In a significant ruling, in favour of Indian Oil Corporation, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that in absence of violation of the rule to evade tax will not invoke penalty under Rule 173Q and quashed the penalty.
The Appellant appealed before the Supreme Court against the Tribunal Final Order No. A/10818-10819/2015 dated 19.06.2015 and was ordered to review petition by way of Misc. Application. The appellant Indian Oil Corporation Ltd. Challenged the applicability of Notification No. 29/89-CE dtd. 01.03.1989 and the legality of the penalty of Rs. 36,00,000/- under Rule 173Q of the Central Excise Rules,1944.
The appellant contended that the exemption under Notification No. 29/89-CE applies to any mineral oil (Kerosene) falling under heading 27.10 of the schedule to the Central Excise Tariff Act 1985 intended for use in the manufacture of Liner Alkyl Benzene or Heavy Alkylate. Further contended that the product classifiable as ‘Kerosene’ under CETH 2710 was not sold through PDS but supplied for manufacture of Liner Alkyl Benzene or Heavy Alkylate and the same would be eligible for exemption Notification No. 29/89.
The appellant submitted that the penalty cannot be imposed when the issue involved was classification dispute or interpretation of Notification.
The respondent contended that there was no specific plea in the appeal memorandum seeking annulment or modification of the penalty imposed on the appellant though invoking of a longer period of limitation as far as the duty demand was concerned has been contested.
It was evident from the notification that the benefit was granted to Kerosene falling under heading No. 27.10 of the Schedule of the Central Excise Tariff Act, 1985 intended for use in the manufacture of liner alkyl benzene or heavy alkylate.
The Tribunal observed that the claim of the Applicant that exemption Notification No. 29/89C.E. applies to any mineral oil (Kerosene) falling under heading 2710 of the Schedule to the Central Excise Tariff Act 1985 is not correct. The said exemption Notification applies only to “Kerosene” and not for any other mineral oil falling under heading 2710. Further observed that it was a matter of difference of opinion regarding the classification of goods between the applicant and the department.
Judicial member Mr Ramesh Nair and Technical Member Mr Raju set aside the penalty and held that “no penalty is imposable upon the appellant under Rule 173Q of the Central Excise Rules 1944 as the applicant has not violated any Rules/provisions with an intention to evade payment of duty”.
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