DTA clearances by 100% EOU require main charging provision treatment, and clandestine removal needs corroborative evidence.
For pre-11.05.2001 DTA removals by a 100% EOU made without permission, duty was chargeable under the main charging provision of the Central Excise Act, 1944, not the proviso to Section 3(1). Allegations of clandestine removal required independent corroboration, such as buyer, transporter, or other tangible evidence; a statement or stock discrepancy alone was insufficient. Where the duty demand failed and no independent basis for confiscation remained, excess stock confiscation and derivative penalty could not be sustained. The commentary reflects that the impugned order was set aside and relief followed.
Issues: (i) Whether, for the period prior to 11.05.2001, duty on DTA clearances by a 100% EOU removed without permission was payable under the proviso to Section 3(1) of the Central Excise Act, 1944 or under the main charging provision; (ii) whether the allegation of clandestine or illicit clearance was proved by reliable corroborative evidence; (iii) whether confiscation of excess stock and the consequential penalty could be sustained.
Issue (i): Whether, for the period prior to 11.05.2001, duty on DTA clearances by a 100% EOU removed without permission was payable under the proviso to Section 3(1) of the Central Excise Act, 1944 or under the main charging provision.
Analysis: The relevant period preceded the statutory amendment that substituted the expression in the proviso to Section 3(1). For that period, the proviso applied only to goods produced by a 100% EOU and allowed to be sold in India, whereas goods removed without permission in DTA remained chargeable under the main charging provision. The binding Supreme Court line of authority and the Board circular supported that position.
Conclusion: The demand could not be sustained under the proviso to Section 3(1); the appellant's case was to be assessed under the main charging provision, and the contrary view taken below was .
Issue (ii): Whether the allegation of clandestine or illicit clearance was proved by reliable corroborative evidence.
Analysis: The record did not show independent corroboration through investigation of buyers, transporters, or other tangible evidence ordinarily required to establish clandestine removal. A mere statement or stock discrepancy, without supporting material, was held insufficient to discharge the Revenue's burden.
Conclusion: The allegation of clandestine removal was not satisfactorily proved and the demand based on it could not stand.
Issue (iii): Whether confiscation of excess stock and the consequential penalty could be sustained.
Analysis: The excess stock discrepancy was accepted as capable of explanation by accounting error, and no sustainable independent basis for confiscation remained once the duty demand failed. The penalty was derivative of the demand and could not survive independently.
Conclusion: Confiscation and penalty were unsustainable.
Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.
Ratio Decidendi: For a pre-11.05.2001 clearance by a 100% EOU without permission, duty liability on DTA removals lies under the main charging section of the Central Excise Act, 1944, and clandestine removal must be proved by credible corroborative evidence before demand, confiscation, or penalty can be upheld.