2016 (6) TMI 71 - AT - Central Excise

Tribunal overturns duty demand and penalties, clarifies DTA clearance conditions

The Tribunal set aside the duty demand, rendering penalties unnecessary and dismissing the Revenue's appeal. The judgment clarified the interpretation of ... Whether the permission granted by the Development Commissioner allowed DTA clearances of Synthetic Yarn - Demand of duty - Clearance of Polyester Synthetic Yarn in the DTA on payment of duty - Notification No. 8/97-CE dated 01.03.1997 as amended on the basis of DTA clearance permission granted by the Development Commissioner on 15.04.2002 - Held that:- the only harmonious interpretation of the scope of condition 1 of the permission is that the clearances in the DTA for Cotton Yarn and Synthetic Yarn is subject to the condition that similar goods i.e. goods namely Cotton Yarn and Synthetic Yarn should have been manufactured and exported from the unit in the past. It is not disputed and indeed it is demonstrated by the various AR-4 application copies submitted by the appellant that the unit had exported both Cotton Yarn and Synthetic Yarn in the past. Seen in this context it become evident that condition No. 1 in the DGFT's Permission letter does not disallow domestic clearances of synthetic yarn granted by the Development Commissioner in the opening paragraph of the said permission letter. Indeed, this interpretation is in conformity with para 6.8 (c) & (d) of the Hand Book Procedure 2002/2007. As is evident that, the entitlement for domestic clearances is determined in totality and not with reference to specific items. The contention of the Ld. DR that Synthetic Yarn and Cotton Yarn do not belong to the same class of goods nor are they similar goods is not germane to the present case because the appellant asessee had manufactured and exported both Cotton yarn and Synthetic Yarn from the same unit and therefore clearance of Synthetic Yarn for DTA sales as per the DGFT's Permission letter dated 15.04.2002 was in conformity with its condition No. 1 also. Consequently, the impugned duty demand becomes unsustainable. As a result, the question of any penalties is rendered preposterous which in turn renders the Revenue’s appeal also infructuous. Accordingly, the impugned orders are set aside. - Decided in favour of assessee Issues Involved: Duty demand upheld on appellant assessee, reduction in penalty, validity of permission for DTA clearance of Synthetic Yarn, interpretation of conditions for DTA clearance.Analysis:1. Duty Demand Upheld: The appellant assessee and the General Manager appealed against the duty demand upheld in the orders-in-appeal. The demand was confirmed based on the appellant clearing Polyster Synthetic Yarn in the Domestic Tariff Area (DTA) on payment of duty. The permission for DTA clearance was subject to the condition that the goods cleared should be similar to or belong to the same class as goods manufactured and exported from the unit. The appellant had only exported Cotton Yarn during a specific period, making the permission for Synthetic Yarn clearance questionable.2. Reduction in Penalty: The Revenue filed an appeal against the reduction in penalty on the appellant assessee, arguing that the penalty should be restored to the original amount imposed by the primary adjudicating authority. The contention was that the reduction in penalty was not legal and proper. However, the Tribunal found the duty demand unsustainable, making the question of penalties irrelevant.3. Validity of Permission for DTA Clearance of Synthetic Yarn: The key issue revolved around whether the permission granted by the Development Commissioner allowed DTA clearances of Synthetic Yarn. The appellant argued that the permission was granted for both Cotton and Synthetic Yarn, even though no Synthetic Yarn was exported during the relevant period. The Tribunal analyzed the conditions of the permission and the Export and Import Policy to determine the validity of the clearance.4. Interpretation of Conditions for DTA Clearance: The Tribunal examined the conditions specified in the permission for DTA clearance, including the requirement for goods to be similar or belong to the same class as those manufactured and exported from the unit. The Tribunal emphasized that the permission granted by the Development Commissioner did not explicitly require exports of Synthetic Yarn during the specific period, as long as both Cotton and Synthetic Yarn had been exported in the past from the same unit. The Tribunal's interpretation aligned with the Export and Import Policy guidelines, leading to the conclusion that the clearance of Synthetic Yarn for DTA sales was valid.In conclusion, the Tribunal set aside the duty demand, rendering penalties unnecessary and dismissing the Revenue's appeal. The judgment clarified the interpretation of conditions for DTA clearance, emphasizing the totality of entitlement and past export history in determining the validity of clearances.