Pre-deposit in customs duty disputes over excess wastage was limited, with prima facie liability and no full stay granted.

CESTAT, Mumbai considered whether 100% export oriented units seeking waiver of pre-deposit in customs duty demands arising from excess wastage were entitled to full interim relief, and whether the proceedings were barred by limitation. It noted that the demand concerned duty foregone on excess duty-free inputs attributable to wastage beyond permissible norms, rather than recovery triggered only upon clearance of waste for home consumption. The prima facie limitation objection under Section 28 of the Customs Act, 1962 was also not accepted at this stage. Complete waiver was declined, and the applicants were directed to deposit 30% of the duty demanded, with the balance duty, interest and penalty stayed pending appeal.

---

---

Issues: Whether the applicants were entitled to complete waiver of pre-deposit and stay of recovery in proceedings arising from demands of customs duty foregone on excess wastage, and whether the demands were barred by limitation.

Analysis: The applicants, being 100% export oriented units, imported rough ophthalmic blanks duty free under the relevant customs exemption notifications subject to input-output norms. The record indicated that the wastage generated during manufacture exceeded the permissible limit, and the demand was treated as one for duty foregone on the excess quantity of inputs attributable to such wastage. The objection that duty could be recovered only when the wastage was cleared for home consumption was rejected as the demand related to the excess duty-free inputs, not to the point of clearance of waste. The contention that the proceedings were time-barred under Section 28 of the Customs Act, 1962 was also found untenable at the prima facie stage.

Conclusion: The applicants did not establish a case for complete waiver of pre-deposit. They were directed to deposit 30% of the duty demanded in each case, and only then would the balance duty, interest, and penalty remain stayed pending disposal of the appeals.

Final Conclusion: Interim protection was granted only in part, while the principal demand was treated as disclosing a prima facie liability and the challenge to limitation did not succeed at this stage.

---