2007 (4) TMI 448 - AT - Central Excise

Summary

Issues:
Demand of duty and penalty on capital goods procured by the 100% Export-Oriented Unit (EOU) under Notification No. 22/2003-C.E. due to alleged non-compliance with para 4(i) of the Notification.

Analysis:
The lower authorities demanded duty and imposed a penalty on the appellants, an EOU, for removing duty-free capital goods procured from indigenous sources to granite quarries for granite extraction and subsequent manufacturing activities. The department issued a show cause notice alleging non-compliance with para 4(i) of the Notification as the quarries were not owned or held under lease by the EOU. The original authority and the Commissioner (Appeals) upheld the demand and penalty. The appellants contested the demand, leading to the present appeal.

The learned Counsel challenged the demand on various grounds, including the validity of raising the demand under Rule 20(3) of the Central Excise Rules, 2002, and argued that the operations in the quarries constituted a "mining lease" as defined by the Supreme Court. The Counsel highlighted that similar facts were previously considered by the Tribunal, but new arguments were presented in this case. The Counsel asserted a strong prima facie case against the duty demand.

After considering the submissions, the Tribunal noted that the capital goods were moved with departmental approval, and the agreements with quarry-owners allowed mining operations against royalty payments as per State Government rules under the Mines and Minerals Act, 1957. The Tribunal analyzed the definition of "mining lease" and "mining operations" under the Act and concluded that the transactions between the appellants and quarry-owners resembled a "mining lease" based on the Supreme Court's interpretation. Therefore, the Tribunal held that the requirement of para 4(i) of the Notification was satisfied, negating the cause for duty demand. The Tribunal differentiated this case from a previous decision and reserved judgment on the applicability of Rule 20(3) for duty demand.

In the final decision, the Tribunal granted waiver of predeposit and stay of recovery for the duty and penalty amounts, indicating a favorable outcome for the appellants based on the prima facie view that the duty demand lacked merit.

This comprehensive analysis of the judgment showcases the legal intricacies involved in the dispute over duty demand and penalty imposition on capital goods procured by the EOU, emphasizing the interpretation of relevant laws and precedents to arrive at a just decision.