Mere Wrong Availment Of Exemption Notification Does Not Mean That Availment Was Done To Evade Payment Of Central Excise Duty: CESTAT

The Bench of Dilip Gupta (President) and P. V. Subba Rao (Technical) has observed that, “Mere wrong availment of an Exemption Notification would not lead to a conclusion that it was with an intent to evade payment of central excise duty unless the department is able to not only allege but substantiate that the said suppression was deliberate with an intent to evade payment of central excise duty.”

In this case, the assessee engaged in manufacture of allopathic medicines and food products, The assessee had been availing an Area Based Exemption for excisable goods manufactured from 25.12.2004.

The Audit Team observed that the assessee was not eligible for availing the benefit of the Exemption Notification and so it had short paid excise duty.

A show cause notice was issued to the assessee alleging that the assessee has wrongly availed benefit of exemption to evade payment of appropriate Central Excise duty wilfully with mala-fide intent and fraudulently cleared their finished goods without payment of appropriate duty under the said notification which was not available to them.

To which, the assessee filed a detailed reply. However, the Commissioner did not accept the contentions. Thus, the assessee has challenged the order passed by the Commissioner before the Tribunal.

The assessee contended that the entire period of dispute in the show cause notice falls under the extended period of limitation under section 11A (4) of the Central Excise Act. But according to facts and circumstances of the case, the extended period of limitation could not have been invoked.

The Tribunal stated that the Commissioner held that since the assessee did not fulfil the condition stipulated in the Exemption Notification, the clearing of products at a reduced rate of duty is intentional. The reply filed by the assessee has not been appreciated by the Commissioner in its correct perspective. Thus, in the absence of any intent by the assessee to evade payment of service, the extended period of limitation under section 11A (4) of the Central Excise Act could not have been invoked.

The Tribunal agreed to the contention of the assessee that it bona fide believed that it was entitled to avail the benefit of the Exemption Notification, and it cannot be said that the belief is mala fide merely because it may ultimately be held that the assessee is not entitled to the benefit of the Exemption Notification.

“It is, therefore, clear that the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. The show cause notice issued to the appellant, however, merely mentions that the appellant wrongly availed the benefit of the Exemption Notification with intent to evade payment of central excise duty. It does not elaborate why the appellant intended to evade payment of duty,” added the Bench.

In view of the above, the Tribunal allowed the appeal.

Counsel for Appellant/ Assessee: Priyanka Goel

Counsel for Respondent/ Department: Rakesh Agarwal

Case Title: M/s. Aglowmed Ltd. V. Commissioner Central Goods and Service Tax, Dehradun

Case Number: Excise Appeal No. 51902 of 2021

Click Here To Read/Download The Order