2001 (8) TMI 1135 - AT - Central Excise

Summary

Issues:
1. Liability to pay central excise duty as a 100% EOU.
2. Compliance with procedural formalities for conversion to EOU.
3. Alleged contravention of Central Excise Rules.
4. Demand for differential duty and penalty imposition.

Analysis:

Issue 1: Liability to pay central excise duty as a 100% EOU
The appellants, a cotton yarn manufacturer, applied for conversion to a 100% EOU and were granted permission by the Development Commissioner. They obtained a customs license for a private bounded warehouse and executed necessary agreements. The dispute arose regarding the liability to pay central excise duty as a 100% EOU from 19-11-99 to 15-5-2000. The Tribunal analyzed the facts and concluded that no duty liability accrued during this period as the appellants had followed the prescribed procedures and obtained necessary permissions. Therefore, the demand for differential duty was deemed unwarranted.

Issue 2: Compliance with procedural formalities for conversion to EOU
The appellants had applied for conversion to a 100% EOU, obtained necessary permissions, executed agreements, and completed formalities like executing a B-17 Bond. They intimated the authorities about their EOU status and sought permission to procure goods without duty payment. The Development Commissioner confirmed their EOU status from 16-5-2000. The Tribunal found that the appellants had diligently complied with all procedural requirements for conversion, including obtaining necessary approvals and permissions, thus validating their EOU status.

Issue 3: Alleged contravention of Central Excise Rules
The show cause notice alleged that the appellants cleared goods in DTA without permission and without paying central excise duty, contravening Central Excise Rules. However, the appellants argued that they had obtained necessary permissions and approvals for selling goods in DTA after payment of duty. The Tribunal noted that the central excise authorities had verified their stock and granted permission for DTA sales, thereby confirming compliance with rules. Consequently, the allegations of contravention were dismissed.

Issue 4: Demand for differential duty and penalty imposition
The Commissioner had confirmed a demand for differential duty and imposed a penalty on the appellants. However, the Tribunal, after considering the facts and legal provisions, set aside the impugned order. It ruled that no duty liability existed for the period in question, and there was no basis for penalty imposition. The Tribunal found that the appellants had acted in accordance with the law and had not violated any provisions, thereby allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand for differential duty and penalty, as the appellants had lawfully operated as a 100% EOU and complied with all relevant procedures and formalities.