Factory Closed Due To Unavoidable Circumstances Not Liable For Excise Duty: CESTAT
The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that if a factory is closed due to unavoidable circumstances, it is not liable to pay excise duty.
The Bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that “the closure of the factory was not on the choice of the assessee whereas, they were compelled to keep the factory closed as per the direction of the Gujarat Pollution Control Board. Therefore, closing of the production was beyond the control of the assessee.”
Section 11A(1)(a) of the Central Excise Act, 1944 pertains to the recovery of excise duties that were either not levied, short-levied, short-paid, or erroneously refunded. If a duty has not been properly collected or refunded due to reasons other than fraud or deliberate misstatement, the Central Excise Officer must issue a notice within two years from the relevant date. This notice will demand that the person responsible for the duty explain why they should not pay the amount specified.
In this case, the assessee/appellant was operating under a compounded levy scheme for paying excise duty. During the period of March-2015 and April-2015 they had to stop production because they did not receive the necessary consent order from the Gujarat Pollution Control Board to restart operations. They informed the excise department of this closure but despite the factory closure, the range officer demanded excise duty for the month of March-2015 and April-2015. To which, the assessee responded that the closure was due to circumstances beyond their control and requested a duty abatement for that period. A show cause notice was issued by the Assistant Commissioner, demanding Rs. 2,40,000/- along with interest and penalty. The adjudicating authority confirmed the demand, stating the factory had not remained closed for more than three months.
Aggrieved, the assessee filed an appeal before the Commissioner (Appeals) who upheld the order of the Adjudicating Authority. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.
The assessee contended that the factory closure was not voluntary but rather due to external circumstances that is the lack of a consent order from the Gujarat Pollution Control Board. Therefore, in these peculiar circumstances, the assessee cannot be demanded the excise duty for the period when the factory remained close.
The Tribunal observed that the closure of the factory was not on the choice of the assessee whereas, they were compelled to keep the factory closed as per the direction of the Gujarat Pollution Control Board. Therefore, closing of the production was beyond the control of the assessee.
The Tribunal pointed out that the assessee cannot be fastened with the duty liability during the closure of the factory even though for the 2 months as the same was beyond their control.
In view of the above, the Tribunal allowed the appeal.
Counsel for Appellant/ Assessee: M.K. Kothari,
Counsel for Respondent/ Department: Himanshu P Shrimali
Case Title: Dhanuka Steel v. Commissioner of C.E.-Ahmedabad-ii
Case Number: Excise Appeal No. 10554 of 2018 - DB