Pranav B Prem

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the Revenue cannot compel an assessee to avail an optional exemption notification without its consent. The Tribunal emphasized that the choice to claim or not to claim such an exemption rests solely with the assessee, and authorities cannot retrospectively apply the benefit against the assessee’s option.

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The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) was dealing with appeals filed by the Commissioner of Central Goods and Service Tax, Dehradun, challenging orders which had dropped duty demands raised against M/s Today Jobs, M/s Maxima Solutions, and Hindustan Unilever Ltd. (HUL).

During the relevant period, Today Jobs and Maxima Solutions were job workers for HUL, engaged in wrapping, pouching, labelling, packing and similar activities for goods manufactured by HUL. Both entities had taken service tax registration and were paying service tax under the category of “business auxiliary service.” As per law, if the activity did not amount to “manufacture,” service tax was payable; if it amounted to “manufacture,” central excise duty was payable.

The department contended that as per the Chapter Note to the Central Excise Tariff, the activities carried out by Today and Maxima amounted to manufacture. Consequently, they were liable to pay central excise duty and not service tax. It was further observed that Notification No. 50/2003-CE dated 10.06.2003, which granted area-based exemption, was available to them as their units were situated in the notified area. However, availing the notification required a formal declaration by the assessee indicating the date from which it opted for the exemption.

Both Today and Maxima filed such declarations only on 31.03.2010, specifying that they were opting for the exemption from 30.03.2010 and 15.03.2010 respectively. The Revenue argued that since the declarations were filed belatedly, excise duty was payable for the earlier periods, and the Commissioner erred in dropping the demands by applying the exemption retrospectively.

The Tribunal agreed with the Revenue to the extent that the exemption could not be forced upon the assessees for periods prior to the date they themselves had opted for it. The Bench observed: "What choice the assessee makes is its business decision. It is not for the officers to alter this choice or force any one option on the assessee or confer benefits of a notification when the assessee did not opt for it (which may have other consequences such as denial of CENVAT credit)."

Accordingly, the Tribunal held that the demand of duty against Maxima for the period 01.08.2009 to 14.03.2010 and against Today for the period 01.07.2009 to 29.03.2010 had to be confirmed with applicable interest. However, for the period after the dates indicated in their respective declarations, the exemption notification would apply.

On the issue of penalties, the Bench found no ground to impose penalties under Section 11AC of the Central Excise Act, 1944, since there was no evidence of fraud, suppression or wilful misstatement. Similarly, penalty under Rule 26 of the Central Excise Rules, 2002 against HUL was held to be unsustainable, as there was no allegation of goods being rendered liable to confiscation or of invoices being issued without actual supply of goods.

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Ultimately, the Tribunal dismissed the Revenue’s appeals against HUL, partly allowed the appeals against Today Jobs and Maxima Solutions by upholding duty demands for the period prior to their opting for the exemption, and confirmed that an optional exemption notification cannot be enforced without the assessee’s consent.

Appearance 

Counsel for Appellant/ Department: Rakesh Agarwal and R.K. Mishra

Counsel for Respondent/ Assessee: M.H. Patil, Sachin Chitnis, Viraj Reshamwala and J.M. Sharma.

Cause Title: Commissioner of Central Goods v. M/s Hindustan Unilever Limited

Case No: Excise Appeal No. 52196 Of 2024

Coram: Justice Dilip Gupta [President],  P.V. Subba Rao [Technical Member]