Commissioner of Central Excise & ST CGST, Daman, Vapi v. KEC International Ltd.
Whether an assessee substantially complied with the conditions of an exemption notification, and whether the lack of an undertaking was only a procedural lapse, was a conclusion based on the peculiar facts, so it raises no substantial question of law under the Central Excise Act; the exemption cannot be denied for a procedural lapse where the project certificate was marked to the department and the invoices were verified.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-12
KEC International, which makes electric wires and cables, was alleged to have taken excise exemptions for supplies to power projects without furnishing the required certificates and undertakings. The CESTAT held that it had substantially complied because the department's own verification matched the invoices. The Revenue's appeal before the High Court failed.
What happened
After an audit, a show-cause notice dated 18 June 2014 proposed to demand central excise duty of ₹4,42,30,084 on the ground that the appellant had availed exemption under Notification No. 6/2006-CE (Sr. Nos. 91, 91A and 91B), No. 12/2012-CE (Sr. Nos. 336 and 338), No. 33/2005-CE, No. 15/2010-CE and No. 26/2012-CE without giving the certificates, undertakings and intimations required to the competent authority. The Principal Commissioner's order of 23 March 2016 confirmed ₹4,38,73,549, dropped the demand under Sr. No. 338 of Notification No. 12/2012-CE, imposed a penalty under section 11AC and personal penalties of ₹5,00,000 each on two employees. The CESTAT (Final Order Nos. 11181-11183/2024, 7 June 2024) held that invoking the conditions of Customs Notification No. 21/2002 at the adjudication stage went beyond the show-cause notice and could not apply to an assessee that is not the importer; that the jurisdictional Assistant Commissioner's report of 26 February 2016 had verified the invoices against the project certificates and that the certificate was marked to the department; and that failing to submit the undertaking was a procedural lapse. It allowed the appeals. The Revenue pressed two questions: whether there was substantial compliance and whether exemptions require strict compliance with the certificates condition.
Questions before the court
- Did the CESTAT err in holding that substantial compliance with the exemption notifications sufficed despite the missing undertaking and certificates?
Why the court ruled this way
The High Court examined the Tribunal's order and found that its conclusions were purely fact based, reached after taking into consideration the facts of the case, with reasons set out in paragraph 8 of its order, that there was substantial compliance and that substantial benefit could not be denied for a procedural lapse (paragraph 2). Considering the peculiar facts, the Tribunal granted relief under the notifications (paragraph 3). No substantial question of law arose from an order passed on the peculiar facts of the case (paragraph 4). The Tribunal's underlying reasoning was that the certificate had been supplied by the Ministry directly to the department, which did not dispute it, the invoices matched the project certificates, and the purpose of the undertaking, namely to prevent misuse of the exemption, was served once the invoices were verified.
Controlling point
No substantial question of law arose and the Revenue's appeal was dismissed.
Order and next steps
The appeal was dismissed with no order as to costs.
Practical implications
An assessee claiming a project-related exemption should keep project certificates, show that copies were marked to the jurisdictional officer and obtain departmental verification of invoices, as these facts supported substantial compliance here.
Limits of this ruling
- The High Court's order is a short refusal to entertain a fact-based challenge; it does not lay down that exemption conditions may be ignored or approve the Tribunal's reasoning as a rule of law.
Law and judgment source
- Central Excise Act, 1944, section 35G
- Notification Nos. 6/2006-CE, 12/2012-CE, 33/2005-CE, 15/2010-CE and 26/2012-CE
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Source checked: 2026-10-12 · Judgment paragraphs: paragraphs 1–4 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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