Equivalence of excise and customs prevents later customs duty, penalties or confiscation when excise equal to customs was paid.

Where exporters in a 100% EOU cleared finished marble slabs to DTA under a judicial stay and paid excise equal to the customs duty leviable on like imported goods pursuant to the proviso to Section 3, a subsequent demand for customs duty on imported raw marble is unsustainable because revenue parity was maintained; consequential interest demand is also set aside. Because there was no suppression, collusion or wilful misstatement and clearances and payments were on record, extended limitation and mandatory penalties predicated on suppression cannot be sustained. Confiscation and redemption fines are also unsupportable where no sanctionable breach occurred and goods were not available for seizure.

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Issues: (i) Whether customs duty and consequential interest could be demanded on imported marble blocks used by EOUs where excise equal to customs was paid on DTA sales; (ii) Whether extended period of limitation could be invoked; (iii) Whether mandatory penalty under section 114A was properly imposed; (iv) Whether imported marble blocks were liable to confiscation under sections 111(d) and 111(o) and whether redemption fine under section 125 could be imposed.

Issue (i): Whether customs duty with consequential interest could be confirmed on imported marble blocks where EOUs cleared finished slabs to DTA after paying excise equal to customs under the proviso to Section 3 of the Central Excise Act, 1944 and pursuant to High Court stay orders.

Analysis: The proviso to Section 3 of the Central Excise Act, 1944 mandates that excise on goods produced in a 100% EOU and cleared to DTA shall be equal to the customs duties leviable on like imported goods; the appellants paid such excise as directed by the High Court stay permitting DTA sales. The DGFT notification restricting DTA sales was the subject of litigation and stayed by the High Court; during the stay period clearances were made on payment of full excise equal to customs duties. The resulting receipt of revenue as excise on finished slabs, rather than as customs on raw marble, negates any revenue loss. Precedent where excise on finished products discharged equivalent customs demand applies.

Conclusion: Demand of customs duty and consequential interest on the imported marble blocks is unsustainable and is set aside in favour of the assessee.

Issue (ii): Whether the extended period of limitation could be invoked to sustain demands in these cases.

Analysis: Invocation of extended limitation depends on elements such as suppression, collusion or wilful misstatement. Having concluded that the duty demand itself is unsustainable on merits because excise equal to customs was paid under lawful stay orders and there was no concealment of material facts, it is unnecessary to sustain extended limitation. The factual matrix shows relevant clearances and payments were on record and subject to judicial stay.

Conclusion: Extended period of limitation was not required to be invoked; no basis for sustaining demands on limitation grounds in favour of the assessee.

Issue (iii): Whether penalties under Section 114A of the Customs Act, 1962 were correctly imposed.

Analysis: Section 114A mandates penalty where duty or interest was not levied by reason of collusion or wilful misstatement or suppression. Given that the primary demand of customs duty was unsustainable and that clearances were made pursuant to High Court stay orders with payment of excise equal to customs, the statutory threshold of collusion, suppression or wilful misstatement is not established.

Conclusion: Penalties under Section 114A are not sustainable and are set aside in favour of the assessee.

Issue (iv): Whether the imported marble blocks were liable to confiscation under Sections 111(d) and 111(o) of the Customs Act, 1962 and whether redemption fines under Section 125 could be validly imposed.

Analysis: Section 111(d) concerns import contrary to prohibition; Section 111(o) concerns breach of conditions attached to exemption unless sanctioned by the proper officer. The appellants had authorisation from the Development Commissioner and acted under High Court stay permitting DTA clearances on payment of duty; the proper officer had cleared imports at entry assessment. Further, the imported marble blocks had been processed into slabs and therefore were not available for physical confiscation; Section 126 requires the adjudicating authority to take possession upon confiscation. Section 125 provides redemption fine as an option to the owner except where provisional release on bond creates an obligation. Absent a sanctionable breach or availability of goods for confiscation, confiscation and consequent redemption fine cannot be sustained.

Conclusion: Confiscation under Sections 111(d) and 111(o) cannot be sustained and redemption fines under Section 125 cannot be validly imposed; disposition is in favour of the assessee.

Final Conclusion: The appeals are allowed and the impugned orders confirming customs duty with interest, penalties under Section 114A and courses of confiscation/redemption fines are set aside; consequential reliefs follow for the appellants.

Ratio Decidendi: Where EOUs cleared finished goods to DTA pursuant to judicial stay and paid excise equal to the customs duty payable on like imported goods under the proviso to Section 3 of the Central Excise Act, 1944, a subsequent demand for customs duty, mandatory penalty under Section 114A, or confiscation under Sections 111(d)/111(o) is not sustainable absent sanctionable breach, suppression or availability of goods for confiscation.

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