned order is not legally tenable in denying the benefit of SSI exemption from the beginning and as such, it is liable to be quashed.

10)The appellant submit that they were claiming the SSI exemption. The certificate under notification 108/95 or international competitive bidding was taken. They have submitted the certificate even though they were not registered with the department. This was done with a view that the benefit of this notification will be available in addition to exemption limit of Rs. 1.5 Crore under notification no. 8/2003. This implies that they will not consider the clearance made under this certificate in computing the limit of Rs. 1.5 Crore exempted under notification 8/2003. This was done by them. Thereafter, a lot of correspondence took place between the department and them, the matter was referred to various authorities. It was held that the exemption under notification 108/95 or under notification 6/2005 for international competitive bidding is not available. Then they have paid duty on the same since they have already crossed the limit of Rs. 1.5 Crore for other clearances without considering the clearances under this certificate. But this has been misinterpreted for denial of SSI exemption by the learned adjudication officer which is not legally tenable. They have paid the duty on such clearance as exemption was denied to them. When they have not considered these clearances for SSI exemption and no other exemption is available to them then they cannot once again re-compute the SSI clearance and then pay duty. The simple thing was that they have claimed the exemption under notification no. 108/95 or under international competitive bidding and that was not allowed then pay the duty on the same. But nowhere SSI exemption will be disallowed for the same.

Further, it is reiterated that they had initially claimed the benefit under notification no. 108/95 and as per provisions of Rule 6(5) of the Cenvat Credit Rules, 2004; the credit is allowable even if the goods are cleared at NIL rate after availing benefit under this notification. Thus, right from the beginning, the option was available with them to claim both notification no. 108/95 and Cenvat Credit. Similarly, if goods are cleared for international competitive bidding under notification no. 6/2006; then too the credit is allowed under rule 6(5) ibid. But they being small scale unit were not aware of this provision and did not take the credit. Hence even if the exemption was available then also credit was allowed to them. But now, when the benefit of these exemption notifications is denied to them, then too, the credit taken afterwards will remain intact. As such, the taking of credit will not be affected anyways by forgoing the benefit under this notification. Therefore, the impugned order is not justified in denying the credit.
On the basis of above submissions it is ample clear that the impugned order in original is not tenable in the eyes of law and as such, it is liable to be set aside.

