Exemption cannot be denied when the competent Ministry has issued Exemption certificate: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in the matter of M/s. KEC International Limited Vs. Commissioner of Central Excise and Central Goods & Service Tax ruled out that Exemption cannot be denied when the competent Ministry has issued an Exemption certificate.

In this case, the appellant has vehemently submitted that they have cleared the goods on the basis of the exemption notification on a certificate to this effect having been issued by the Competent Authority in the Ministry of New and Renewable Energy Resources. They have submitted the certificate to the jurisdictional Central Excise authorities before effecting the clearance and therefore, no suppression or misrepresentation can be alleged and the extended period cannot be invoked. They submit that for this reason, the demand prior to 31.1.2016 is beyond the normal period of limitation.

As per CESTAT “There is a force in the submission of the appellant. When the clearances are intimated to the department, it is not open to the department to invoke the extended period as no fraud, collusion, suppression, etc., has been brought on record, as held in the cases of Bombay Chemicals Pvt. Ltd. and LAPP Pvt. Ltd. When the competent authority in the Ministry has issued a certificate stating that exemption is available, exemption under said notification cannot be denied.”

Further “The appellant has also argued that in terms of the notification, in case of any non-compliance of subclause (1), the liability to pay the duty is on the project developer and not the appellant. As per the discussion above, it has to be held that the impugned goods are components required for initial setting up of solar power generation project or facility and to that extent, there is no violation of the substantial compliance of the notification.”

The CESTAT further highlighted that “Coming to the procedural compliance, it is not the case of the department that the appellant did not produce the requisite certificate from the competent authority. In such circumstances, in terms of the notification in the event of non-compliance, the project developer of such project shall pay the duty which would have been leviable at the time of clearance of goods, but for this exemption.”

The Tribunal ruled out that, “The department has relied upon the decision in Saraswati Sugars Ltd., Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar vs. Commissioner of Central Excise and Service Tax, Alwar22 and Dilip Kumar and Company. The wordings of the notification being clear, there is no scope for any interpretation, strict or liberal in the instant case. Therefore, the ratio of the cases is not applicable to the facts of the present case. In fact, these cases would help the cause of the appellant rather than the department. When the notification provides unambiguously that duty foregone, if any, is to be recovered from the project developer and not from the appellant-manufacturer; it is not open to the Revenue to demand duty from the appellant. As far as the appellant is concerned, the clearances are made in accordance with the provisions of the notification and on the strength of a certificate issued by the competent authority. No demand can be raised against the appellant without getting the said certificates cancelled. For this reason, also the demand is not sustainable.

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