TAXAP/1069/2007 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1069 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= THE COMMISSIONER OF CENTRAL EXCISE Versus MEGA AIR TECH ENGINEERS ========================================= Appearance : MR RJ OZA for Appellant(s) : 1, None for Opponent(s) : 1, ========================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 16/07/2008 ORAL JUDGMENT TAXAP/1069/2007 2/5 JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1. Appellant revenue has proposed the following three questions. (i) Whether the Tribunal was justified in extending the benefit of doubt to the respondents and in holding despite the evidence that the case would not be equated with that of clandestine removal and whether the Tribunal has erred in law in upholding the setting aside of penalty under Section 11AC of the Central Excise Act, 1944? (ii)Whether the Tribunal was justified in upsetting the findings as regards clandestine removal of excisable goods of the respondents with an intent to evade payment of Central Excise Duty without the same being challenged in the appeal of the revenue? (iii)Whether the Tribunal was justified in upholding the setting aside of the penalty on the partner under Section 11AC of the Act which is mandatory in nature on the ground that the amount of Central Excise duty having been deposited by the respondent before issuance of the show cause notice? 2. The case of the appellant is stated thus in the memorandum of appeal. 5. That the scrutiny of statutory records also revealed that they had declared under Rule 173B of the Central Excise Rules, 1944 their finished products vide declaration dated 3.11.1999 as- (a) Room Air Conditioner Window Type, (b) Room Air Conditioner Split Type, (c) Split Air-conditioner Part Highwall Mount cooling unit, (d) Split Air-conditioner Part Condensing Unit, (e) Split Air-conditioner Part Floor Model, (f) Air-conditioning Sub-assembly, (g) Air-conditioning Spare Parts, falling under Chapter Sub-Heading No.8415.00 of the Central Excise Tariff Act, 1985. 6. Vide a further declaration dated 9.3.2000, the respondent once again declared their finished products as Room Air- TAXAP/1069/2007 3/5 JUDGMENT condition Window Types, Split Air-conditioner and Spares and Parts as - (i) Split Air-conditioner Part Highwall Mount cooling unit, (ii) Split Air-conditioner Part Condensing Unit, (iii) Split Air-conditioner Floor/Tower Type, (iv) Split Air-conditioner Part-water Cooled Type, (v) Air-conditioner Kit Part assembly with and coil/ condenser without compressor, (vi) Air-conditioner Kit Part assembly with assembly and Compressor without coil, and (vii) Fan Blade & Blower 7. It appears that the factory had also filed price declaration for their finished products under Sub-rule 2A of the Rule 173C of the Central Excise Rules, 1944 and declaration dated 30.3.2000 under Sub-rule 3A of Rule 173C of the Rules. 8. The respondent mentioned in respect of “Parts” the type of duty as only Basic Excise Duty whereas in respect of complete machine, they have mentioned both Basic Excise Duty and Special Excise Duty. The respondent cleared Air- conditions of various types as mentioned in the show cause Considering the submissions advanced by the learned advocate for the petitioners, issue Notice returnable on 21st July, 2008. By way of ad interim relief, further proceedings pursuant to the First Information Report vide Palanpur City Police station II C.R. No.344 of 2007, are hereby stayed. Mr. Mukesh Patel, learned Additional Public Prosecutor waives service of notice on behalf of respondent No.1 – State of Gujarat. However, they had paid only the Basic Excise Duty on Window/Room Air-conditioners Kits, Cooling Units of Split Air-conditioners by declaring them as “Parts” of Air- conditioners under Chapter heading No.8415 of the3 Central Excise Tariff Act, 1985 and by availing the benefit of Notification No.22/2000-CE dated 6.3.2000 vide which the parts of Air-conditioners were exempted from payment of Special Excise Duty.” 3. In light of the aforesaid facts, it was the say of the appellant TAXAP/1069/2007 4/5 JUDGMENT revenue that respondent assessee had clandestinely removed split air conditioners by showing them as parts of air conditioners and had wrongly read the notification. The duty, which was levied, was accompanied by penalty levied under section 11AC of the Central Excise Act, 1944. 4. The respondent assessee carried the matter in appeal before the Commissioner (Appeals), who while upholding the levy of duty, deleted the penalty. Revenue preferred second appeal before the Customs, Excise and Services Tax Appellate Tribunal (the Tribunal) challenging part of the order made by Commissioner (Appeals) whereunder the penalty had been deleted. After hearing both the sides, the Tribunal has held that it was agreed that split air conditioners after assembly, would be a full fledged air conditioning unit but merely because sub assemblies were described as parts of air conditioners, the same could not be treated as a deliberate attempt to evade tax. The Tribunal has further noted that the respondent assessee appears to have interpreted the notification in a manner beneficial to the assessee and such an act cannot be equated with a case of clandestine removal. 5. Heard the learned counsel for the appellant revenue. The facts narrated in the order in original have been reiterated and it was emphatically pleaded that the Tribunal had committed an error in deleting the penalty. 6. The facts are not in dispute. The goods, which were removed under invoices by describing the same as parts of air conditioners and exemption, meant for parts of air conditioners, was claimed and availed of. It is not a case where any facts were suppressed. In the circumstances, there is no infirmity in the impugned order of Tribunal which would TAXAP/1069/2007 5/5 JUDGMENT warrant interference. 7. In absence of any question of law, as proposed or otherwise, much less a substantial question of law, the appeal is dismissed. (D.A. MEHTA, J.) (HARSHA DEVANI, J.) shekhar/-