2006 (1) TMI 543 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of excise duty on clearance of socks by an EOU unit.
2. Imposition of penalty on the company and Managing Director.
3. Interpretation of Notification No. 125/84-C.E. regarding duty liability.
4. Applicability of tariff rate on excise duty.
5. Consideration of Larger Bench judgment and its impact on the case.

Analysis:
1. The appellant sought waiver of pre-deposit of Rs. 81,48,576/- excise duty on the clearance of socks in the DTA, alleging clandestine clearance without duty payment. Additionally, penalties were imposed on the company and Managing Director, with confirmation of interest. The appellant argued that socks were non-dutiable and exempted under the Tariff, challenging the Commissioner's reliance on Notification No. 125/84-C.E. for excise duty liability post-clearance in DTA.

2. The appellant contended that excise duty was exempted at a nil rate under the tariff, emphasizing the unsettled nature of the issue due to a Larger Bench judgment (Himalya International Ltd.) set aside by the Apex Court for reconsideration. The company, closed since 2002, faced financial hardship, unable to pre-deposit the amount. The appellant urged for a full waiver of pre-deposit and stay on recovery, citing the order's lack of legal sustainability.

3. The JDR argued that the Notification mandated customs duty payment for clearances in the DTA area, highlighting duty liability on shortage of stocks. However, the Commissioner did not confirm customs duty due to non-export of goods, leading to the inapplicability of Notification No. 125/84-C.E. post its rescindment by Notification No. 24/2003-C.E. The excise duty confirmation was required at the tariff rate, which was nil, raising doubts on the basis for confirming excise duty.

4. Upon careful consideration, the Tribunal observed the absence of customs duty confirmation due to goods clearance in the DTA area, rendering Notification No. 125/84-C.E. inapplicable. Despite the Commissioner's reference to the Larger Bench judgment allowing 50% customs duty confirmation, the absence of a customs duty demand in the notice and the judgment's setting aside raised concerns on the sustainability of the order. Acknowledging the appellant's strong case on merits, the Tribunal granted full waiver of pre-deposit and penalty, staying recovery, and prioritized the appeal due to significant revenue implications.

In conclusion, the Tribunal granted the appellant a full waiver of pre-deposit and penalty, staying recovery, considering the nil tariff rate and unsettled legal issues arising from the Larger Bench judgment's status.