2018 (8) TMI 948 - AT - Central Excise

Tribunal sets aside penalties, clarifies deemed exports vs. DTA clearance, and upholds limitation provisions.

The Tribunal allowed the appeals, finding the demand unsustainable on limitation grounds and setting aside the penalties imposed. The judgment emphasized ... 100% EOU - Extended period of limitation - no suppression of facts - deemed exports - case was booked against the appellant for exceeding the limit of their DTA clearance - Held that:- In terms of decision of the Hon'ble Gujarat High Court in the case of Anita Synthetics Pvt. Limited [2014 (9) TMI 368 - GUJARAT HIGH COURT], deemed exports cannot be clubbed for the purpose of calculation of clearances in DTA and thus, the appeal on this count is allowed. A perusal of the show cause notice shows that the entire data for issue of show cause notice has been derived from the returns filed by the assessee. In the circumstances, the appellant has disclosed the entire clearances to the Revenue therefore, the charge of suppression of facts or misdeclaration cannot be invoked against the appellant - It is a failure on the part of the Revenue to detect the mistake of the appellant - demand is not sustainable on limitation. Since the demand is not sustainable the penalties imposed on the appellant and its Director are also set-aside. Appeal allowed - decided in favor of appellant. Issues Involved:Confirmation of demand of duty and imposition of penalties based on exceeding the limit of DTA clearance for a 100% EOU, invocation of extended period of limitation, treatment of deemed exports as DTA clearance, requirement of prior permission for clearances in terms of Foreign Trade Policy, applicability of limitation provisions when B-17 bond is executed, disclosure of clearances to Revenue, suppression of facts or misdeclaration, and sustainability of demand and penalties.Analysis:1. Confirmation of Demand of Duty and Imposition of Penalties:The appeals were filed against the confirmation of demand of duty and imposition of penalties. The appellant argued that the demand was based on ER-II returns and invoked an extended period of limitation. The counsel contended that the entire case was based on the returns and that the demand was erroneous, treating deemed exports as DTA clearance. The Tribunal referred to the decision of the Hon'ble Gujarat High Court and held that deemed exports cannot be clubbed for the calculation of clearances in DTA, thus allowing the appeal on this count.2. Invocation of Extended Period of Limitation:The appellant argued against the invocation of the extended period of limitation, stating that they had declared all clearances to the Revenue, and the charge of suppression of facts or misdeclaration could not be invoked. The Tribunal noted that the appellant's failure was a mistake undetected by the Revenue. Referring to previous decisions, including the case of Emcure Pharmaceuticals Limited, the Tribunal held that the demand was not sustainable on limitation grounds.3. Requirement of Prior Permission and B-17 Bond:The respondent contended that as the appellant was not a status holder, prior permission of the Development Commissioner was required for clearances. Additionally, the respondent argued that the appellant had executed a B-17 bond, allowing duty demand at any time without limitation. The Tribunal clarified that the B-17 bond did not cover advance DTA sales, and a separate bond as prescribed was necessary. However, the Tribunal held that the demand was not sustainable on limitation grounds, setting aside the penalties imposed on the appellant and its Director.In conclusion, the Tribunal allowed the appeals, finding the demand unsustainable on limitation grounds and setting aside the penalties imposed. The judgment emphasized the distinction between deemed exports and DTA clearance, the disclosure of clearances to the Revenue, and the requirement of proper permissions and bonds for clearances. The decision provided clarity on the applicability of limitation provisions and upheld the principles of law in interpreting the case.