2005 (9) TMI 388 - AT - Central Excise

Summary

Issues:
1. Benefit of exemption under Notification 126/94 availed by the appellants.
2. Confiscation of goods, demand of duty and interest, and imposition of penalties by the Commissioner.
3. Violation of conditions of the project report submitted to the Development Commissioner.
4. Use of extruder machines and duty-free raw material in production.
5. Export of finished goods manufactured from duty-free material.

Analysis:

1. The appellant was granted a letter of authority by the Development Commissioner (DC) to set up a unit in KFTZ for manufacturing plastic goods. The appellant procured duty-free raw materials under Notification 126/94-CE and exported finished goods without payment of duty under AR4s. The appellant exported goods worth Rs. 21.66 lakhs against the projected Rs. 30 lakhs in the first year.

2. A show cause notice was issued to the appellants for not adhering to the project report submitted to the DC, leading to the confiscation of goods, duty demand, interest, and penalties by the Commissioner. The Commissioner alleged non-compliance with the project report's manufacturing method and misuse of duty-free raw materials and extruder machines.

3. The Commissioner contended that the appellants did not follow the project report's manufacturing method, leading to the confiscation of goods and penalties. However, the appellants informed the DC about manual operations due to delayed electric connection and received permission to broaden their export product range. The Commissioner's order did not establish that duty-free goods were removed without payment of duty or that finished goods were not exported.

4. The Commissioner argued that the extruder machines procured duty-free were not used in producing final goods, justifying confiscation. However, the finished goods were exported using duty-free materials obtained under CT 3 certificates. The Commissioner's decision to confiscate goods based on non-adherence to the export goods' production method was deemed unjustified.

5. The Tribunal found that the Commissioner's order lacked sufficient evidence to support the confiscation and penalties imposed on the appellants. The Tribunal concluded that the Customs authorities should not demand duty or confiscate goods solely based on non-compliance with the export production method. Therefore, the appeal was allowed, and the Commissioner's order was set aside.

This detailed analysis highlights the key legal issues involved in the judgment and the Tribunal's decision regarding each issue, emphasizing the justification for setting aside the Commissioner's order.