2004 (12) TMI 643 - Commission - Central Excise

Summary

Issues Involved:
1. Unauthorized clearance of goods into the Domestic Tariff Area (DTA) without payment of duty.
2. Calculation of duty on clandestine clearances and permitted rejects.
3. Applicability of exemption notifications to 100% Export Oriented Units (EOUs).
4. Immunity from penalties, fines, and prosecution.

Detailed Analysis:

1. Unauthorized Clearance of Goods into DTA:
The applicant, a 100% EOU, was found to have cleared polished granite slabs into the DTA without paying the required duty. Central Excise officers seized records during a search on 8-4-92, leading to a Show Cause Notice (SCN) alleging the clearance of 2,20,638.289 sq. ft. of granite slabs valued at Rs. 1,89,15,926/- without duty payment. The duty demanded was Rs. 3,18,89,891/- under Rule 9(2) of the erstwhile CER, 1944 read with Section 3 of the Central Excises and Salt Act, 1944, invoking the proviso to Section 11A(1) for demanding duty beyond six months. Penalties and confiscation were also proposed under various rules.

2. Calculation of Duty on Clandestine Clearances and Permitted Rejects:
The applicant admitted to clandestine clearances of 1,10,326 sq. ft. valued at Rs. 93,77,760/- and agreed to pay duty on Rs. 1,07,64,273/-. The Commissioner (Investigation) verified the quantities and valuation, concluding that the total duty payable was Rs. 38,89,604/-. The applicant argued that only basic customs duty should be levied on permitted clearances, referencing Hyderabad Industries Ltd. and Fabworth India Ltd. cases. However, the tribunal found that the total clandestine clearances were 2,20,289 sq. ft., justifying the Revenue's deductions for wastage and exported goods. The duty on clandestine clearances was calculated at Rs. 25,52,299/-, and the duty on 5% permitted rejects was Rs. 24,30,120/-, totaling Rs. 49,82,419/-.

3. Applicability of Exemption Notifications to 100% EOUs:
The applicant argued that only basic customs duty should apply to permitted clearances, citing Section 12 of the Customs Act and various judicial precedents. However, the tribunal held that all duties under the Customs Tariff Act, including additional duties, were applicable. The retrospective amendment to Section 3(1) of the Central Excise Act by the Finance Act, 2000, clarified that EOUs must pay the aggregate of customs duties on DTA clearances. Thus, the applicant's reliance on Hyderabad Industries and Fabworth India Ltd. was deemed unfounded.

4. Immunity from Penalties, Fines, and Prosecution:
The tribunal noted that while the applicants cooperated during the proceedings, their legal arguments were not sustainable. Nevertheless, the tribunal granted immunities from penalties, fines, and prosecution under the Central Excise Act, 1944. The applicant company was directed to pay the balance duty of Rs. 29,82,419/- within 30 days, after adjusting the Rs. 20 lakhs already deposited. Immunities were also extended to the Managing Director, Shri Ravinder Reddy.

Conclusion:
The tribunal settled the case under Section 32F(7) of the Central Excise Act, 1944, with the following terms:
- Duty liability settled at Rs. 49,82,419/-.
- Immunities from penalties, fines, and prosecution granted.
- The applicant company directed to pay the balance duty within 30 days.