CA Urvashi Porwal
In the case of Commissioner Central Excise vs M/S Indian Oil Corporation Ltd, it was held by Punjab and Haryana High Court that substantive benefits provided by a notification cannot be denied on account of procedural lapses by the assessee.
Brief Facts of the Case
The respondent-Corporation, who is engaged in the manufacturing of petroleum products, was issued a show cause notice dated 10.05.2007 by the office of the Commissioner of Central Excise, Rohtak on the ground that 5% EBP was exempted from payment of whole of central excise duty upto 30.06.2004 vide No.6/2002-CE dated 01.03.2002 (as amended), under notification No.28/2002-CE dated 13.05.2002 (as amended) from Spl. A.E.D. and under notification No.15/2003-CE dated 01.03.2003 (as amended) from AED. The said notifications were further amended and exemptions were granted vide notification No.12/2004-CE dated 04.02.2004 giving exemptions upto 30.06.2004 and by notification No.37-39/2004-CE dated 04.08.2004 giving exemptions from 04.08.2004 and by notification No.4/2006-CE dated 01.03.2006 (as amended). As per the show cause notice, the respondent-Corporation did not satisfy the condition regarding the duty paid character as the ethanol blended motor spirit was being prepared after the tank truck was filled with 95% unleaded MS 87 octane and 5% of ethanol from different storage tanks. The ground for denying the exemption was that the invoices of unleaded motor spirit were being prepared after the tank truck was filled and the duty liability etc. was being paid at the time of removal from the factory gate. The duty on the motor spirit was being paid by the Corporation at the time of the clearance of the final product which was 5% EBP. Accordingly, as per the show cause notice, the provisions of Rule 4 of the Central Excise Rules, 2002 (for short, the ‘Rules) has been violated as the excisable goods had been removed without paying the central excise duty leviable on the final product. Similarly, Rule 6 of the Rules regarding the assessment of duty by the Corporation was alleged not to be proper and correct and as per Rule 8 of the Rules, since the excisable goods had been removed without paying full duty in the manner provided and thus, proper records were not being maintained as per Rule 10, pertaining to daily stock account. Correct invoices were not being maintained, as per Rule 11, accordingly, the show cause notice was made final against the Corporation on the ground that it was also violation of Rule 12 as proper and correct monthly periodical returns had not been filed.
The Commissioner, vide its order dated 07.12.2007, determined and confirmed the central excise duty under Section 11A(1) of the Act and also invoked full amount of penalty along with interest. However, the proceedings against the officials were dropped on the ground that they were employees of Public Sector Undertakings.
The said order, as has been noticed, has been set aside by the Tribunal placing reliance upon the judgment rendered in the case of respondent by the CESTAT, West Zonal Bench, Ahmedabad (supra).
Contentions of the Revenue
The Revenue has submitted that the duty upon the ethanol doped petrol has been exempted provided the conditions under the notification dated 01.03.2003 are strictly complied with and the appropriate duty of excise had been paid on the motor spirit and ethanol. The excise had not been paid on the motor spirit petrol but the two had been mixed and therefore, the respondent-Corporation was not entitled for the exemption and had violated the mandatory provisions. Thus, the Tribunal was in error in granting the benefit of exemption from the additional duty of excise once the mandatory conditions had not been fulfilled. The reliance has been placed upon the judgment of the Apex Court in Eagle Flask Industries Ltd. Vs. Commissioner of C.Ex., Pune 2004 (9) LCX 235 to submit that the conditions given in the notification had to be strictly complied with.
Contentions of the Assessee
The Assessee has placed reliance upon Rule 8 of the Rules to submit that admittedly, the duty on the motor spirit had been paid by the 5th day of the following month and therefore, once both the products had been stored at a common premises and the demand had been made in accordance with law at the time when the goods had been removed from the premises, there was no violation as such which would lead to the denial of exemption under the notification dated 01.03.2003.
Held by Hon’ble High Court
The Hon’ble High Court referred to the notification dated 01.03.2003 which reads as under:
“Seeks to exempt 5% ethanol doped petrol from additional duty of excise, levied under section 111 of the Finance (No.2) Act, 1998- In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 111 of the Finance (No.2) Act, 1998 (21 of 1998) the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts 5% ethanol blended petrol that is a blend-
(a) consisting, by volume, of 95% Motor spirit (commonly known as petrol), on which the appropriate duties of excise have been paid and, of 5% ethanol on which the appropriate duties of excise have been paid; and
(b) conforming to Bureau of Indian Standards specification 2796, from the whole of the additional duty of excise leviable thereon. Explanation.- For the purposes of this exemption “appropriate duties of excise” shall mean the duties of excise leviable under the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), the additional duty of excise leviable under the Finance (No.2) Act, 1998 (21 of 1998), and the special additional excise duty leviable under section 147 of the Finance Act, 2002 (20 of 2002), read with any relevant exemption notification for the time being in force.
2. This notification shall remain in force up to and inclusive of the 29th day of February, 2004.”
The benefit is given to the final product, i.e., 5% ethanol doped petrol (EBP) which is a blend of 95% motor spirit(petrol) and 5% ethanol. Both the said products were being stored in the premises of the refinery of the assessee and on the ethanol, the excise duty had been paid whereas on the motor spirit, the excise duty was not paid at the time of mixing the two, before the EBP was taken out from the factory/refinery premises. However, it is common case of the parties that as per Rule 8, the said duty has been paid on motor spirit (petrol) also, within the required period by 5th day of the following month. Once that is so and the duty has also been paid, it would be too technical a default to penalise the Corporation on the ground that the duty should have been paid prior to the mixing and therefore, deny it the benefit of exemption. It is not the case of the appellant-Department that thereafter, there was non-payment of the excise duty upon the motor spirit and therefore, the Tribunal was right in following its earlier view of the co-ordinate Bench of Ahmedabad, wherein it has been held that as per Rule 8, the duty liability shall be deemed to have been discharged and the amount payable is credited to the account of the Central Government by the specified date.
The Hon’ble Court further stated that the judgment relied upon by the appellant-Department in the case of Eagle Flask Industries Ltd. (supra) would not be applicable in the present case. In the said case, the manufacturers had failed to comply with the requirement of submitting the declaration and to give the undertaking as per the form annexed and accordingly, it was held that it was not an empty formality and it was the foundation for availing the benefits under the notification and the procedural requirements could not be held to be without any consequences which would normally deny the benefit of the notification. The authorities below had concurrently found against the assessee and the said order was, thus, upheld by the Apex Court and therefore, reliance upon the same is of no avail to the appellant.
In view of the above, the appeal is dismissed.