2007 (1) TMI 371 - AT - Central Excise

Summary

Issues: Duty demand and penalty on export production of Polyester Staple Fiber

Analysis:
The judgment by the Appellate Tribunal CESTAT, NEW DELHI, involved a duty demand of Rs. 10 crores and an equal penalty concerning the export production of Polyester Staple Fiber used in yarn production. The central issue revolved around the interpretation of Rule 19(2) of the Central Excise Rules, 2002, which allows the removal of excisable goods without duty payment for export production. The appellant argued that the duty demand was contrary to the legal provision, emphasizing that all removals without payment of duty had the approval of jurisdictional excise authorities, making them lawful under the rule.

The tribunal considered the contention raised by the revenue that the removal of Staple Fiber was without the approval of the Commissioner and was done without involving sale, purchase, or payment processes. However, the tribunal found no merit in the revenue's arguments. It noted that all removals without duty payment were indeed approved by the excise authorities having jurisdiction. Moreover, the tribunal highlighted that the rule did not impose any restrictions on the removal of goods for export production based on sale, purchase, or payment considerations. It was established that the yarn produced from the non-duty paid fiber was eventually exported, reinforcing the legality of the removals for export production under the rule.

Consequently, the tribunal concluded that the duty demand was not sustainable in light of the approvals obtained for non-duty paid removals and the absence of any violation of the rule. As a result, the penalty was deemed unwarranted. The judgment further stated that the requirement for pre-deposits was waived, and the recovery of the duty demand was stayed pending the disposal of the appeal. The decision provided clarity on the legal interpretation of Rule 19(2) in the context of duty demands and penalties related to the export production of Polyester Staple Fiber, ensuring compliance with the applicable excise regulations.