2003 (9) TMI 377 - AT - Central Excise

Appellate tribunal rules in favor of Export Oriented Unit exempting duty, directs action under Central Excise Act.

HARSHVARDHAN EXPORTS Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I

The appellate tribunal set aside the demands of duty and penalties under the Customs Act, ruling that no duty could be imposed on goods manufactured in a ... Demand - Shortages in raw material in 100% EOU - Warehoused goods Issues:1. Recovery of Customs duty on shortage of grey fabrics.2. Imposition of interest on delayed payment of evaded Customs duty.3. Imposition of penalties under various sections of the Customs Act.Analysis:1. The issue of recovering Customs duty on the shortage of grey fabrics was raised in the case of a 100% Export Oriented Unit (EOU) engaged in processing fabrics. The Commissioner determined the duty payable on the shortage of goods found and imposed penalties on the unit and its director. The appellate tribunal analyzed the situation and found that the goods in question were not warehoused goods but were manufactured in India from imported raw materials. As per the Customs Act, warehoused goods are non-duty paid imported goods placed in a warehouse, which did not apply in this case. The goods were liable for duty under the Central Excise Act, and the tribunal held that no duty under the Customs Act could be imposed on goods manufactured in an EOU. Citing a previous case, the tribunal set aside the demands of duty and penalties under the Customs Act, allowing the appeal.2. Regarding the imposition of interest on delayed payment of evaded Customs duty, the tribunal did not specifically address this issue in the judgment, as the focus was on the incorrect imposition of Customs duty itself. Therefore, there was no detailed analysis provided for this particular issue.3. The imposition of penalties under various sections of the Customs Act was also a key issue in the case. The tribunal examined the allegations made in the show cause notice, emphasizing the illicit removal and sale of grey fabrics procured duty-free from a 100% EOU. The tribunal concluded that since the goods were not warehoused goods but manufactured in India, the demands for duty and penalties under the Customs Act were not maintainable. The tribunal directed the department to proceed with recovering duty under the Central Excise Act if necessary and take action for contravention of the Central Excise Act and rules accordingly. As a result, the appeals were disposed of with the demands under the Customs Act being set aside, allowing the department to pursue appropriate actions under the Central Excise Act.