Reasoning of the Commissioner (Appeals):-

The Commissioner (Appeals) held that It is seen that the appellant had initially claimed exemption under Notification No. 108/95-CE dated 28.08.95 and 06/2006-CE dated 01.03.2006 and subsequently withdrew their claim under the said Notification. Thus, it is to be decided that whether the appellant is eligible for the SSI exemption under Notification No. 8/2003-CE dated 08.03.2006.
They observe that during the financial year 2008-09, the total value clearances was of Rs. 25683997/- which is under permissible limit as specified under Notification No. 8/2003-CE dated 01.03.2006 and in the financial year 2007-08, the value of clearances was also less than 1.5 crore. The adjudicating authority had however, denied the said exemption on two grounds viz,
- non filing of declaration required under Notification No. 36/2001-CE (NT) dated 02.06.2001
- wrong availment of credit by not following the conditions of Notification no. 8/2003-CE dated 01.03.2003.
As regards non filing of declaration under Notification No. 36/2001-CE (NT) dated 02.06.2001 is concerned, they find that there are number of judgments which involves that non filing of declaration is a procedural lapse for which substantial benefit of exemption Notification cannot be denied. Thus, they hold that SSI exemption under Notification No. 8/2003 cannot be denied solely on the ground of non filing of declaration which is in the nature of intimation alone. Further, the adjudicating authority held that for availing full exemption, the appellant was not eligible to avail the credit of duty on inputs under Rule 3 or Rule 11 of Cenvat Credit Rules, 2004 as per para 2(iii) of Notification No. 8/2003. The appellant however argued that since they had availed the credit of Rs. 501217/- on 23.12.2009 in respect of inputs received during the period 05.11.08 to 01.12.08 and utilized the same for payment of duty on the goods cleared under exemption Notifications other than SSI exemption from 16.12.08 to 28.01.09, thus the benefit of SSI exemption was available to them. In this regards, they find that SSI exemption up to the value of clearances of 1.5 crore exemption was not available to the appellant in case they prefer to avail credit of duty on inputs as clearly envisaged in the said SSI exemption ceased to be available to them. But the appellant did not avail any credit at the material time and was availed on 23.12.09 i.e. in the subsequent year. As such the act of availing credit in the subsequent year as against the preceding years distorts the scheme of SSI exemption as it reopens the assessment of duty retrospectively without any provision of the SSI exemption scheme. It is therefore, not just and valid to allow the credit retrospectively. This also finds support from the Supreme Court’s judgment in the case of CCE, New Delhi vs. Hari Chand Shri Goyal 2010(260) ELT 3(SC), wherein it has been held that if mandatory requirements to claim exemption are no followed, the benefit of exemption notification not available. Thus, they held that the appellant wrongly availed the Cenvat credit of Rs. 501217/- in December 2009 for payment of duty became payable during Dec 08 and Jan 09. Hence, the appellant was eligible for SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 during the year 2008-09 up to 1.5 crore and liable to pay duty on the value of clearance of Rs. 7859372/- i.e. 22859372 - 15000000.
Since the appellant had charged duty of Rs. 923090/- on the value of clearance of Rs. 8840710/- from the buyers, therefore they were liable to pay the same in cash along with interest. Further, the appellant contended that the adjudicating authority had not discussed the case law cited by them in their reply for non imposition of penalty under Section 11AC of Central Excise Act, 1944. They further relied upon the decision of Commissioner of C. Ex., Coimbatore vs. M.S. Samuel and Sons [2009 (238) ELT. 696 (Tri. - Chennai)] wherein it was held that no penalty is warranted when the assessee has acted on the basis of bonafide belief. In this regard they observed that the adjudicating authority has categorically discussed the reasons of non compliance by the appellant and pointed out that despite of several letters and summon issued by the department for providing the details of clearances month wise, date wise/invoice wise, the assessee had not taken care and not provided the same which were very essential requirement for extending the SSI benefits. It is also a fact that during the material time, the appellant neither got themselves registered with the department nor paid the duty as directed by the department as they were not entitled for exemption under Notification No. 108/95-CE dated 28.08.95 and 068/2006-CE dated 01.03.2006. The adjudicating authority clearly held that the assessee has suppressed vital information from the department and did not abide by the directions given buy the department. The case laws cited by the appellant are also not applicable in present case. However, they observe that Supreme Court in the case of UOI Vs Dharmendra Textile Processors [2008(231) ELT 3(SC)] has held that if a statute prescribes penalty for breach of civil obligation, penalty is impossible irrespective of mens-rea.
Therefore they held that there is no reason to intervene the finding of adjudicating authority and thus, uphold penalty under Section 11AC of the Central Excise Act, 1944. However they reduced the penalty to Rs. 9,23,090/- i.e. to the extent of duty liable to be paid. Hence final demand and penalty now is Rs. 9,23,090/-.

Decision:- Appeal partly allowed.

Conclusion:- It is observed from this case also that it is practice of the department to deny benefits to the assessee for procedural lapses even when the assessee is rightly entitled to such benefits. In this case, non filing of declaration on crossing the specified limit of Rs. 90 lacs in terms of Notification No. 36/2001-CE(NT) dated 02.06.2001 was held as the sole reason to deny the benefit of SSI exemption even when there are plethora of judgments on this issue decided in favour of the assessee. This practice of denying intended benefit to the assessee at the adjudication stage itself merely adds cost of the assessee and where the amount involved is huge, the assessee is left with no option but to fight battle in the appellate forums.

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