CESTAT bench sets aside the penalty imposed on Tata Chemicals by Central Excise

Tata Chemicals Ltd had announced that, with reference to the earlier announcement dated April 11, 2006, wherein the Company had informed that Commissioner, Central Excise Haldia Commissionerate, Kolkata has passed order demanding duty of Rs 278.35 crores and penalty of an equal amount for the period from September 01, 1999 to September 30, 2005 i.e. for 6 years. It was the contention of the Department that CENVATABLE inputs have been used in the manufacture of fertilizer (DAP - Di-Ammonium Phosphate and SSP - Single Super Phosphate), which is exempt from duty and since no separate accounts have been maintained the Company is required to pay 8% / 10% of the sale value of fertilizer.

The issue was contested by the Company before Kolkata bench of CESTAT. The Company also paid duty of Rs 60 lakhs under protest on intermediate products namely NFC and spent Sulphuric Acid used in making fertilizers.

"The Honourable Bench of CESTAT vide its order dated March 27, 2007 decided as under:

1. We find no justification whatsoever for ordering to recover 8% of the value of the exempted fertilizers in the production of which small quantity of NFC and Spent Sulphuric Acid is used in the subsequent process and in a different plant.

2. We take note of the fact that the appellants themselves, subsequent to the Adjudication Order, have paid 16% of the duty on all these items and hence the credit of duty taken by them on the relevant inputs is in order and there is no reason to demand 8% or 10% of the same value of the fertilizers.

3. As regards the period beyond the normal period of limitation, we find that the appellants have not held back any information from the Revenue. Hence, there is no justification for demanding duty beyond the normal period of limitation on these two products.

4. The penalty imposed is set aside."

Further the Company has informed that, by this order the entire demand of 557 crores is set aside.

Source : Equity Bulls

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