EOU wins appeal against duty demand for alleged marble weight mis-declaration without proof of excess clearance

The CESTAT Ahmedabad allowed an appeal by a 100% EOU against duty demand and penalty for alleged mis-declaration of weight of imported rough marble blocks. The department claimed excess quantity beyond the procurement certificate violated policy circular requirements. However, the tribunal found no evidence of excess marble being cleared from the EOU premises or used for unauthorized production. The case was based solely on CHA records showing weight differences from bills of entry, which reflected established trade practices. Without proof of actual excess clearance or misuse, the demand could not be sustained.

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Issues involved:
The issues involved in the judgment are mis-declaration of weight of imported rough marble blocks by the appellants, alleged violation of policy circular, confirmation of duties and penalties, applicability of Notification No. 52/2003-Cus, exemption from customs duty for EOUs, time-barred demand, imposition of penalty, and excess quantity of imported goods.

Mis-declaration of weight and policy circular violation:
The appellants, 100% EOU engaged in manufacturing and exporting marble slabs and tiles, were alleged to have mis-declared the weight of imported rough marble blocks and violated policy circular No. 13(RE-08)/2004-2009. The department contended that excess quantity/weight was not covered by the procurement certificate issued under Notification No. 52/2003-Cus.

Applicability of Notification No. 52/2003-Cus:
The appellants argued that Notification No. 52/2003-Cus grants exemption from customs duty to all goods imported by EOUs for manufacturing finished goods, regardless of the weight of imported goods. They emphasized that customs duty demand on warehoused goods used for manufacturing in bond for exports is not permissible.

Time-barred demand and duty imposition:
The appellants claimed that the demand for customs duty was time-barred as the period of import was from 13.04.2007 to 19.12.08, and the show cause notice was issued on 31.03.2012. They contended that in the absence of suppression or intent to evade customs duty, the demand was barred by limitation.

Imposition of penalty and excess quantity:
The lower authority justified the imposition of penalty and demand of duty based on the excess quantity found in the records of the Customs House Agent (CHA). However, the appellants argued that the difference in weight was due to trade practices and irregular shape of blocks, resulting in greater waste content. They highlighted that imported goods used in manufacturing in EOU are not subject to duty.

Judicial findings and conclusion:
Upon examination of the records and submissions, the Tribunal found that the department failed to prove that any excess goods or weight were cleared and not used in manufacturing. Citing relevant case laws and trade practices, the Tribunal held that the demand of duty and penalty was not sustainable. The appeal was allowed with consequential relief in relation to duty, penalty, and interest, ultimately ruling in favor of the appellants.

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