2006 (3) TMI 428 - AT - Central Excise

Non-fulfilment of export obligation - pre-deposit - penalty - contravened the provisions of Notification Nos. 138/91-Cus. and 140/91-Cus - 100%EOU under Software Technology Park (STP) Scheme - HELD THAT - We notice from the records that the Licensing period has not yet expired. Furthermore, the capital goods are still under bond and in view of the citations on this issue, the confirmation of demand is pre-mature. Hence, they are entitled to seek full wavier of pre-deposit of the amount. As the demands are not sustainable and they are pre-mature, we set aside the impugned order and remand the case to the Commissioner with a direction that he is free to proceed against the appellants subject to the clarification in Circular No. 122/95-Cus, wherein it has been clarified that in matters like non-fulfillment of export obligation, action can be initiated by the Customs Department only in consultation with the Development Commissioner or the Commerce Ministry. The authorities shall follow the procedures as laid down in the Board Circular 1995. The stay application and appeal are allowed on the above terms.

Summary

Issues:
1. Alleged contravention of customs notifications by the appellant related to DTA sales without fulfilling export obligations.
2. Validity of demands raised by the authorities.
3. Interpretation of Circulars 1995 and 1998 regarding show cause notices and demands.
4. Pre-deposit requirement and sustainability of demands.

Analysis:

Issue 1:
The appellant, a 100% EOU under the STP Scheme, faced allegations of contravening customs notifications by engaging in DTA sales without meeting export obligations. The authorities claimed the appellant did not have net foreign exchange, lacked STP permission for DTA sales, and did not export goods initially, leading to duty non-payment on goods cleared for DTA.

Issue 2:
The appellant's counsel argued that demands were unsustainable due to the ongoing Licensing period, capital goods still under Customs bond, and nil duty for software DTA sales. Citing case laws like ABN Granites Ltd. and LML Ltd., the counsel contended that demands on capital goods were premature and not in accordance with the law.

Issue 3:
The Circulars 1995 and 1998 were pivotal in the interpretation of authorities' actions. While the Commissioner relied on Circular 1998 for raising show cause notices, the appellant's counsel emphasized Circular 1995's relevance in cases of non-fulfillment of export obligations. The Circulars guided the permissible actions by the authorities based on the Licensing period status.

Issue 4:
Upon careful consideration, the Tribunal found the demands premature as the Licensing period had not expired, and capital goods remained under bond. Relying on precedents like Suvarna Aqua Farm & Exports Ltd., the Tribunal set aside the impugned order, granting full waiver of pre-deposit. The case was remanded to the Commissioner with directions to follow procedures outlined in Circular No. 122/95-Cus. for actions related to export obligation non-fulfillment.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore highlights the legal intricacies surrounding the alleged contravention of customs notifications, the sustainability of demands, the significance of Circulars 1995 and 1998, and the pre-deposit requirement in such cases.