2006 (1) TMI 369 - AT - Central Excise

Summary

Issues:

1. Broad banding permission omission for weaving of fabrics.
2. Duty payment on cleared goods.
3. Imposition of penalties on the appellants.

Issue 1: Broad banding permission omission for weaving of fabrics

The appellants, a 100% E.O.U., had obtained duty-free POY, converted it to PTY, and then further processed it for weaving to various job workers. The Development Commissioner initially issued a permission for broad banding on 18-1-2001, allowing production of dyed and printed fabrics as well as ready-made garments, but omitted weaving of grey fabrics. This omission was corrected by a corrigendum on 3-5-2001. The appellants had also obtained permission from the Deputy Commissioner to clear PTY for manufacturing grey fabrics by job workers. The Tribunal noted that the initial omission was an obvious error as producing dyed and printed fabric or ready-made garments required weaving of grey fabrics. The correction made by the Development Commissioner validated the appellants' actions, and they had fulfilled their export obligations. Therefore, the Tribunal held that the appellants could not be held responsible for the omission, and the demand and penalties imposed were unjustified.

Issue 2: Duty payment on cleared goods

Due to the late issuance of the corrigendum, the appellants were asked to pay over Rs. 56 lakhs towards duty on the PTY cleared to job workers and an additional Rs. 26.5 lakhs as duty on the raw material, POY. The adjudicating Commissioner had also imposed penalties totaling over Rs. 82.5 lakhs on the appellant-company and Rs. 5 lakhs and Rs. 2 lakhs on the other two directors. The Tribunal, after considering the case records, found that the demand and penalties were unwarranted as the appellants had followed the necessary procedures, obtained permissions, and fulfilled their export obligations. Therefore, the Tribunal set aside the impugned order and allowed the appeals.

Issue 3: Imposition of penalties on the appellants

The penalties imposed on the appellant-company and its directors were based on the duty payment demands made by the authorities. However, since the Tribunal found the demands to be unjustified due to the correction of the initial omission in the broad banding permission, it also deemed the penalties to be unwarranted. The Tribunal concluded that the appellants had acted in good faith, taken all necessary steps, and met their export obligations, making the penalties unjust and therefore set aside the penalties along with the demand for duty payments.

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