2003 (11) TMI 402 - AT - Central Excise

Summary

Issues:
1. Interpretation of Circular No. 442/8/99-CX and Circular No. 85/2001-Cus.
2. Calculation of duty rate and applicability of Notification 2/95.
3. Imposition of penalty under Rule 173Q for Chapter V(A) unit.

Analysis:
1. The appeal dealt with the Commissioner's order regarding the clearance of cotton yarn to the Domestic Tariff Area (DTA) by a manufacturer using both indigenous and imported raw materials. The issue arose as the department alleged that the manufacturer did not maintain a separate manufacturing unit for utilizing domestic indigenous cotton for clearances through the domestic area. The Circulars No. 442/8/99-CX and No. 85/2001-Cus emphasized the need to verify the separate use of raw materials batchwise without requiring a separate manufacturing line. The Tribunal found the Commissioner erred in not applying the circulars correctly, leading to the order being set aside for reconsideration based on the circulars' directives.

2. The appellant contended that the duty rate was incorrectly calculated and that the benefits under Notification 2/95 were not granted. The Tribunal acknowledged the need to examine the correct duty rate application and the extension of benefits under the said notification. The order was remanded for a fresh determination considering these aspects, ensuring the correct application of duty rates and benefits under Notification 2/95.

3. Regarding the imposition of penalty under Rule 173Q, the appellant argued that as their unit fell under Chapter V(A), the penalty was not applicable under Rule 173Q meant for Special Economic Zone (SEZ) units under Chapter VII. The Tribunal agreed with this argument, setting aside the penalty imposition under Rule 173Q and directing a fresh consideration of the matter. The order was remanded for a de novo examination to determine the penalty applicability under the correct provisions for Chapter V(A) units, ensuring procedural compliance and fairness in penalty imposition.