2008 (5) TMI 518 - AT - Customs

Summary

Issues Involved:
1. Waiver of pre-deposit requirement.
2. Financial difficulties and status as a sick unit.
3. Merit of the case based on the Test Report.
4. Time-barred demand.
5. Compliance with exemption notification conditions.

Issue-wise Detailed Analysis:

1. Waiver of Pre-deposit Requirement:
The Appellants filed a Stay Petition seeking waiver of the pre-deposit mandated by Section 129E of the Customs Act, 1962. Initially, the Tribunal directed a pre-deposit of Rs. 68.00 lakhs, considering the alternative contention of exemption under Notification No. 23/2003-C.E. The Appellants, instead of complying, filed a Writ Petition, which led to the High Court directing the Tribunal to reconsider the pre-deposit in light of the Appellants' submissions.

2. Financial Difficulties and Status as a Sick Unit:
The Appellants argued for waiver of the pre-deposit on the grounds of being a sick unit under B.I.F.R. and facing financial difficulties, as reflected in their Annual Report for 2005-06. The Tribunal noted that the recent Balance Sheets and terms of the Rehabilitation Scheme were not provided. Citing the Supreme Court's ruling in Metal Box India Ltd. v. C.C.Ex., Mumbai, the Tribunal held that being a sick company does not exempt the Appellants from pre-deposit requirements under Customs and Central Excise laws.

3. Merit of the Case Based on the Test Report:
The Appellants contended that the Test Report did not specify the percentage composition or origin of Isopthalic Acid, thus the demand could not be sustained. However, the Tribunal found substance in the Department's argument that the presence of imported raw materials in the samples indicated non-compliance with the exemption conditions. The Tribunal held that the detailed examination of the use of imported materials would be addressed during the final hearing.

4. Time-barred Demand:
The Appellants claimed the demand was time-barred as the show cause notice was issued beyond the normal period. The Tribunal noted the Adjudicating Commissioner's finding that the Appellants concealed the use of imported raw materials to evade duty, justifying the extended period for raising the demand. The Tribunal also highlighted that as a 100% E.O.U., the Appellants had a continuous obligation to account for the use of duty-free materials, making the applicability of any time-limit doubtful.

5. Compliance with Exemption Notification Conditions:
The Tribunal emphasized that the Appellants must strictly comply with the conditions of the exemption notification. The Department had shown the presence of imported materials in the samples, which prima facie indicated non-compliance. The Tribunal concluded that the Appellants did not have a prima facie case in their favor regarding the exemption claim.

Conclusion:
The Tribunal, guided by the Supreme Court judgments in Benara Valves Ltd. v. C.C.E and Indu Nissan Oxo Chemicals Industries Ltd. v. U.O.I., directed the Appellants to pre-deposit 15% of the demanded duty within four weeks. Compliance with this direction would result in the waiver of the balance amount during the appeal's pendency. Non-compliance would lead to the dismissal of the appeal. The Stay Petition and Miscellaneous Application were disposed of accordingly.