Export Oriented Unit DTA clearances taxed under the main excise levy; confiscation and penalty were set aside, consumables duty sustained.

Clearances by a 100% Export Oriented Unit to the Domestic Tariff Area without permission were assessable under the main charging provision in Section 3(1) of the Central Excise Act, 1944, not under its proviso. Confiscation of capital goods and unaccounted granite slabs, with the connected penalty and redemption fine, was unsustainable because the goods remained within the bonded premises and the unit had permission to withdraw from the scheme, so those consequences were set aside. The separate duty demand on consumables procured for the unit was upheld, and the appeal succeeded only in part.

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Issues: (i) Whether duty on clearances made by the Export Oriented Unit to the Domestic Tariff Area was chargeable under the main provision of Section 3(1) of the Central Excise Act, 1944 or under the proviso thereto; (ii) whether confiscation of the capital goods and unaccounted granite slabs, along with penalty and redemption fine, was sustainable; (iii) whether the duty demand on consumables procured was liable to be upheld.

Issue (i): Whether duty on clearances made by the Export Oriented Unit to the Domestic Tariff Area was chargeable under the main provision of Section 3(1) of the Central Excise Act, 1944 or under the proviso thereto.

Analysis: The clearances to the Domestic Tariff Area were made by a unit operating as a 100% Export Oriented Unit and the dispute concerned the correct charging provision for such removals. The decision turned on the settled position that, for such clearances without permission, the levy is to be computed under the central excise tariff basis under the main provision of Section 3(1), rather than as an aggregate of customs duties under the proviso.

Conclusion: The duty on the goods cleared to the Domestic Tariff Area was chargeable under Section 3(1) of the Central Excise Act, 1944, and not under the proviso thereto.

Issue (ii): Whether confiscation of the capital goods and unaccounted granite slabs, along with penalty and redemption fine, was sustainable.

Analysis: The capital goods had remained within the bonded premises and the unit had obtained permission to withdraw from the Export Oriented Unit scheme. The unaccounted goods were also within the factory premises. In these circumstances, the basis for confiscation and the consequential penalty and redemption fine was not made out.

Conclusion: The confiscation of the capital goods and the unaccounted granite slabs, and the connected penalty and redemption fine, were set aside.

Issue (iii): Whether the duty demand on consumables procured was liable to be upheld.

Analysis: The record disclosed a separate duty liability in respect of consumables procured for the unit, and no ground was found to interfere with that demand.

Conclusion: The duty demand on the consumables procured was upheld.

Final Conclusion: The appeal succeeded only in part, with relief granted against confiscation, penalty, and redemption fine, while the duty liability on Domestic Tariff Area clearances was sustained on the correct statutory basis and the demand on consumables remained confirmed.

Ratio Decidendi: Clearances by an Export Oriented Unit to the Domestic Tariff Area without permission are assessable under the main levy provision applicable to central excise duty, while confiscation and penalty cannot be sustained where the goods remain within the bonded premises and the de-bonding position supports the assessee's case.

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